Thursday, August 28, 2008

Mileage Reimbursement Changes

People who can deduct mileage for business use, medical use or moving can now use a higher mileage rate set forth by the IRS in June. The IRS has changed the optional standard rates for the second half of 2008.

For business use the rate increased 8 cents, from 50.5 cents to 58.5 cents per mile. The new rate is effective from July 1st to December 31st. This has been set forth in Rev. Proc. 2007-70.

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional standard rate allows employees and businesses to compute the deductible cost of operating an automobile in lieu of tracking actual costs. Businesses can also use it reimburse employees for mileage.

The rate for medical and moving expenses also increased by 8 cents too, but the rate per mile is 27 cents. The rate for charitable use did not change. It stays at 14 cents per mile.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

How Long do I Have to Pay?

How long does the IRS have to collect the money that I owe them?

I get this question every day. Most people believe that they will have to pay on their taxes for the rest of their lives.

When you file a tax return and owe money and don’t pay the balance, the IRS will assess you your tax. They will send you a balance due statement and want to collect. The IRS establishes a collection statue expiration date from the date the tax was assessed. The collections statute expiration date, or CSED, is 10 years and one month long. Although the IRS can re-assess the tax for another 10 years, it is rare that they do. Once the expiration date has passed, the tax “falls off” and you will not owe that tax anymore.

There are a few things that can extend your CSED's. Filing for bankruptcy will extend the expiration date for the time between filing and having your bankruptcy discharged. Making an Offer in Compromise will extend the the CSED also. Any time spent living outside the United states or serving over seas in the military will also extend your CSED's.

To find out where you stand with your CSED’s and to get many more questions answered about the IRS and taxes you owe call a reputable tax resolution firm.

How to deal with the IRS

In my time working for a tax resolution firm, I have found out many things regarding the IRS and taxpayers. Many people believe that the IRS is out to get them and will make it difficult for the them to resolve their situation. The IRS will do little to go over all your options for a resolution. The IRS is the biggest creditor and has ways of collecting money other creditors do not have.

The IRS is the only creditor who has the ability to take money directly out of your bank account and directly out of your pay check. They can even collect from pensions and social security. The IRS can even collect from accounts receivable for businesses who owe a liability. They do this through levies.

Iif you don’t know what you are doing when dealing with the IRS, you will not get the best result possible for yourself. Self representation is no representation. You need people representing you who now how to deal with the IRS and do it hundreds of times per day. They will help you get the best possible outcome that you qualify for.

You don’t go to court without a lawyer, why would you face the IRS without professional representation

Wednesday, August 27, 2008

Haven't filed a tax return in a while, you may owe the IRS

If you haven't filed a tax return in a few years, you may still owe the IRS. You may have even been suprised when you received a Balance Due Notice in the mail from the IRS for years you haven't filed.

The reason for this is the SFR. An SFR stand for Substitute for Return. When you go more than 2 years without filing a return, the IRS might prepare a return for you. They will file you single with standard deductions. You will not get any other deductions that might be beneficial to you. Once they prepare a return for you and you owe tax, they will file that return and assess the tax against you. If they prepare a return for you and you are due a refund, they will not file that return. Thus, you will not get your refund. It is not in the best interest of the Treasury to hand out money on returns not filed by the tax payer.

Once your tax has been assessed, they will put you in the collections letter cycle.

Even though you have a SFR, you can still file a return on top of it with all of your deductions included and you correct filing status. This will file over the SFR and adjust your tax liability, but it will take months to process, so in the meantime, you need to be in a resolution with your supposed liability or the IRS will enforce collections (even if your return shows you don't owe). Doesn't seem fair but that's the way it is.

This is one of those areas where professional representation might be your best bet. It is very tricky when filing over SFRs and when filing old returns. If your returns don't match up to IRS records, you will be red-flagged for an audit for sure, delaying the whole process and even resulting in more penalties.

That's not your money!

The IRS takes the civil trust fund very seriously. If you own a business, you know exactly what the civil trust fund is. When you pay employees, the IRS "trusts" you to collect their withholding and FICA taxes. At that point, you have to give that money to the IRS and file a form 941 to reconcile what you have paid the IRS.

What happens a lot of times is a business will get into a cash crunch and not pay their civil trust fund deposits to pay other bills instead. They think they can catch up with it the next month and when that doesn't happen, the next. Slowly they realize that they are now behind 3 months and have not filed their form 941. The IRS sees this as stealing. This is not unpaid taxes of the business; instead, it is other people's money that was intended to pay their own taxes, medicare and social security retirement. It must be paid back and in full. The IRS does not negotiate on this type of liability.

This potentially places a business in great jeopardy. By not paying and/or filing for 3 months, they have earned themselves a Revenue Officer, the highest level of collections enforcement the IRS has. It is the Revenue Officer's job to collect the civil trust fund money. They will levy a business to collect the money. They can levy bank accounts and accounts receivables. They can even shut down a business to collect the civil trust fund.

It does not have to be the end of the road for your business. There are ways of handling this situation with the IRS. You need professional representation to help you navigate through these kinds of rough waters. There is help if you want it!

Do You Have a Tax Lien?

Tax liens can be filed by the IRS 10 days after a balance due notice or demand for payment has been sent to the tax payer. Lien's are a public notice to the tax payer's creditors that the goverment has claim against the tax payer's property.

The IRS will only release a notice of federal tax lien within 30 days of the tax payer paying their liability in full or if an offer in compromise is accepted and the terms of the agreement fulfilled.

Liens are filled in the courthouse of the county of residence of the taxpayer. Most people believe that the IRS reports this to the credit bureaus. This is not the case. The federal tax lien is public notice and the credit bureaus pick it up there. Having a lien on your creidt reort will damage your credit score.

If you questions about tax liens or other tax problems contact Effectur

Taking Care of Your IRS Problem

When you owe the IRS, or are behind in filing your tax returns; there are three things you can do.
The first is to do nothing and let the IRS enforce collections and take care of your problem for you. This is never a good idea. Although the IRS can prepare and file a return for you, known as a substitute for return or SFR, they will prepare it in the best interest of the treasury. Meaning, they will not take into account any deductions you may be able to take advantage of, and then they will assess a tax liability against you. This will put you into the collections process; mandating that you take action or have the full collection forces of the IRS come after you.

The second thing you can do is handle it yourself. This is also not a good idea. Unless you know how the IRS works and what options are available for you, you will never know if you have gotten the best deal that is available for you. It is not the IRS’s job to get you into your best possible result, it is their job to collect from you. AND it is never a good idea to prepare your own tax return. Always have a professional do it for you so that you can be sure to take advantage of all possible deductions you may have and to avoid costly mistakes and errors that can cause you many many headaches.

The Third and best way to handle your situation is to hire a reputable tax resolution firm. They will know how the IRS works, what options are available to you and get you the best result possible. You wouldn't go to court without a lawyer would you? So why would you want to face the largest bill collector on your own. A reputable firm will have your best interest in mind. Have great communication with clients, have great customer satisfaction scores and deliver what they promise.
You always want to be proactive with the IRS and deal with them on your own terms.

Levy Notice from the IRS

Like so many tax payers, this could happen to you. You get a certified letter form the IRS. When you pick it up from the post office and open it, you read that the IRS intends on levying certain assets.Don't panic!This means that you have not responded to the IRS's other letters they have been sending you. The IRS can not levy you until you have been through the collection due process. Simply put, they have to notify you of a balance due and give you time to respond.If you get a CP 504, intent to levy, there is still time to handle your problem.You do need to get moving right away, because doing nothing will only result in the IRS taking your assets away.If you are unsure of what steps to take next, it might be time to hire a reputable tax resolution firm. A tax resolution firm can help you out tremendously; they know how to deal with the IRS and can get you back onto the road to recovery and peace of mind.

The Collections Process and the IRS

The IRS is required by law to follow specific steps when notifying a tax payer of a tax liability. This is the Collections Due Process. The IRS has to follow these rules step for step. They only need to send notices to the last know address of the tax payer.The process starts with a balance due notice, form CP14 or CP11. The balance due notice states how much is due and from which tax year.After 10 days of sending the Balance Due Notice the IRS will send a second notice of demand for payment with form CP 501.10 days after the CP501, a CP503 is sent with the same demand for payment.When all the above notices are ignored, the IRS will send a CP504, Notice of Intent to Levy. This is always sent via certified mail.In most cases a final notice of intent to levy is sent. This is letter L 1058. This step may be skipped by the IRS.If the taxpayer ignores or fails to respond to all the notices, a Levy is placed against the taxpayer and a notice is then sent to the taxpayer informing them of the levy. The Levy Notice is form 668.If you are in IRS collections, you may need help to handle the IRS. You want to act quickly when you start receiving these notices and not wait until you are levied which can leave you with no money that may be used to get help. It is always best to be proactive with the IRS. You want to deal with the IRS on your terms not theirs.