Friday, May 29, 2009

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!

Sunday, May 24, 2009

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 !

Tuesday, May 19, 2009

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 !

Sunday, May 17, 2009

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.

Tuesday, May 12, 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.

Monday, May 11, 2009

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.

Saturday, May 2, 2009

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.