3 Tips for Dealing with Unfiled Tax Returns

Tax 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.

Here we go again! IRS set to begin using private collectors.

Have you ever noticed how some bad ideas tend to gain new life after a sufficient amount of time has passed for people to forget how bad they were the last time they were tried?  Well, the IRS is bringing back an oldie, but not-so-goodie, starting as early as next spring – private debt collectors.

The IRS is preparing to outsource collection of some of its outstanding tax debts to four separate, private, for-profit companies in 2017.  These companies will be assigned tax debts that are not actively being worked by IRS personnel.

During the IRS’ most recent experiment with private debt collectors, which ended in 2009, the cost of commissions to the collectors, together with the expenses of startup and administration, outstripped the amount of actual tax dollars collected – resulting in a net loss for the IRS!

Add to that the numerous ongoing phone scams that have people wary of dealing with anyone claiming to be working on behalf of the IRS, and you have a recipe for disaster.  The use of private collectors is most likely an attempt to compensate for the reduction of IRS personnel over the past several years, but given the circumstances, you’d think a different approach might be in order.  It will be interesting to see how things play out this time around.

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 at (844) 479-9977.  We will talk openly and honestly about your financial situation and provide you with the best possible strategy for dealing with your tax debt.

IRS Testing Streamlined Processing of Installment Agreements

The 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?

YES, 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.

Uber, Airbnb and Turo. The new “sharing” economy business model makes for complications with the IRS.

The new “sharing” economy

Pooling resources among citizens is quickly becoming an effective way to reduce cost, and make ends meet during trying financial times. Households are discovering that sharing capabilities such as transportation and lodging can relieve financial pressures of day to day living. This model allows everyday people an opportunity to capitalize on owned assets to produce incremental revenue.  Both seller and consumer are winning as these services are increasing choice at generally more attractive prices.  Car rental, vacation housing and urban transportation, to name a few, are leading the way.

The IRS has launched new and supportive guidelines on these businesses designed to assist the sharing community in maintaining these efficient, easy and effective services. The idea is to inspire other sharing programs that support the needs of communities and cities throughout the United States.

If you are one of these providers, it is important to know that money received from providing services is taxable, even if a Form 1099 or W-2 is not issued. There are various deduction options for people who either rent a room in their home, share business space or use their vehicle to taxi people from one location to another.

It is important to get familiar with the new guidelines or get help from a tax professional that you trust. Payment options vary depending on the needs of the taxpayer and there are benefits provided by the IRS…if you know where to look.

As this complicated network expands, the IRS Sharing Economy Resource Center will be forced to evolve and tax implications will follow. As always, TaxLane assists taxpayers in understanding and meeting their tax responsibilities.  A lot of people fall behind and need help getting caught up or dealing directly with the IRS.  When it comes to tax debt, knowing what to do when makes all the difference.  We are here to help if you need it.

IRS Issues Warning About “Back To School” Scams

Scam Warning!

With students and parents preparing to face the start of the new school year, there’s already a lot of running around and taking care of last minute details. The start of the new school year also brings tax scams.

The IRS recently announced that a new scam is making the rounds. They warned of phone calls from fake agents, claiming to represent the agency and demanding a “federal student tax”.

While IRS scams have become a year round thing, this particular one targets parents and students. These bogus impersonators threaten with fines and jail time, demanding payment to stop any legal proceedings.

The IRS urges parents and schools to communicate to each other, students and staff that these scams are happening and to be on the look out.

Some of the tactics these scammer use to pay money or give up personal information include:

• Altering Caller ID information;
• Demanding payments using gift cards;
• “Verifying” tax return information;
• Pretending to be professional tax preparers;

If you receive a call from someone purporting to be an IRS representative, keep the following in mind:

• The IRS will never demand immediate payment over the phone.  You will often get a letter in the mail first;
• Threaten to alert or use local police or law enforcement agencies;
• Demand payment of taxes without benefit of an appeal;
• Ask for card payment information over the phone;

If you get a call you feel may be a scam, the IRS urges you to do the following:

• Don’t provide any personal information and hang up immediately;
• Search the number appearing on the caller ID.  They are often already listed as scam phone numbers;
• If you think you might owe the IRS, call them directly: 1-800-829-1040;

Staying vigilant and alert will help keep crooks from separating you from your hard earned money.

Do you need a 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.

Back-to-School Reminder for Parents and Students: College Tax Credits for 2014 and Years Ahead

With another school year now in full swing, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.

In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.

For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.

Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.

Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.

Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:

• The credit is only available for 4 tax years per eligible student.
• The credit is available only if the student has not completed the first 4 years of postsecondary education before 2014.

Here are some more key features of the credit:

• Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
• The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
• The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
• Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.

The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.

Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:

• Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
• The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
• Income limits are lower than under the American opportunity tax credit. For 2014, the full credit can be claimed by taxpayers whose MAGI is $54,000 or less. For married couples filing a joint return, the limit is $108,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $128,000 or more and singles, heads of household and some widows and widowers whose MAGI is $64,000 or more.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on IRS.gov. Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.

There are a variety of other education-related tax benefits that can help many taxpayers. They include:

• Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
• Student loan interest deduction of up to $2,500 per year.
• Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
• Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.

The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on 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.

New IRS YouTube Video Provides Tips on Health Care, Tax Returns

The Internal Revenue Service announced the availability of several new YouTube videos to help taxpayers get important information about the Affordable Care Act and tax return filing.

The new videos, which are part of a series on the IRS YouTube channel, feature IRS Commissioner John Koskinen discussing the premium tax credit and the individual shared responsibility provision. These provisions of the Affordable Care Act will affect people’s tax returns next year when they file their 2014 returns.

In the video about the premium tax credit, the Commissioner talks about how it can help make purchasing health care through the Health Insurance Marketplace more affordable for people with moderate incomes.

“You can get advance payments of the premium tax credit paid directly to the insurance company to lower your monthly premium, or you can apply for the premium tax credit when you file your tax return for 2014,” Koskinen said.

In the video about the individual shared responsibility provision, Koskinen discusses important facts about coverage requirements, coverage exemptions and the individual shared responsibility payment. He covers who must make a payment, who is eligible for exemptions, and what people need to do when filing their tax return.

“For most people, filing their returns in the spring of 2015 is going to be fairly simple – with regard to this issue, and that is they’ll simply check a box indicating that they have qualifying insurance or they’ll indicate that they’re eligible for an exemption. Otherwise, they’ll calculate their shared responsibility payment and add it to their tax return,” Koskinen explained in one segment of the video.

IRS videos explaining the premium tax credit, the individual shared responsibility provision, and the small business health care tax credit are on the IRS Health Care video playlist. Additional videos about the Affordable Care Act will be available soon.

Health care videos are among those available on the IRS YouTube channel. Taxpayers have viewed IRS videos nearly 8 million times.

More information on the tax provisions of the Affordable Care Act is available at IRS.gov/aca, where you can also find Health Care Tax Tips. You can also subscribe to IRS Tax Tips to get these easy-to-read tips by e-mail from the IRS.

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.

2012 Individual Income Tax Returns Complete Report Now Available

On August 22, 2014, the Internal Revenue Service announced the availability of their report, Statistics of Income – 2012 Individual Income Tax Returns Complete Report (Publication 1304).  This report contains complete individual income tax data.  The statistics are based on a sample of individual income tax returns, selected before audit, which represents a population of Forms 1040, 1040A, and 1040EZ, including electronic returns.

U.S. Taxpayers filed 144.9 million individual income tax returns for tax year 2012.  This number is down 0.3 percent from 2011.  The adjusted gross income less deficit reported on these returns totaled 9.1 trillion dollars.  This is an increase of 8.7 percent when compared to the prior year.

The report is based on a sample of 144.9 million individual income tax returns filed for tax year 2012, and provides estimates on sources of income, adjusted gross income, exemptions, deductions, taxable income, income tax, modified income tax, tax credits, self-employment tax, and tax payments.

Classifications include tax status, size of adjusted gross income, marital status, age, and type of tax computation.  A brief text reviews the requirements for filing tax returns, explains the changes in tax law, and describes the sample used to produce the report.  The report is available for review and download at the following location in the IRS’s official website:

http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Returns-Publication-1304-(Complete-Report)

For more information about these data, one may write to the Director, Statistics of Income Division, RAS:S, Internal Revenue Service, 1111 Constitution Avenue, K-Room 4122, Washington, D.C 20224

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.