Do You Qualify For AConditional Installment Agreement?

When you have tax liability and you are unsure about negotiating with the IRS yourself, contact a tax professional that can assist you getting this tax debt behind you. What the average taxpayer is uncertain about when negotating with the IRS themselves are the types of installment agreements in which you may qualify for. There are several types of resolutions that could be applicable to you, but being uneducated about those resolutions would prevent you from getting into a resolution that might be less of a financial burden each month.
One resolution that comes to mind is a conditional installment agreement. This past week I had a client get approved for a conditional IA. Conditional Installment Agreement's are however to get approved by the IRS. The perfect candidate for a conditional IA would be a taxpayer that after factoring in all their income and expenses, still has a large monthly disposable income. Say for instance, a montly disposable income of $2000/month would cause a hardship on most people. However, with a conditional installment agreement, the IRS will consider the actuals (actual expenses, not the IRS standards), if it will payoff the liability in full in 60 months.

How you calculate the monthly payment on a conditional installment agreement:
Take your Net Income minus the difference in the actual expenses and the IRS standards, minus the Total Allowable Expenses = the monthly payment

This payment times 60 months ( or five years) will give you the total payoff to the IRS. This should more than cover the total liability owing.

Conditional Installment Agreements normally consist of taxpayers that generate a substantial amount of income on a monthly basis, but in turn require some changes in lifestyle. Having a conditional installment agreement approved prevents taxpayers from possibly losing their homes and vehicles if they can live up to the payment arrangement till the liability is paid in full.

This is just one type of resolution that a professional tax resolution firm can assist a taxpayer in getting their tax debt behind them. If you have federal or state tax debt, don't hesitate to contact a reputable tax firm for help today.

Are You Missing Your Federal Tax Refund for 2008?

If you have just filed your 2008 federal tax return, and you have yet to receive your rebate, you can log onto the irs.gov website to find out if the return has been processed. Whether you opted for direct deposit or asked the IRS to mail your refund check, you still have the option of tracking your refund on the irs.gov website.

You can generally get information about your refund 72 hours after IRS acknowledges receipt of your e-filed return, or three to four weeks after mailing a paper return.
Have a copy of your tax return handy. You will need to provide the following information from your return:

*Your Social Security Number (or Individual Taxpayer Identification Number);
*Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er))
*The exact whole dollar amount of your refund

It's a good indicator that if you have not received your refund within 28 days, from the original IRS mailing date shown, then you are able to trace your refund by changing your address online.
Begin your search at"Where's My Refund" Here you will enter your SSN, Filing Status, and Refund Amount, and hit submit.

As always, please be aware of emails and phising scams. It is important to keep in mind that the IRS never sends out emails falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.

IRS Speeds Lien For Homeowner's Trying To Refinance Or Sell

The Internal Revenue Service announced earlier in the year an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner. “We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

Do You Have Tax Debt & You Are Looking To Buy A New Home?

We all know that with the rising issues with the economy and the number of declined loans, it is becoming increasingly harder to purchase a home these days. Not to mention if you are in tax debt, there are implied liens placed on your property until that lien has been satisfied.


Recently I have been asked to supply mortgage lenders with a letter declaring that the lien has been satisfied because the debt was paid in full. At this time, the mortgage lenders will not grant a loan to a taxpayer until they know that there is no liens attached to the properties.

On the flip side, if you are selling your home, you will need to apply for a loan discharge. You do not want to purchase a property with a lien attached to it. This is particularly why title searches are ran before a homeowner makes the final decision.


Discharge of a Federal Tax Lien :


If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance.



Withdrawing Liens
By law, a filed notice of tax lien can be withdrawn if:
*The notice was filed too soon or not according to IRS procedures,
*You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
*Withdrawal will speed collecting the tax, or
*Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.



If you have tax debt, and you need someone to help get you in a resolution so that you can move forward with the purchase of a new home, don't hesitate to call a tax professional today.

Can The IRS Abate Interest Owed On Valid Tax Liability?

So many taxpayers are convinced that the IRS will abate interest. Unfortunately the only reason why the IRS would abate interest, would be due to their error or neglagance. If an error occured on the taxpayers part, then in no instance would they be accountable for the error. The IRS takes great pride on not making mistakes and where they are mistakes made, the IRS will do a proctological exam on the emplied error ( depending on the value of the error) before issuing a refund. On the other hand, penalty abatement is more feeseable but it to has its miticulous requirements before abating. Reason's would be as followed:*Incarceration*Severe medical condition that would prevent a taxpayer from filing their returnUnfortunately, penalties are difficult to get abated as well, but the IRS will consider a reasonable cause that would benefit a taxpayer in granted. Requesting Abatement or Refund of Interest Due to IRS Error or DelayThe IRS can abate interest if the interest is caused by IRS errors or delays.The IRS will abate the interest only if there was an unreasonable error or delay in performing a managerial or ministerial act (defined on this page).
The taxpayer cannot have caused any significant aspect of the error or delay. In addition, the interest can be abated only if it relates to taxes for which a notice of deficiency is required. This includes income taxes, generation-skipping transfer taxes, estate and gift taxes, and certain excise taxes. Interest related to employment taxes or other excise taxes cannot be abated. The term “managerial act” means an administrative act that occurs during the processing of your case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel.

Myth: Wages,Tips & Other Compensation Are Not Considered Income

This argument asserts that wages, tips, and other compensation received for personal services are not income, because there is allegedly no taxable gain when a person “exchanges” labor for money. Under this theory, wages are not taxable income because people have basis in theirlabor equal to the fair market value of the wages they receive; thus, there is no gain to be taxed.
A variation of this argument misconstrues section 1341, which deals with computations of tax where a taxpayer restores a substantial amount held under claim of right, to somehow allow adeduction claim for personal services rendered.Another similar argument asserts that wages are not subject to taxation where a person has obtained funds in exchange for their time. Under this theory, wages are not taxable because the Code does not specifically tax these so-called “time reimbursement transactions.” Some take a different approach and argue that the Sixteenth Amendment to the United States Constitution did not authorize a tax on wages and salaries, but only on gain or profit.
For federal income tax purposes, “gross income” means all income from whatever source derived and includes compensation for services. Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded.
In 1994,the court stated, “an abiding principle of federal tax law is that, absent an enumerated exception, gross income means all income from whatever source derived.” The IRS issued Revenue Ruling 2007-19, advising taxpayers that wages and other compensation received in exchange for personal services are taxable income and warning of the consequences of making frivolous argumentsto the contrary.

Can You Prevent Levies/Liens ?

Many of our clients are all consumed with having liens/levies filed. Once this happens, consider yourself in collections status. However to get here, one would have to be a perpetual late filer or have debt liability, causing them to react (to important notices)later than than they should have. It's always important to take care of the issue at hand versus waiting to the last minute which in turn will cause undo stress and increased penalties and interest that are extremely difficult to get abated. Keep in mind that there are several notices (about 11 to be exact) the Internal Revenue Service will send you before you get assigned to the collection department. Unfortunately, some taxpayers are naturally procrastinators which invariably continue to get themselves in deeper debt with the IRS, if not addressed as soon as the notice is received.


It's apparant that taxpayers don't take the IRS serious when these notices are sent. But after the following subsequent notices are sent, the IRS will not be so lenient with a taxpayer after trying to worn them time after time. For all tense and purposes, the IRS gives a delinquent taxpayer ample opportunity to get in compliance. These eleven notices could delay the collections process for years.


Here are the notices the IRS will send to a delinquent taxpayer before sending them to the collections department: CP-501CP-502CP-503CP-504L-1058. After you have been sent the CP-504, the IRS considers you in "collections". Immediate action to levy your bank account or wage will take place in about 40 days from the time you are sent the CP-504. If issued a bank levy, the financial institution has to place a hold on the available funds for 21 days before being levied. About 30 days from when the 504 is sent , the taxpayer will be issued an L1058. This is the final notice that confirms the levy implementation on ones bank or wage. If a taxpayer tries to call and rectify their tax debt, they will be unsuccessful due to the requirement of a Power Of Attorney. POA's are the only individuals with enough authority to have a Stay On Collection granted.

In terms of a lien filing, there is always an implied federal tax lien when you have tax liability. Most of the time this tax lien is not filed unless you owe over $25,000. If you owe less than this amount, you can get into an affordable payment plan based on the assessed balance. If you get into the installment agreement before the lien is applied then you are secured with no future levies,liens. However, if you let the issue persist then levies/liens will be issued and not liens are never lifted until the debt is paid in full.


It is imperative that you take care of your tax debt and file your returns on time. Once entering in the collection process, there is no turning back. The IRS will continue this daunting process with hopes the client pays their debt owed in full.There are reputable companies out there that can help with the filing of your taxes and your tax liability where you don't have to pay your debt in full. If you find yourself currently in the collection department, don't wait. Its better to be proactive instead of trying to catch up.

How Could You Get Your Tax Penalties Abated?

So many taxpayers are convinced that the IRS will abate interest. Unfortunately the only reason why the IRS would abate interest, would be due to their error or neglagance. If an error occured on the taxpayers part, then in no instance would they be accountable for the error. The IRS takes great pride on not making mistakes and where they are mistakes made, the IRS will do a proctological exam on the implied error ( depending on the value of the error) before issuing a refund. On the other hand, penalty abatement is more feeseable but it to has its miticulous requirements before abating. Reason's would be as followed:

*Incarceration*Severe medical condition that would prevent a taxpayer from filing their return. Unfortunately, penalties are difficult to get abated as well, but the IRS will consider a reasonable cause that would benefit a taxpayer in granted.Requesting Abatement or Refund of Interest Due to IRS Error or DelayThe IRS can abate interest if the interest is caused by IRS errors or delays.The IRS will abate the interest only if there was an unreasonable error or delay in performing a managerial or ministerial act (defined on this page). The taxpayer cannot have caused any significant aspect of the error or delay. In addition, the interest can be abated only if it relates to taxes for which a notice of deficiency is required. This includes income taxes, generation-skipping transfer taxes, estate and gift taxes, and certain excise taxes. Interest related to employment taxes or other excise taxes cannot be abated. See Pub. 556, Examination of Returns, Appeal Rights, and Claims for Refund, for more information.Managerial act. The term “managerial act” means an administrative act that occurs during the processing of your case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel.

A decision regarding the proper application of federal tax law is not a managerial act.Ministerial act. The term “ministerial act” means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of your case after all prerequisites of the act, such as conferences and review by supervisors, have taken place.

A Resolution To Relieve You From Your Current Tax Liability

I had a client email me ask me what Currently Not Collectible actually meant. So many taxpayers with outstanding tax liability have no idea that IRS can stop collections on your liability. However, CNC Status is not as easy to obtain as it used to be. The IRS is cracking down on the qualifications for CNC. The IRS's decision is predicated on the following requirements:

1. The IRS has to deem you as having less than $25/month in MDI (Monthly Disposable Income) which is your income less your monthly expenses (IRS allowable expenses),
2. No liquid assets to pay yout liability
3. Automatic CNC will be approved if the taxpayer is deceased with no collection potential from the deceadent estate or no collection potential for estate taxes
4. CNC approved a corporation or LLC is classified as a partnership or association taxable as a corporation remains in business and is current but is unable to pay back taxes. Also when a corporate income tax liability owed by a financial institution certified as insolvent by the Officer of the Controller of the Currency or the Office of Thrift Supervision
5. A taxpayer is deployed to a combat zone
6. When collection of the liabiltiy would create an undue hardship for taxpayers by leaving them unable to meet necessary living expenses.

According to the IRS approval, they will cease payments of taxes for at least 12-18 months, when they will review your current financial stability for re-approval of CNC or the induction back into collections for ability to pay (closing code).When the time comes to re-evaluate your case, the IRS will default your CNC status if they can't locate you, and could possibly levy you. The IRS will annually send you a statement balance (CP 89) around 12-18 for case review. They basically want to see if anything has changed about your current financial state. Finally, a tax lien will always be filed with CNC status. This is a public notice filed with the county courthouse against your property. Therefore, if you were to go try to sell your property, the lender would first be paid off, then the IRS and any left over proceeds would be for your gain.

Are You In Tax Compliance?

What does being tax compliant mean?- Filing all required tax returns (Business or Individual) for the years 2001-2006-Paying your taxes (Business-income,payroll,excise) (Individual-income,payroll,excise)-Being current on your tax payments (Business -estimated and federal tax deposits) (Individual -estimated taxes)

What does "Due Process"mean? Following legal procedures set forth in the IRS for assessing additional tax liability. Notice (i.e. CP 2000 or an Audit Report) (Form 4549).*30 Day letter (for to exercise internal appeal rights)*90 Day letter (for Taxpayer to exercise appeal to the US Tax Court)- Certified Mail!!!!A Tax Consultant can help you better understand the nuances of the collection process.

Will The IRS Interest Rates Stay The Same ?

Just when you thought the interest rate might decrease, it stays the same for the Third Quarter of 2009 ! Out of Washington, the Internal Revenue Service has announced that the interest rate remain the same starting July 1-2009. The rates will be as followed:


*Four percent for overpayment's and three percent in case of a corporation
*Four percent for underpayments
*Six percent for large corporate underpayments and
*One and a half percent for the portion of a corporate overpayment's exceeding $10,000

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate during April 2009 to take effect May 1, 2009, based on daily compounding.

If you have an outstanding liability with the IRS or you are unsure and need a compliance evaluation, don't hesitate to call a tax liability specialists for help today. Don't let compounding interest grow your tax debt exponentially without getting help today!

I have 2008 tax liability! Will the IRS factor this in with all other years?

I recently had a client to ask me they could include their tax liability for 2008 in with the other outstanding liability owed to the IRS? First of all, you need to make sure you filed your return on time, to show the IRS that you will continue to stay in compliance going forward. By compliance, I mean filing your returns on time and paying any outstanding liability.

There is a possibility that the Internal Revenue Service will factor in the liability. However, there is no guarantee that this will happen. The IRS is very reluctant to factor in this liability because it conveys to them the inability to stay in compliance.

Recently I had a taxpayer that I worked to get them into Currently Non Collectible as their resolution with the IRS, to find out they were going to owe $50,000 for 2008. If we are talking about a small liability to consider, then the IRS would be more accommodating. When we are talking about liability of this caliber, they will not only factor this amount in, but default their resolution as CNC.

In order to achieve CNC, your monthly disposable income cannot be over $ 25.00 a month. While their current financials supported this, the IRS will see an inconsistency with the income. They will question the adjusted gross income. How is that they basically have no income but they incurred a liability like this. They will become suspicious of where the income went during the 2008 tax year.

This is a perfect example of why the IRS will not factor in the current liability with the current liability. Don't let this be you, contact a reputable resolution firm to handle your tax debt today !

Is It A Federal Offense To NOT File Your Returns?

Another proposal would make repeated failure to file a tax return a felony. Current law provides that willful failure to file a tax return is a misdemeanor punishable by a term of imprisonment for not more than one year, a fine of not more than $25,000 ($100,000 in the case of a corporation), or both. A taxpayer who fails to file returns for multiple years commits a separate misdemeanor offense for each year.
Under the administration’s proposal, any person who willfully fails to file tax returns in any three years within any five-consecutive-year period, if the aggregated tax liability for such period is at least $50,000, would be subject to a new aggravated failure-to-file criminal penalty. The proposal would classify such a failure as a felony and, upon conviction, impose a fine of not more than $250,000 ($500,000 in the case of a corporation) or imprisonment for not more than five years, or both. The proposal would be effective for returns required to be filed after Dec. 31, 2009.
The administration also proposes to revise the offer-in-compromise application rules to eliminate the requirements that an initial offer-in-compromise include a nonrefundable payment of any portion of the taxpayer’s offer.

Don't let this be your outcome, contact a tax professional today to help properly prepare your tax returns today !

The Misconception: 2009 Stimulus and Does It Apply To Me?

A lot of taxpayers are under the impression/misconception that we are entitled to (under the Obama Administration) that taxpayers will receive a stimulus refund for those who made at least $3000 in income for the 2oo8 tax year. Truth is that there is no stimulus refund for 2008, at least not in a cash out. However, there are other opportunities where certain taxpayers will be the recipient of tax benefits if the following applied to you:

* First Time Homwbuyer-What is the credit?
A. The first-time homebuyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. For homes purchased in 2008, the credit operates like an interest-free loan because it must be repaid over a 15-year period.
The credit was expanded in 2009 for homes purchased in 2009, increasing the amount of the credit and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date.
Q. How much is the credit?
A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.
Q. Which home purchases qualify for the first-time homebuyer credit?
A. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before Dec. 1, 2009, to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.

When Do I have to pay the credit for the home of the purchase?
When must I pay back the credit for the home I purchased in 2009?
A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.

*Purchase of a vehicle-
In 2009, you can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. A qualified motor vehicle includes a passenger automobile, light truck, or motorcycle, the original use of which begins with that purchaser and that has a gross vehicle weight rating of 8,500 pounds or less. A qualified motor vehicle also includes a motor home, the original use of which begins with that purchaser. The amount of tax you are able to deduct is limited to the tax that is imposed on the first $49,500 of the purchase price of the vehicle. The deduction is phased out over a $10,000 range that begins when modified adjusted gross income is more than $125,000 ($250,000 if married filing a joint return).

*Tax Credit For Energy Savors-
ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property.The new law also raised the limit on the amount that can be claimed for improvements placed in service during 2009 and 2010 to $1,500, instead of the $500 lifetime limit under the old law.
In addition, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, and skylights, certain central air conditioners, and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

Is It True That Your Tax Debt Can Just Go Away For Good?

So what equals the removal of tax debt ? Its called CSED dates (Collection Statutory Expiration Dates). What exactly is a CSED date, and what does this mean for taxpayers have tax debt? D you know that the Internal Revenue Service, can't collect on your debt forever? This is true, the IRS only has ten years to collect on your debt. Technically, if you have tax debt stemming from the 2000 tax year, more than likely the CSED date has expired and the IRS can no longer collect this tax liability.However, if you have undergone a Audit, Bankruptcy, or are currently in Offer

In Compromise Examination review, then your CSED dates have been extended. Other than these examples, the IRS will cease collection on tax debt that has expired. There is a resolution called partial pay installment agreement, where the CSED dates play an important role on the total liability the client would have paid for. In a partial pay installment agreement, the CSED will always run, leaving the taxpayer only paying a portion of the total tax liability owed. Keep in mind the IRS approves only a small portion of these every year, and a taxpayer should be ecstatic to have gotten this as a resolution.

I've seen where reputable tax resolution firms were able to save taxpayers thousands of dollars by establishing partial pay installment agreements, and buying time for other CSED dates to expire.If you have tax debt, and you want to know more about CSED dates and whether or not you would qualify for partial pay installment agreement, don't hesitate to contact a tax professional today, and get this tax debt behind you for good.

The Rules Of The 10% Penalty Fee From Taking Early Distribution. Has This Happened To You?

Generally, if you are under age 59 1/2, you must pay the 10% additional tax on the distribution of any assets (money or property) from your traditional IRA, distributions before you are age 59 1/2 are called early distributions. The 10% additional tax applies to the part of the distributions that you have to include in gross income. It is in addition to any regular income tax on the amount.

After 59 1/2 and before age 70 1/2 After you reach age 59 1/2 you can receive distributions after you reach age 59 1/2 , distributions are not required until you reach age 70 1/2. There are several exceptions to the age 59 1/2 rule. Even if you receive distribution before you are age 59 1/2, you may not have to pay the 10 % additional tax if you are in one of the following situations:



* You have un-reimbursed medical expenses that are more than 7.5 % of your adjusted gross income

*The distributions are not more than the cost of your medical insurance
*You are disabled
*You are the beneficiary of the deceased IRA owner
*You are receiving distributions in the form of an annuity
*The distributions are not more than your qualified plan
*The distribution is due to an IRS buy of the qualified plan
*The distribution is due to ab IRS levy of the qualified plan
*The distribution is a qualified reservist distribution

If you have withdrew from an IRA that will consequently cause potential tax liability, call a professional tax consultant today for help beyond your expertise.

A Credit For First Time Homebuyers? Part of the 2008 Stimulus Package

Who does not qualify for the first time home buyer credit ? If you answer yes to the following questions, you would not qualify for the credit !


*Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly).
*You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. See Form 8859. This rule does not apply for a home purchased in 2009.
*Your home financing comes from tax-exempt mortgage revenue bonds. This rule does not apply for a home purchased in 2009.
*You are a nonresident alien
*Your home is located outside the United States
*You sell the home, or it ceases to be your main home, before the end of 2008
*You acquired your home by gift or inheritance
*You acquired your home from a related person. A related person includes:
*Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.)
*A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation
*A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.



First Time Homebuyer Credit is part of the Obama stimulus package for 2008. The credit of $8000 (if you purchased the house in 2009), or 10% of the purchase of your home will be credited to you.



Homes purchased in 2009. You must repay the credit only if the home ceases to be your main home within the 36-month period beginning on the purchase date. This includes situations where you sell the home, you convert it to business or rental property, or the home is destroyed, condemned, or disposed of under threat of condemnation. You repay the credit by including it as additional tax on the return for the year the home ceases to be your main home. If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.

How Do I Know If I Qualify For CNC For My Tax Debt?

How do you know if you qualify for Currently Non Collectible status with the IRS? This is not an easy resolution to obtain with the IRS. There are many restrictions,that prevent the average taxpayer from being considered for CNC. So often in resolution, we see where our everyday expenses often not considered an allowable expense with the IRS. The IRS will only consider necessary living expenses count.

Expenses such as tuition expenses for your children, expenses above the standard (factored by the county you live in), private school expense, over the standard car payments. If there are two people working in the household, the IRS will allot for two car payments. However, if there are more than two people lieving in the household, paying for their childs vehicle, the IRS will not deem this as an allowable expense.

So often, we think the IRS will allow such expenses, but they don't. I had a client this week that would have been considered CNC if they would accept her tuition payments for her children's college. The IRS will view this as an opportunity for the child to get a job and help pay on this type of expense.

In order for the IRS to even consider you to be Currently Non Collectible, your Monthly Disposable Income cannot be over $25 a month. What I mean by Monthly Disposable Income is your income less your allowable expenses (determined by the IRS). As you can see, financially you are strapped ( for lack of a better word) and need relief from your tax debt.

If the IRS considers you as Currently Non Collectible, you will placed in this resolution for at least a year (if not longer) , then the IRS will review your financials to determine whether or not you have the ability to pay the IRS on a monthly installment agreement. While in CNC, the CSED dates still run (how long the IRS has to collect on your debt) but interest will still accrue.

If you have tax debt, and you need help determining whether or not you would be a good candidate for CNC, contact a professional resolution firm today for relief of this continuous burden.

Is It Finally Here? A Tax Credit For Energy Savors?

The Internal Revenue Service today reminded individual and business taxpayers that many energy-saving steps taken this year may result in bigger tax savings next year

Homeowners can get bigger tax credits for making energy efficiency improvements or installing alternative energy equipment.
The IRS also announced homeowners seeking these tax credits can temporarily rely on existing manufacturer certifications or appropriate Energy Star labels for purchasing qualifying products until updated certification guidelines are announced later this spring.

“These new, expanded credits encourage homeowners to make improvements that will make their homes more energy efficient,” said IRS Commissioner Doug Shulman. “People can improve their homes and save money over the long run.”

ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property.

The new law also raised the limit on the amount that can be claimed for improvements placed in service during 2009 and 2010 to $1,500, instead of the $500 lifetime limit under the old law.
In addition, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, and skylights, certain central air conditioners, and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

If you are avid energy savor and need help on the preparation of your return, contact a professional tax rep today.

Can The IRS Take Property Willed To Me ?

I had an interesting conversation with a client today with regards to liens. The question was, after a resolution has been established, and a taxpayer has been willed property, does the IRS have the rights to seize these assets?
I explained to the client that in their case, when the CSED (Collection Statutory Expiration Dates) expires, the Internal Revenue Service legally does not have the rights to any property. The only way the IRS would have the rights to this property (after the CSED date expires), is if a judgment has been placed up the liability; this will extend the CSED dates, given the IRS the ability to collect on this liability.
Consequently a lien would be placed upon this property enabling the IRS the ability to collect on the lien attached to the property. However, if property has not been willed in the name of the taxpayer (or taxpayer's owing the tax if they file married filing joint), there would nothing for the IRS to collect on.
This is all contingent upon whether or not the CSED dates have expired. Obviously, if the property has been willed before the expiration dates expire, then the IRS has full rights to the proceeds administered to the taxpayer where the lien has been filed.

Did You Miss Out On Your 2008 Stimulus Payout?

If you didn't file for an economic stimulus payment in 2008 because you weren't sure you were eligible, you may be able to file for a payment in 2009

The IRS and Treasury are working closely with the Social Security Administration to ensure that all eligible individuals know what to do to receive a stimulus payment.
Normally, certain Social Security payments are not subject to income tax. However, the economic stimulus law passed in February contains a special provision allowing Social Security recipients to count those benefits toward the qualifying income requirement of $3,000 and thereby qualify for the stimulus payment.


The following are requirements you must meet or there is no need to file for the stimulus:

*You have, or your family has, at least $3,000 in qualifying income from, or in combination with, Social Security benefits, certain Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
*You and any family members listed on your tax return have valid Social Security numbers.
*You are not a dependent or eligible to be a dependent on someone else’s federal

What is the Stimulus Worth:

Eligible individuals — between $300 and $600
Joint filers — between $600 and $1,200
With eligible children — an additional $300 for each qualifying child

All of the above applies to those who receive social security,veteran affairs,railroad retirement or low-wage workers.

Do You Need Outside Assistance With Your Taxes?Need To See Someone Locally?

Though I feel it is best to contact a reputable tax resolution firm for tax preparation and tax resolution matters, it is not always needed for when you need to visit a tax assistance center in person. If you can't seem to find a reputable tax resolution firm, you may want to contact or personally visit your local Taxpayer Assistance Center.



At the Taxpayer's Assistance Center, you will find no appointment necessary, just walk in for assistance. If you find yourself culturally challenged with language barriers, don't be alarmed because they are multilingual services in over 150 languages. The Taxpayer Assistance Center will also help you prepare your tax return for free for those whose income is less than $42 k. The center is also a place for those who are currently in an installment agreement or who would just like to make voluntary payments. The only information you need present with you is the tax period and the type of payment it is for.



If you have received an IRS notice, please bring it to the center as well, as they can see what tax years and the current tax liability owing, as well as assessment issues and auditing purposes.The center will also have tax returns and account transcripts as well as tax forms for those that may (say for instance) want to prepare their return themselves, or file for extensions on tax returns.

Do You Want More $$ In Your Pocket On Your Tax Returns?

If you just filed your 2008 1040 Federal Tax Return and six months dowu cnn the road you need yo make some changes, you can amend a return by filing out a form 1040X. If you need to make changes to your filing status, dependants, total income, deduction or credits. Below are some facts you need to know when amending a return:

*Generally, you do not need to file an amended return for math errors as the IRS will be ale to make the correction for you.
*You also do not usually need to file an amended return because you forgot to include forms – such as W-2s or schedules – when you filed; the IRS normally requests those forms from you.
*Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
*If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
*If the changes involve another schedule or form, attach it to the 1040X.
*If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
*If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.
Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

If there are changes that need to be made to your return, don't neglect to make those changes when they could mean more tax deductions or more of a refund !

Who Else Wants Their Levy Released ?

A levy, is a mandatory garnishment against a taxpayers bank,social security,wage sources. There are a series of collection notices, elevem to be exact that are sent before a levy is even put into action. Where bank levies are one time, wage levies are continuous and will not be released until either the tax is paid in full, a resoliution has been made (i.e. installment agreement, Offer In Compromise,Currently Non Collectible ) or it prevents a hardship on the taxpayer,

Internal Revenue Service requires levies to be released in the following circumstances.
*The liability is satisfied by full payment, i.e., is no longer owed
*The statutory collection period has run out

Note:
*Generally, a levy served prior to the expiration of the collection period is good and should not be released. In addition, a levy served after reducing a tax liability to a judgment is valid.

Example:

*One week before the statutory collection period runs out, a notice of levy is served at the taxpayer's bank. The bank does not have to send the levy proceeds until the 21 day holding period on bank levies expires, and this will be after the period for collection runs out. This levy does not have to be released when the collection period runs out, because it was served timely.

Exception:
*A continuous wage levy served before the expiration of the collection statute must be released after the expiration of the collection statute.

Example:

*When a notice of levy is served on a taxpayer's right to property, sometimes that includes the right to receive future payments, e.g., pension benefits. If there is a fixed and determinable right to receive those future payments, the levy will attach them when they would have been paid to the taxpayer, even though it is not actually a "continuous" levy. As long as the right to property has been levied before the period for collection runs out, the notice of levy does not have to be released.

How Does Filing Late for 2008 Affect My Current IRS Resolution?

If you are currently in an Installment Agreement with the Internal Revenue Service, and you have not filed your 2008 return, then this will default your agreement if you owe. The best advice I can give you ( if this is the case for you), is to borrow the money to pay this off. If you can't borrow from a lender, then I would apply it to a credit card or borrow from friends or family.

In working for a tax resolution firm, I have recently seen the impact having 2008 tax liability has on the current resolution agreements. Whether its currently non collectible, or partial pay installment agreements, the IRS will not have empathy if you file your return late and you owe. The Internal Revenue Service wants to see that you are in compliance and not continuing to be habitual late filers. Furthermore, the IRS can sometimes send your employer lock in letter requiring the change to be made on your withholdings (W-4); this change will be for "0" instead of the number of dependants you legitimately qualify to take as exemptions.

Consequently, once your installment agreement has been defaulted, it is very difficult to get yourself back in an agreement with the same terms. Therefore, I encourage you to keep yourself compliant and pay the tax owed at the time of filing to prevent such action from taking place !

Times Running Out To File Your 2008 Return? Are You Prepared

Well if you have not done so already, your 2008 federal tax return is due by April 15. If you are unable to have it Time Date Stamped with the Internal Revenue Service by April 15, then you will need to file a Form 4868, which is an Extension To File form.

This form will prevent you from paying a failure to file penalty, but not a failure to pay penalty (if you owe). However, if you do not owe, you should not have a penalty either way because you do not owe tax. This is something to keep in mind as a taxpayer, but not make habitual in case you were to owe. It is always a good practice to go ahead and file on time to prevent yourself from any unwarranted penalties.

Secondly, if you owe for 2008 as well as other years, and you are entering in an installment agreement, keep in mind that this will default your current IA if you do not file your return on time and pay the tax owed. This is common among many accredited tax resolution firms that work diligently to get a favorable resolution for taxpayers, only to wind up in a defaulted status due to perpetual negligence.

If you have not taken care of your 2008 tax return, you still have time to find an acredible tax representative to help you ! Or if you are not prepared, then file the Extension To File form by April 15, and this will give you until October 15 to file.

It's better to be late than never !

Get Rid Of Your Tax Debt Once And For All

Its frustrating with owing tax debt and carrying this burden around not knowing which route to take. However,its worse negating the next steps in getting this behind of you . The average taxpayer is not well versed in knowing how to negotiate with the IRS. One thing, a taxpayer can count on when having tax liability is that there is a light at the end of the tunnel and you may not have to satisfy the entire liability.

You may not know it, but the Internal Revenue Service only has ten years to collect on your tax liability. There is an acronym called CSED (Collection Statutory Expiration Date), which tells the IRS and other tax specialist just how long the IRS has to collect on your tax debt.

If your liability falls under $ 25,000, the IRS will accept an Installment Agreement based on the liability owed. The IRS will take the amount you owe divided 50 (months) t0 get the amount required to pay until the debt is satisfied. In case like this you will always pay the debt in full. However, with a partial pay installment agreement you will not satisfy the debt in full.

This is why they call it a partial pay installment agreement because you will not have to pay the liability in full. What a relief this would be of a tax professional could negotiate this kind of settlement with this IRS. Question is, do you qualify? Partial pays are not normally granted unless the IRS deems this liability never being paid in full. Therefore they will negotiate a payment that will satisfy some of the debt allowing the rest of the debt to fall off when the CSED dates run out.

This is why handling an extensive issue own your own may not your best option. There are trained Enrolled Agents that have prior experience with the IRS that can help negotiate a resolution like this if you qualify. If you have a large tax liability and the IRS does not see much future income potential, then you might be a good candidate for Partial Pay Installment Agreement.

Who Else Wants A Tax Credit ?

So who would of thought that Washington DC would allow taxpayers who buy a new vehicle this year are entitled to a tax credit. Yes this is true, any taxpayer is entitled to deduct, state & local sales & excise taxes paid on the purchase on their 2009 return next year.

Yes this will give those taxpayers more incentive to buy now and get cash back later on their returns. Therefore the taxpayers can afford to purchase ahead of time to make their purchase this year. However, there is a limitation to the state & local sales and excise tax. These tax credit's do not apply to those purchasing over a $49,500 car, light truck, motor home or motorcycle.

The amount of the deduction does not apply to those making an Adjusted Gross Income between $125,000 and $135,000 for individual filers and between #250,000 & $260,000 filing joint. One point the IRS made also alerts taxpayers that the vehicle must be purchased after February 16,2009 and before January 1, 2010 to qualify for the deduction.

Although the deduction can't be taken on their 2008 tax returns, the deduction is available regardless of whether you itemize deductions (schedule A).

What Equals The Removal Of Tax Debt?

So what equals the removal of tax debt ? Its called CSED dates (Collection Statutory Expiration Dates). What exactly is a CSED date, and what does this mean for taxpayers have tax debt? D you know that the Internal Revenue Service, can't collect on your debt forever? This is true, the IRS only has ten years to collect on your debt. Technically, if you have tax debt stemming from the 2000 tax year, more than likely the CSED date has expired and the IRS can no longer collect this tax liability.

However, if you have undergone a Audit, Bankruptcy, or are currently in Offer In Compromise Examination review, then your CSED dates have been extended. Other than these examples, the IRS will cease collection on tax debt that has expired. There is a resolution called partial pay installment agreement, where the CSED dates play an important role on the total liability the client would have paid for. In a partial pay installment agreement, the CSED will always run, leaving the taxpayer only paying a portion of the total tax liability owed. Keep in mind the IRS approves only a small portion of these every year, and a taxpayer should be ecstatic to have gotten this as a resolution. I've seen where reputable tax resolution firms were able to save taxpayers thousands of dollars by establishing partial pay installment agreements, and buying time for other CSED dates to expire.

If you have tax debt, and you want to know more about CSED dates and whether or not you would qualify for partial pay installment agreement, don't hesitate to contact a tax professional today, and get this tax debt behind you for good.

Have You Forgot To Include Your Taxable Deductions for 2008?

Do you have contributions to deduct off your taxes? Have you contributed to other qualified organizations. Don't forget, as this could be a sizeable deduction that you don't want to leave off.For example, this year I donated quite a bit if furniture to Hospice, that I can show on my 2008 taxes.This amount was over $500, and therefore I will need to include a form 8283 Noncash Charitable Contribution Form along with my 2008 tax return.

To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

2008-2009 First TIme Homebuyer Tax Credit

As the April 15th deadline approaches for homebuyers, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8 k for first time homebuyer credit for 2009 home purchases. For those who recently purchased a home, or are thinking of purchasing a home in the next few months, there are several different ways that they can get a tax credit even if they have already filed a return.

The Treasury Department is actually encouraging taxpayers to explore their options to maximize their credit and get the most of your money back if possible.
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

Claiming A Deduction For Your Home Office

Taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements.
In order to claim a business deduction, you must use part of your home for one of the following two reasons:

*Exclusively and regularly as either: your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Where there is a separate structure not attached to your home, the regular and exclusive use does not need to be your principal place of business as long as the use is in connection with your trade or business.

*On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

Allowable Expenses

If you experience tax debt and you have either hired someone to take care of this burden for you, or you have elected to take on the IRS yourself, the allowable expenses are still the same. The IRS has standards for the following:

Car payment- $489
Maintenance- depends on the state, county you live in
Housing-depends on the state,county,number in the household
Out of pocket health cost- for one individual under 65 is $60

Taxpayers have difficulty understanding these allowable and unallowable expenses in resolution. One would think that a child's tuition would be allowed but, the IRS feels that students should take the opportunity to apply for school loans; this is not deemed as an allowable expense.

Child care, if not paid to a business or an individual that reflects this as income on their tax return, is not considered allowable either. I recently had a client that revealed he paid his mother in law $1000/month in childcare. However, considering this was "under the table" cash, and not reported on her return as income, consequently increased his income.

Income and expenses are what determine your Monthly Disposable Income (MDI). The more disallowed epenses, the higher your MDI. If you have tax debt, and you are taken it upon yourself to try and resolve this debt, you need to make yourself aware of IRS standards and what they will consider a "necessary living expense". Bare in mind, this is difficult to do.

If you have tax liability, and you are reluctant to act on your behalf, contact a tax resolution specialist today. There are specialist out there that have many years of service with the IRS and know the Internal Revenue Manual and how to negotiate a more favorable outcome.

Do you have a habit of not filing your returns?

Have you filed your tax return yet? You have until April 15 2009 to do so? If you have experienced delinquent unfiled returns in the past, then you may or may not know the types of penalties you will incure if you negate to stay in compliance.

I think its safe to say that once you start getting in the habit of forgetting to file your returns, you continue to do so. This will bring upon a failure to file penalty and if you owe tax, a failure to pay penalty. According to the IRS, the failure to file penalty for 2008 has increased to the following :

"If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is increased. In this situation, the minimum penalty is the smaller of $135 or 100% of the unpaid tax."

Any person who willfully attempts to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof:
*Shall be imprisoned not more than 5 years
*Or fined not more than $250,000 for individuals ($500,000 for corporations)
*Or both, together with the costs of prosecution

If you neglect to pay the tax owed, then daily interest will accrue daily:

The IRS changes the interest rate it charges each quarter. The rate is determined by taking the federal standard rate plus 3%. Currently for the first quarter of 2009, the rate is 5%. The IRS interest rate has ranged from 5% to 9% in the past 6 years. The amount of interest is computed based on the rate applied in each quarter to the amount owed.

Don't wait, contact a tax professional that can help you with your returns and your tax debt today.

Allowable Expenses by the Internal Revenue Service

I had a taxpayer ask me the other day whether or not they could claim all their children in their household as an expense/deduction. That truth is that when you have two people that co-mingle bank accounts, then the IRS will want to see the total household income and bank accounts from both individuals. The IRS will view girlfriend/boyfriend situations different than roomates that keep separate financials. In a situation like this, as long as you include a letter from you and your roomate stating that you pay the other rent/utilities, the Internal Revenue Service should not ask for further financial documentation from your roomate.

However, in terms of children, the IRS will allow you to claim the children you include on your tax return, but not if the other parent includes them. For example, I have been working on a resolution for a client that lives with his girlfriend,they have two children of their own, except for one (which is the mother's child from a separate relationship) child. Normally the mother claims the children, but in this case she relinquished their two children, allowing the father to claim the kids, so he would be able to claim three in the household for a larger living expense.

Eventhough the third child lives with them, he will be unable to claim them as living in the household because its technically his child. Utlimatelly, we are trying to lower the taxpayers monthly disposable income and get them into an affordable payment plan.

As you can see there are some very finite details in what is considered allowable/unallowable expenses (necessary living expenses) the IRS will consider when negotiating a resolution.

Have You Filed Your 2005 Tax Return? Do You Want A Refund?

Unclaimed refunds totaling approximately $1.3 billion are awaiting over a million people who did not file a federal income tax return for 2005, the Internal Revenue Service announced today. However, to collect the money, a return for 2005 must be filed with the IRS no later than Tuesday, April 15, 2009.

People should check their records, especially if they had taxes withheld from their paychecks but were not required to file a tax return. They may be leaving money on the table, including valuable tax credits that can mean even more money in their pockets."
The IRS estimates that half of those who could claim refunds for tax year 2005 would receive more than $581. Some individuals may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2005 returns, the window closes on April 15, 2009. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

Don't get caught not collecting on money a tax refund that you are rightfully due, call a tax return professional today.

New Interest Rates For 2009

The Internal Revenue Service today announced in Revenue Ruling 2008-54 that interest rates for the calendar quarter beginning Jan. 1, 2009 will drop by one percentage point. The new rates will be:
*Five (5) percent for overpayments [four (4) percent in the case of a corporation];
*Five (5) percent for underpayments;
*Seven (7) percent for large corporate underpayments; and

Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate during October 2008 to take effect Nov. 1, 2008, based on daily compounding

Qualifying For CNC

I had a conversation with a client the other day about whether he would qualify for a Currently Non Collectible when he was dissatissfied with the Offer In Compromise amount to settle his tax debt. Eventhough you get denied an offer amount does not mean you can't settle on another resolution with the IRS.
However, with this taxpayer he was told he would qualify for Currently Non Collectible (from a not so reputable company) and he will unfortunately will not due to having too much liquidable assets. The IRS will not agree to CNC, Status 53 of you have (in this taxpayer's case) remaining left over money from a settlement prevents him from qualifying for CNC.
When you have assets, that can be liquidated, CNC is impossible to get accepted. Monies, in the bank, IRA's,401 k's,equity in homes and vehicles can all cause you to not get into Currently Non Collectible. If the Internal Revenue Service forsees that you can borrow against your home, and liquidate assets, they will ask this of you before just deeming you as CNC and sustaining any collection activity for over a year.

Currently Non Collectible means that your expenses outway your income; a full financial disclosure of your income, expenses and assets will be thoroughly reviewed.

Employment Taxes for Household Employers

Did you know that if you pay someone to come in your home and care for your dependents or spouse, you may be a household employer. If you are a household employer, you will need an EIN (employer identification number) and you may have to pay employment taxes. If the indivuduals who work in yout home are self-employed, you may have to pay employmentsw taxes. If the individuals that work in your home are self-employed, you are not liable for any of the taxes, discussed in this section. Self-employed persons who are in the business fot themselves are not household employees. Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business.

If you use a placement agency that is in control of what work is done and how it will be done by a babysitter, then this person is not your employee (in the household). But, if an agency merely gives you a list of sitters and you hire one from that list, the sitter may be your employee.

If you have a household employee you may be subject to:
1.Social security and Medicare taxes
2.Federal unemployment tax,
3.Federal income tax withholding

Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. Federal income tax withheld from the employee's total pay if the employee asks you to do so and you agree.

Estimate Payment Update

As the result of legislation enacted last year, there is a new California estimate payment requirement beginning on or after January 1, 2009. This new law changed the percentage amount for estimated tax installment payments from four equal installments of 25 percent of the required annual amount to installments of 30 percent of the required annual amount for each of the first two installments and 20 percent of the required annual amount for the last two installments. The new law did not change withholding requirements, therefore, wage earners do not need to change their withholding to address the change to the percentage amount for estimated tax installment payments, so long as the total amount of tax owed with the return for 2009 or 2008, after being reduced by credits and taxes withheld for the applicable year, is less than $500 ($250 in the case of a married individual filing separately). This $500 threshold was increased this year. In previous years the threshold was $200.
Unlike an estimated tax installment payment, which must be paid in an amount required by the law to avoid an underpayment penalty for a particular installment, taxes on wages do not need to meet the percentages for estimated tax installment payments to avoid the penalty for underpayment of estimated taxes. Taxes withheld on wages can vary substantially over the year and withholding can be increased at anytime during the year to meet the less-than-$500-owed threshold and avoid the penalty. If, however, taxes withheld for a taxable year and credits for a taxable year do not reduce taxes owed to less than $500 for the current year or the prior year, then a taxpayer may need to make estimate payments, paid in the required installments, to avoid the penalty for underpayment of estimated tax.

Educational Tax Deductions

If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. This could include refresher courses, courses on current developments, and academic or vocational courses.

Example:
You repair televisions,radios, and stereo systems for XYZ Store. To keep up with the latest changes, you take special courses in radio and stereo service. Those courses maintain and improve skills required in your work.

The following are examples of educational expenses that were deductible because the courses maintained or improved skills:

*A tax attorney attended an out-of-town tax forum. The course was valuable for her in maintaining current knowledge of the tax laws.
*An engineering aide took night courses that improved his skills but were not required by his employer.
*A concert harpist took music lessons. The costs were deductible as she was maintaining or improving her skills.

Civil Trust Fund Negotiation

To encourage proment of withhrld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP. These taxes are called trust fund taxes because you actually hold the employee's money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immeditately collected from the business. The buisiness does not have to have stopped operating in order for the TFRP to be asessed.

Who Can Be Responsible for the TFRP

The TFRP may be assessed against any person who:
*is responsible for collecting or paying withheld and employment taxes, or for paying collected excise taxes, and
*willfully fails to collect or pay them

A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:

*an officer or an employer of a corporation
*a member or employee of a partnership
*a corporate director or shareholder
*a member of a board of trustees of a nonprofit organization
*another person with authority and control over funds to direct their disbursement, or
*another corporation

For willfulness to exist, the responsible person:

*must have been, or should have been, aware of the outstanding taxes and
*either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).

Using available funds to pay other creditors when the buisness is unable to pay the employment taxes is an indication of willfulness.

How Do you know if you qualify for Innocent Spouse Relief?

All the facts and circumstances below are considered in determining whether its inequitable to hold you liable. Some of the factors include:

*The taxes owed are your spouse's or ex-spouse's
*You are no linger married to that spouse
*You thought you spouse would pay the taxes on the original return
*You didn't know about the items changed in the audit
*You would suffer a financial hardship if you were required to pay the tax. You would not be able to pay for basic living expenses like food, shelter, and clothing
*You did not significantly benefit (above normal support) from the unpaid taxes
*You suffered abuse during your marriage

However keep in mind that you must file no later than two years from the sate the IRS first attempted to collect that tax from you.

You are an injured spouse if you share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse's legally enforceable past-due federal taxes, state income taxes, child or spousal support payments, or a federal non-tax debt, such as a student loan. If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment.

If you think you qualify for Inniocent Relief, contact a repuatable tax debt company for assistance and relief of this burden

Offer In Comporomise and the IRS

An offer in compromise is an agreement a taxpaye and the Internal Revenue Service that settles the taxpayer's tax liabilitiee for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or throuhg a payment agreement.

In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayers ability to pay and includes the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and toher property and any dissipated assets. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

OIC- Doubt as to Liability
A legitimate doubt exists that the assessed tax liability is correct. Possible reaons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law (2) the examiner failed to consider the taxpayersevidence (3) the taxpayer has new evidence.

OIC- Doubt as to Collectibility
Doubt exists that the taxpayer could ever pay the full amount of the tax liability owed within the remainder of the statutory period for collection.

OIC- Effective Tax Administraton
There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstances exists that would allow thr IRS to consider an OIC. To be eligible for compromise on this basism, a taxpayer must denmonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Small Business's Can Claim IRA Retirement

Retirement plans are not just for big businesses. They are also available for sole proprietorships. If you are self-employed small business owner, you can set up a qualified retirement plan for yourself and your employees.If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. You can also deduct trustee fees if contributions to the plan do not cover them.The Internal Revenue Code provides significant tax incentives for employers that establish and maintain retirement plans that comply with the requirements of the Code.

Such plans include Simplified Employee Pension (SEP) plans and Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) plans.Generally under these plans, contributions that are set aside for retirement may be currently deductible by the employer, but are not taxable to the employee until distributed from the plan.You must set up and fund a qualified retirement plan such as a SEP or SIMPLE-IRA.

No matter what type of plan for the self-employed you are considering, you must actually make contributions to a qualified and properly maintained retirement plan account. This fact sheet provides a quick look at preventing incorrect deductions for retirement plan.

Do You Qualify For Head Of Household When Filing Your Tax Returns?

To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. You can determine whether you paid more than half of the cost of keeping up a home by using the following worksheet.

Cost of Keeping Up a Home :Property taxes Morgage interest expenseRentUtility chargesUpkeep and repairsProperty insuranceFood consumed on the premisesOther household expensesIf the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. Costs you include: the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.

Costs you do not include: the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.There are so many nuances that the average taxpayers negates to include when preparing tax returns. Before you cost yourself money, contact a licensed tax preparer to help prepare your returns.

How To Report Expenses To The IRS

Did you know that if you are self-employed, you must report your income and expenses on Schedule C or C- EZ (Form 1040) if you are a self-proprietor, or on Schedule F (Form 1040) if you are a farmer. You do not use Form 2106 or 2106 EZ.

Say for instance, if an employee receiving the standard meal allowance under a non accountable plan may claim 50% of the standard meal allowance as a miscellaneous itemized deduction, subject to the 2% limitation. Reimbursements under accountable plans are not included in the employers taxable compensation. Therefore, such employees receive no deduction, and the 50% limitation applied to the employer's deductions.

If you are both self-emplyed and a W-2 earner, you must keep separate records for each business activity. Report your business expenses self-employment on Schedule C,C EZ- or F. You will need to report your business expenses for your work as an employee on Form 2106 or 2106-EZ.

Allowable and Unallowable IRS Expenses Towards Resolutions

This week I had a taxpayer ask me whether or not the following expenses would be considered an "allowable" expense with the Internal Revenue Service. When it comes to what is considered an allowable and unallowable expense, the IRS has strict guidelines on what they deem as a necessary living expense.



1. School Loan, for a child- This would not be considered an allowable expense , unless you had a ledger showing how was paid along with the balance; need to include the original loan statement

2. A personal loan you have made with a family member- This too is not an allowable expense because its not a loan backed by collateral. Meaning, the loan could be in someone else's name, and the taxpayer pay them monthly, but not itf the loan is not through an acredited finacial institution backed by collateral (car,home,assets).



If you have questions or need tax debt relief, contact a professional who can help today.

How Long To Keep Records and Receipts for Tax Purposes

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep your records that support your deduction (or an time of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date.

Say For Instance:

If you use your automobile less than 50% fir business and claim actual expenses, you must keep those records for at least 6 years (the straight-line, useful life depreciation period).

Knowing Which Tax Form To Use

When you file your 2008 individual tax return, you will use one of three IRS tax forms. Be sure to use the simplest form you can, which will help you avoid costly errors or processing delays so you won’t have to wait to receive your refund. Each of these forms can be filed electronically, which speeds up the processing of your return.
Use the 1040EZ if:• Your taxable income is below $100,000• Your filing status is Single or Married Filing Jointly• You (and spouse) are under age 65 and not blind• You are not claiming any dependents• Your interest income is $1,500 or less
Use the 1040A if:• Your taxable income is below $100,000• You have capital gain distributions• You claim certain tax credits• You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees
If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. You must use the 1040 if:• Your taxable income is $100,000 or more• You claim itemized deductions• You are reporting self-employment income• You are reporting income from sale of property

The Five Filing Status

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.
There are two things to consider when determining your filing status:First, your marital status on the last day of the year determines your filing status for the entire year. Secondly, if more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Here are the five filing status options:



1. Single. This will generally apply to anyone who is unmarried, divorced or legally separated according to your state law.
2. Married Filing Jointly. A married couple may file a joint return together. If your spouse died during the year, you may still file a joint return with that spouse for the year of death.
3. Married Filing Separately. A married couple may elect to file their returns separately.
4. Head of Household. This generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
5. Qualifying Widow(er) with Dependent Child. You may be able to choose this filing status if your spouse died during 2006 or 2007, you have a dependent child and you meet certain other conditions.

Looking For A Reputable Tax Preparer?

If you will be paying someone to do your tax return, choose a tax preparer wisely. You are legally responsible for what’s on your tax returns even if they are prepared by someone else. So, it’s important to find a qualified tax professional.
The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.
Most tax return preparers are professional, honest and provide excellent service to their clients; you can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.


*Find out what the service fees are before the return is prepared. Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.
*Only use a tax professional that signs your tax return and provides you with a copy for your records.
*Avoid tax preparers that ask you to sign a blank tax form.
*Choose a tax preparer that will be around to answer questions after the return has been filed.
*Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
*Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
*Determine if the preparer’s credentials meet your needs. Does your state have licensing or registration requirements for paid preparers? Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.
*Before you sign your tax return, review it and ask questions.



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Email Scams-IRS

Be aware of e-mail scams that fraudulently use the IRS name or Logo as a lure. The goal of the scam is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft and steal your money.
The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.
If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site,
Do not reply.
Do not open any attachments. Attachments may contain malicious code that will infect your computer.
Do not click on any links. If you clicked on links in a suspicious e-mail or phishing Web site and entered confidential information, visit our Identity Theft page on IRS.gov.
You can help shut down these schemes and prevent others from beingvictimized. If you receive a suspicious e-mail that claims to come from the IRS, you can forward that e-mail to a special IRS mailbox, phishing@irs.gov The e-mail must be forwarded using special instructions at IRS.gov, or it loses the encoding needed to track it to its source. The IRS can use the information, URLs and links in the suspicious e-mails you forward to trace the hosting Web site and alert authorities to help shut down the fraudulent sites. After you forward the e-mail to us, delete the message.

Adoption Credit on Your Taxes

You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child (including a child with special needs). The adoption credit is an amount subtracted from your tax liability. For expenses paid prior to the year the adoption becomes final, the credit generally is allowed for the year following the year of payment. A taxpayer who paid qualifying expenses in the current year for an adoption which became final in the current year, may be eligible to claim the credit for the expenses on the current year return, in addition to credit for expenses paid in a prior year. The adoption credit is not available for any reimbursed expense. In addition to the credit, certain amounts paid by your employer for qualifying adoption expenses may be excludable from your gross income.

For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. A taxpayer also may be eligible to take an increased credit or exclusion for expenses related to the adoption of a child with special needs if the child otherwise meets the definition of qualifying child, is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. The credit and exclusion for qualifying adoption expenses are each subject to a dollar limit and an income limit.

Under the dollar limit the amount of your adoption credit or exclusion is limited to the dollar limit for that year for each effort to adopt an eligible child. If you can take both a credit and an exclusion, this dollar amount applies separately to each. For example, if we assume the dollar limit for the year is $10,000 and you paid $9,000 in qualifying adoption expenses for a final adoption, while your employer paid $4,000 of additional qualifying adoption expenses, you may be able to claim a credit of up to $9,000 and also exclude up to $4,000.
The dollar limit for a particular year must be reduced by the amount of qualifying expenses taken into account in previous years for the same adoption effort.
The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (modified AGI). If your modified AGI is below the beginning phase out amount for the year, the income limit will not affect your credit or exclusion. If your modified AGI is more than the beginning phase out amount for the year, your credit or exclusion will be reduced. If your modified AGI is above the maximum phase out amount for the year, your credit or exclusion will be eliminated.

Generally, if you are married, you must file a joint return to take the adoption credit or exclusion. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements.