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.