3 Tips for Dealing with Unfiled Tax Returns

business woman biting her nailsTax season comes around every year whether you are ready or not.  Most people prepare and file their returns on time every year.  Maybe you are one of those people who, for any number of reasons, never got around to filing your return.  Once you missed one return, the prospect of later filing two or more returns became overwhelming.  Before you knew it, you were several years behind and not sure how to remedy the situation.  Letters and notices from the IRS started to stack up on your desk, but you were too overwhelmed to open them.  Now is the time to change things.

Below are three steps to take NOW:

1) Stop avoiding the issue

The IRS is not going anywhere.  Prolonging the inevitable is only hurting yourself.  The longer you wait to deal with this issue, the more interest and penalties will compound.  It’s definitely to your advantage to deal with things on your terms, before the IRS forces your hand with collection action and/or audits.

Although uncommon, in a worst case scenario the IRS can pursue criminal charges against non-filers.  They can also file a return for you and then assess the tax and start collection activity.  The filing of a substitute for return (called an “SFR”) often results in a significantly higher tax liability because the IRS normally won’t give you the benefit of all of the tax breaks that you would get if you filed the return yourself.

If there is a possibility that you will be a due a refund for a past year, you have three years to file and claim that refund.  However, if you owe money and don’t file a return, the time frame for assessment never starts.  While the IRS will usually only request six years of unfiled returns when dealing with non-filers, not filing a return technically leaves the IRS with an open-ended time frame for assessment and collection.

2) Gather your information

Go through your old papers, folders, and file drawers and gather anything that might be tax related.  Err on the side of including too much.  You can always thin things out later.  If you don’t have copies of old records, you can request past statements from your bank or credit card companies.  You can also request copies of information from the IRS that various entities (employers, investment companies, mortgage lenders, etc.) would have submitted to the IRS under your Social Security number.  While records created at the time of an expense are preferred, some records can be recreated, if necessary.  Include all records related to major purchases, such as homes, cars, or investments.

Once you have everything gathered, go through and sort it by year, and then by month.  You can sometimes back into information for a particular tax year based on only a few monthly statements.  Create a separate folder for each year, or even each month within the year if the records are voluminous.

If you also happen to have a stack of unopened correspondence from the IRS, now is the time to deal with it.  You want to make sure that you don’t miss any important information or any response deadlines that may be helpful.  Open and sort these notices in date order as well and put them in their own folder.

3) Find a qualified professional

If you haven’t filed a tax return in several years, odds are that you aren’t going to be able to catch up and file all of your back returns on your own.  The best advice is to find a qualified professional to prepare the returns and walk you through the process.  In addition to preparing the returns, a good tax professional can also help you navigate the IRS collection process and a possible installment agreement or offer in compromise.  If you have a good reason for failing to file your returns, a qualified professional can also help you request abatement of some IRS penalties.

TaxLane® (www.taxlane.com), regularly assists taxpayers with Unfiled Returns, Offers in Compromise, Installment Agreements, and the removal of IRS liens and levies.  Steve Photopoulos, JD, MST, a tax professional with over fifteen years of experience, is the owner and founder of TaxLane®, and creator of the blog, Life in the Tax Lane (www.lifeinthetaxlane.com).

To find out what options are available to you, contact our offices at (844) 479-9977.  We will talk openly and honestly about your tax situation and provide you with the best possible strategy for dealing with your IRS issues.

IRS Testing Streamlined Processing of Installment Agreements

Tax HelpThe IRS has announced that it is currently experimenting with expanded criteria for streamlined processing of taxpayer requests for installment agreements.  Among the expanded criteria for streamlined processing are individual taxpayers with an outstanding tax balance between $50,000 and $100,000 that request an installment agreement that will pay off their balance in 84 months or less.

The IRS will provide information regarding additional expanded criteria in the coming weeks.  The test program is scheduled to run through September 30, 2017.

TaxLane®, regularly assists taxpayers with Offers in Compromise, Installment Agreements, and the removal of IRS liens and levies.

To find out what options are available to you, contact our offices.  We will talk openly and honestly about your financial situation and provide you with the best possible strategy for dealing with your tax debt.

The IRS’s has proposed a fee increase for installment agreements…are there exceptions?

Internal Revenue ServiceYES, there are.

The Internal Revenue Service has proposed changing its fees for people who pay taxes in installments starting on January 1, 2017. Currently, the fee is a maximum of $120, and it will go up to $225. TaxLane regularly helps people work though all types of tax issues.  If you are in a situation that may be impacted by this change, you can save some money by speaking with someone now regarding the resolution of any tax issue you may have.

We have found that there will still be a number of exceptions made for lower-income families. For example, the $43 fee for families of four with an income with around $60,000 or less will remain the same. Other savings will be offered to taxpayers who take advantage of such options as the direct debit program. The IRS has offered many of its services at a rate that is under the actual cost for the services, you just have to know where to look and…qualify.

Navigating the options can be a bit daunting.  Getting help from someone or a firm that understands the IRS’s language and requirements will ensure the best outcome.

The actual proposed fees are as follows. Even if a person initially qualifies for one of the higher fee rates, they can reduce that by using one of the payment options that lowers the fee.

  • A regular installment agreement will be $225 if it is made on the phone, in person, by filing Form 9465 or by mail.
  • If the person then sets up a direct debit, the fee drops to $107.
  • Making an online payment agreement reduces the fee to $149.
  • Choosing direct debit when making an online payment agreement brings the fee down to $31.
  • A restructured or reinstated installment agreement costs $89.
  • The low-income rate remains $43.

Call a trusted professional to help you or take a look at (REG-108792-16), now available in the Federal Register to get more details about the coming IRS fee changes.

Do you need a Fresh Start?

Tax Lane Fresh Start

You’ve no doubt heard the words “fresh start” a lot recently.  Many of our competitors hype it as the silver bullet that will solve all of your tax problems.  But, what do they mean by fresh start?  Will it really bring you the solutions you need?

Can the IRS’s Fresh Start Initiative help you? 

The short answer is YES.

But the amount it can help you is directly related to the level of experience and knowledge of the person or firm you have hired to help you manage through your tax related issues.  I’m not saying that my company, TaxLane®, is the only one capable of navigating the in’s and out’s of this program to help you.  I am saying, however, that you should do your homework when seeking assistance.  There are tax firms that know how to use it and there are companies that are just using it to land your business.

What is the Fresh Start Initiative?

The Fresh Start Initiative was introduced by the IRS to expand the options eligible taxpayers have to pay back taxes and avoid tax liens.   Some of the areas that the Fresh Start program impacts:

  • Tax Liens.

The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien. That amount is now $10,000. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.

GET HELP:  There are parameters and certain qualifications that a skilled firm can help you with.

  • Installment Agreements.

The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 COULD QUALIFY to pay through monthly direct debit payments for up to 72 months (six years).

GET HELP:  Installment agreements may require financial statements and other supporting documentation, historical tax information and applicable completion of IRS forms such as a Collection Information Statement, Form 433-A or Form 433-F.

  • Offers in Compromise.

An Offer in Compromise is an agreement that MAY allow taxpayers to settle their tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program.

GET HELP:  For eligible taxpayers, an Offer in Compromise can significantly reduce the amount that they owe the IRS.  Not all taxpayers will qualify for an Offer in Compromise and the difference between those that qualify and those that don’t is often the quality of the offer that they submit.  The IRS has voluminous rules regarding the requirements of an acceptable offer.  If you don’t meet these requirements, your offer will be summarily rejected.

Accurately completing the offer paperwork and correctly reporting your assets and income can have a dramatic effect on the likelihood that your offer will be accepted. The right help in this situation can be a game changer.

Can we help you?

YES.

TaxLane®, regularly assists taxpayers with Offers in Compromise, Installment Agreements and the removal of IRS liens and levies.

To find out if the Fresh Start Initiative is for you, contact our offices.  We will talk openly and honestly about your financial situation and provide you with the best possible strategy for dealing with your tax debt.

Take a breath.  It’s going to be Ok.

IRS Repeats Warning About Phone Scams

fraud, scam, theftThe Internal Revenue Service and Treasury Inspector General for Tax Administration (“TIGTA”) are still receiving complaints from taxpayers about unsolicited calls from people claiming to be from the IRS and demanding payment.  The TIGTA has identified approximately 1,100 victims who have lost a total of $5 million from these scammers.

Here are a few things taxpayers should know about the IRS that can help you recognize a scam:

  • The IRS will NEVER ask for credit, debit or prepaid card information over the phone;
  • The IRS will NEVER insist that you use a specific type of repayment to pay tax obligations;
  • The IRS will NEVER request immediate payment over the phone and will not take enforcement action immediately after a phone conversation.

Taxpayers who receive these calls may be told that they owe money that must be paid immediately or that they are entitled to a large refund.  If unsuccessful the first time, scammers may call back and try a different method.

Here are some other typical characteristics of a scam:

  • Scammers will use fake names and IRS badge numbers. The names are usually common;
  • Scammers may know the last four digits of you social security number;
  • Scammers are able to make the caller ID appear as if the IRS toll free number is calling;
  • Scammers occasionally send bogus IRS emails to support their bogus phone calls;
  • Scammers will add background noise to simulate the sound of a call center;
  • Scammers will threaten the potential victim with jail time or suspending their driver’s license. Similarly, another scammer will call back shortly after hanging up and pose as the DMV or local police; and the caller ID may be masked to support their claims.

If you receive a phone call from someone claiming to be from the IRS, here are some simple steps you can take:

  • If you know you owe taxes, or you think you might, call the IRS at 1-800-829-1040. The IRS employees at that line can help you with a payment issue if there is one;
  • If you know you don’t owe taxes, or you have no reason to think that you owe any taxes, then call and report the incident to the TIGTA at 1-800-366-4484;
  • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of the complaint.

Taxpayers should also be aware that there are other types of telephone scams and solicitations that claim to be from the IRS, such as debt relief or lottery sweepstakes.

The IRS encourages taxpayers to be vigilant against email and telephone scams.  The IRS does not initiate contact with taxpayers via electronic media, including email, text messages or any social media source.  The IRS will always contact taxpayers with official correspondence sent through the mail.  People who receive such emails should not open any links contained in the message.  Instead, forward the email to phishing@irs.gov.

This blog brought to you by TaxLane, LLC, providing tax preparation and consulting services to individuals and small businesses.

Pittsburgh, Allison Park, Hampton, Shaler, Glenshaw.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.

IRS Interest Rates to remain the same for 1st Qtr. 2013

The Internal Revenue Service has announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2013.  The rates will be:

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) 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.

IRS FY 2013 Budget – They’re Back!

The IRS has released details of its FY 2013 budget request.  The current request is approximately $12.8 billion, representing about an 8% increase over 2012.

One of the primary focuses of the FY 2013 budget is increased enforcement.  The budget includes $403 million in new IRS enforcement activities, which are expected to raise $1.48 billion annually by FY 2015.  In addition to the 4.3-to-1 direct return that the IRS expects to achieve on its enforcement investment, the IRS estimates that the deterrence value of these activities will be at least three times the direct revenue impact.  Translation — Once you see what the IRS does to your friends and neighbors, you will think twice before you cheat on your taxes!

The budget also includes $200 million in additional examination and collection programs, which are expected to raise more than $1.1 billion by FY 2015.  The IRS believes these investments are especially important to further the IRS’ mission of improving tax compliance.

While some of the enforcement increases represent IRS efforts to recover from reductions in funding over the past two years, the IRS is clearly turning its focus toward enforcement, with the goal of increasing both compliance and revenue.

What does this mean for most taxpayers?  I would expect to see a trend of increasing examinations and more focused (i.e. more aggressive) collection efforts.  While we will have to wait and see what the full impact of these increased activities will be, it definitely looks like the IRS is looking to put the “teeth” back into its enforcement efforts.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.

Q: What is a Tax Lien?

A: A lien is a legal claim on property.  A tax lien is a public record that puts your creditors on notice that the IRS has a claim against all of your property, including property you acquire after the lien is filed.  The lien attaches to all of your property both real and personal, such as your home, your car, or any other property rights you may have.  Because it is a public record, a tax lien can also negatively affect your credit report and score.

While receiving a notice of federal tax lien can be an unsettling experience, there are legitimate methods that can be used to either appeal the filing of the lien, or have it withdrawn, released, or discharged.  However, it is important that you act quickly; as a lien notice is usually the first aggressive step in the IRS collection process which can later include levy and garnishment.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.

What is the difference between a lien and a levy?

People are often confused about the various collection options available to the IRS and their effect.  A lien is public record filed with the local clerk of courts providing notice that the IRS has a claim to the property (real and personal) of the taxpayer.  While a lien may have negative effects on a taxpayer’s credit report/score, it is not the most potent collection weapon in the IRS’ arsenal.

A levy, on the other hand, is an actual attempt by the IRS to seize your property, such as real estate, personal property, or cash you may have in a bank account.  The IRS will normally send you notice of their intent to levy via certified mail prior to the actual levy.  You will have a short period of time to react to the notice and potentially stop the levy from taking place.

Levies are usually used by the IRS when a taxpayer either fails to respond to repeated attempts at collection, or if the IRS is concerned that particular assets of the taxpayer may soon become unavailable for collection purposes due to sale or other disposition.

An experienced tax practitioner can sometimes get a levy lifted.  A lien, on the other hand, normally remains in place until the underlying tax debt is resolved.  In either case, a quick response is required to deal with IRS liens and levies.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.