By Jennifer L. Rath, Enrolled Agent
If a taxpayer owes federal taxes, but does not have the financial ability to pay these taxes in full, the taxpayer can apply for a payment plan with the IRS to pay these taxes, and usually on a monthly basis. However, depending on the amount of taxes owed, the IRS may require the taxpayer to submit detailed financial information in order for the IRS to evaluate a suitable monthly payment. For this purpose, the IRS requires a taxpayer to prepare and submit a Collection Information Statement (CIS), typically through a Form 433, and with supporting financial ...
As extension season awaits us in less than three months, there are many taxpayers who will discover that they have fallen victim to identity theft. The IRS has recently clarified measures to take if you happen to fall into that category, which should not be taken lightly.
The most common way of discovering that you have fallen victim to identity theft occurs upon electronically filing your tax return.
Taxpayers attempting to file a tax return that the IRS rejects because another return under the taxpayer’s Social Security number has already been filed are likely victims of identity ...
Generally, an employer is required to deduct and withhold Federal Insurance Contribution Act taxes ("FICA"), Federal Unemployment Tax Act taxes ("FUTA"), and income tax withholding from its employee's wages and is separately liable for the employer's share of FICA and FUTA. However, in some cases, an employer will use a third party to perform some or all of the employer's federal employment tax withholding, reporting, and payment obligations.
Common third-party payer arrangements include: a payroll service provider ("PSP"), a reporting agent ("RA"), a professional employer ...
The IRS has the power to seize or “levy” assets, banks accounts, wages and other assets and income of an individual or business to satisfy delinquent taxes. However, the IRS will sometimes levy the wrong assets or income; that is, it will seize assets or income belonging to someone other than the person or business that owes the tax. This happens.
When the IRS wrongfully seizes or levies the assets or income of a person or business that does not owe the tax, this person/business can file a claim for wrongful levy with the IRS and also can sue the IRS civilly to prevent the levy or to have the ...
The IRS recently announced that, beginning this month, the tax agency will be assigning certain unpaid tax accounts to private collection agencies. The IRS will retain and continue to collect most unpaid taxes. The IRS has identified certain tax accounts, however, that it will assign over to these newly-designed private collection firms for collection. The accounts to be assigned to the private collection firms involve taxpayers who have not paid their taxes for many years and who should be well-aware of their unpaid taxes.
The private collection firms will be authorized to contact ...
The IRS requires businesses to obtain a Form W-4 from each employee, and also a Form W-9 from contractors and others who may receive payments for services. If a business does not receive these forms, the business must deduct and withhold “back-up withholding” from all wage and other payments to these individuals equal to 24% of the payments (down from 28% prior to 2018). Amounts withheld from an employee/contractor’s payments as back-up withholding are reported on Forms W-2/Form 1099 by the business, and should be reported as federal income tax withheld on the ...
An IRS tax levy is a seizure of a person’s property or rights to property. The IRS then uses the seized property to pay taxes owed. A levy allows the IRS to confiscate a person’s property, which includes cars, boats, real estate, and other “tangible” property. The IRS can also levy and take a person’s wages, bank accounts, and retirement income including Social Security benefits.
The IRS has been authorized to impose levies since 1954. Generally, the IRS must wait at least 10 days from the date it sends a notice of intent to levy before it can make a seizure. This notice must inform ...
The United States has a voluntary tax reporting system. Once a tax return is filed, however, the IRS will seek to verify that filed tax returns comply with the tax laws. To achieve this, an IRS audit ("examination") must take place. There are different types of IRS audits.
The most common type of IRS audit is a "correspondence audit" conducted entirely through the mail. Most correspondence audits are initiated by the IRS computer system, which receives income information for individuals reported to the IRS by third parties (e.g., Form W-2 wages/salaries from employers; Form 1099 ...
If an individual or business owes but has not paid federal taxes, the IRS will make efforts to collect these taxes. The IRS will first send a series of notices requesting payment, but if the taxpayer does not respond to the IRS and make arrangements to pay the taxes, the IRS will then begin "enforced collection measures." The most common measures used by the IRS to collect taxes are (1) the "levy" (or garnishment), where the IRS notifies an employer to take taxes out of an employee or a worker's paycheck and send this money to the IRS; and (2) the bank account levy or seizure where the IRS simply ...
Married couples may file a joint federal income tax return together, reporting their joint income and expenses. The benefit of a joint return is that the overall tax rate may often be lower. However, if a joint return is filed, each of the spouses is fully and individually liable for all taxes that are required to be paid.
Married couples may also elect, instead, to separately file their own returns. The downside is the tax rate for each separately-filing spouse may be higher, but each spouse is only liable for his or her own taxes - and not the taxes of the other spouse.
If a joint tax return is ...
Businesses that have employees and pay wages and salaries must withhold federal employee income taxes and the employee's share of federal employment taxes (FICA) from these wages and salaries. The employer must "match" the employee's FICA share, and these three components then become the employer's "federal tax deposit," which the employer must electronically pay to the IRS periodically. The frequency of when federal tax deposits must be made by an employer varies (weekly, bi-monthly, monthly, etc.) depending on the amount of these federal "payroll" taxes that are due.
Where an individual or business owes IRS taxes, Congress has given the IRS a tax lien against all the assets of the taxpayer. The lien covers real estate, homes, furniture, cars, investments, and nearly everything an individual may own. The IRS tax lien also covers all the assets of a business that owes taxes.
The IRS will also record a notice of this tax lien against a taxpayer, typically in the county where deeds are maintained. Once the notice of the tax lien is recorded, most counties publish the lien recording electronically and this information then "goes out to the world." The ...
Where individuals and businesses owe IRS taxes, the IRS has a settlement program where it can legally accept less than what is owed. Known as an "Offer in Compromise," Congress has given the IRS the authority to "compromise" and reduce a tax debt owed to it, but only under very specific terms. The IRS does not have other programs or alternatives where it can accept less tax than what is owed - only the Offer in Compromise.
The IRS Offer in Compromise program has been in effect for many years, but the program has changed. Many individuals and businesses file their own Offers in Compromise with ...
If an individual or business owes federal taxes and does not have the current ability to pay these taxes, the IRS can "seller-finance" and offer a payment plan with the taxpayer. The primary benefit of a payment plan is that it provides a clear agreement with the IRS on how much is to be paid and over what time period. Also, and as an inducement to enter into a payment plan with the IRS, the IRS will reduce the amount of penalties that will be due. The IRS will not "levy" or "garnish" wages or seize bank accounts while a payment plan is in effect.
Before the IRS will consider a payment plan for back ...
The United States has a voluntary income tax reporting system. U.S. citizens, permanent residents, and businesses here must annually file income tax returns with the IRS, reporting their "worldwide income," deductions, and their "net taxable income," and pay income taxes to the IRS based on this amount. The rate of tax is "progressive;" that is, it increases as taxable income goes up. There is a minimum level of income for which an annual tax return is not required to be filed and which varies on filing status. For example, in 2016 for a single (unmarried) taxpayer, the individual must ...
Many individuals and businesses owe taxes to the IRS, or they have not filed their tax returns or both. While the IRS may be the most powerful creditor in the world, there are solutions. This is Part I of a series addressing the most common issues faced by taxpayers owing taxes, and what can be done. The following is a list of each blog topic, and which also includes topics on IRS Tax Audits, and also IRS Criminal Tax Investigations, as this is where tax debts with the IRS can often arise as well:
- Unfiled Tax Returns (Part II)
- Payment Plans (Part III)
- Currently Not Collectible Status (Part IV)
In June of 2016, the Internal Revenue Service (IRS) changed its procedure for granting discharges of estate tax liens and implemented centralized handling of applications for discharge. Historically, Specialty Examination Estate & Gift and Specialty Collection Advisory (Advisory) shared the responsibility for processing applications for discharge of the estate tax lien, depending on the circumstances. In June 2016, the responsibility for working all applications for discharge of the estate tax lien was transferred to Advisory and centralized in the Estate Tax Lien Group ...
When an individual or business owes federal taxes, a lien arises in favor of the IRS in all property of the delinquent taxpayer. The IRS will often file a notice of this tax lien - a Notice of Federal Tax Lien or "NFTL" - in the state offices where the taxpayer resides or has property. The IRS generally uses IRS Form 668(Y), Notice of Federal Tax Lien, for this purpose. If the taxpayer is able to fully pay all the taxes owed to the IRS, the IRS will then issue a "Release" of the NFTL. The IRS is also authorized to "Discharge" its tax lien in specific property of a taxpayer (but otherwise retaining its ...
If an individual or business owes unpaid income taxes to the IRS, or to a state, federal bankruptcy laws may provide relief for some, if not all, of these taxes. Generally applicable to "older" federal and state income taxes, if a taxpayer has filed timely tax returns for a tax period, the due date of which, including extensions, is more than 3 years from the date a bankruptcy petition is filed; if the tax return is filed late, at least 2 years have elapsed since the filing of the late return and the filing of the bankruptcy petition; and, where the IRS has made an "assessment" of the tax owed, at ...
When someone owes the IRS taxes, as a result of not paying the tax shown as due on a tax return or where the IRS audits and imposes additional taxes owed, the IRS will "assess" this tax liability, and with penalties and interest. The term "assess" or "assessment" simply means the IRS has recorded the taxes as a legal liability of a taxpayer. Once the IRS assesses a tax liability against a taxpayer, the IRS then proceeds to collect it.
The IRS has developed a series of "collection notices" sent to taxpayers in its efforts to collect assessed federal taxes. These notices are generated now by the ...
On September 26, 2016, the IRS announced its plans for the private collection of certain federal tax debts beginning next spring. The announcement identified the following four (4) contractors that the IRS selected to carry out these collection efforts:
- CBE Group, 1309 Technology Pkwy, Cedar Falls, IA 50613
- Conserve, 200 CrossKeys Office Park, Fairport, NY 14450
- Performant, 333 N Canyons Pkwy, Livermore, CA 94551
- Pioneer, 325 Daniel Zenker Dr, Horseheads, NY 14845
The origin of this new program can be traced back to IRC § 6306, which was enacted as part of the American Jobs Creation ...
Beginning December 4, 2015, if you owe significant taxes to the IRS, the U.S. State Department now has the authority to deny or even revoke your passport.
Congress recently passed the Fixing America's Surface Transportation Act, Public Law 114-94 (FAST Act), and, as part of this broad-reaching effort to fix our nation's roads, adopted a little-publicized tax collection provision requested by the IRS where individuals can be prevented from receiving, or, worse still, can lose their passports if they owe taxes to the federal government.
Section 32101 of the FAST Act adopted a new ...
Generally, there are four methods of resolving an assessed federal tax liability: (1) full payment, (2) payment through installments under a written agreement, (3) an offer in compromise, and (4) bankruptcy. The IRS also has the authority to temporarily suspend collection or payment of federal taxes through placing an account in currently uncollectible status.
An Offer in Compromise (OIC) is an agreement between the taxpayer and the IRS that settles a tax liability for payment of less than the full amount owed. The IRS will generally accept an offer in compromise when it is unlikely ...
When spouses file a joint income tax return each is jointly and severally liable not only for the reported tax liability, but also for any additional taxes, penalties and interest later claimed by the IRS as due. A spouse can request relief from this joint liability by filing a request for innocent spouse relief with the Internal Revenue Service.
The IRS states that an innocent spouse request must be filed within two years after the date initial collection activities for the unpaid taxes have begun. The United States Tax Court has repeatedly disagreed with the IRS, however, ruling in ...
- Changes in Tax Rates for 2023
- South Carolina Department of Revenue Issues Draft Guidelines for the Use of Transportation Tax Revenues
- 2021 Update for Rollback Taxes in South Carolina
- South Carolina Business License Reforms Go Into Effect January 1, 2022
- The Death of S Corporations?
- Summary of Proposed 2021 Federal Tax Law Changes
- South Carolina Department of Revenue Announces Temporary Relief For State Tax Nexus and Employer Tax Withholding Requirements
- South Carolina Joins Other States and Adopts Federal State and Local Tax Deduction Cap Workaround
- Cigarette “Buydown” Payments to Retailers Excluded from South Carolina Sales Taxes
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