Innocent Spouses And The IRS
June 18, 2009 by Taxcut Editor
Filed under Personal and Business Taxes, Tax Resolution
Historically, tax issues arising from bad marriages fell into the category of “better or worse” for marriages.
The IRS granted no innocent spouse tax relief, but has changed its views.
Innocent Spouses And The IRS
When a marriage has problems, finances are almost always one of the elements that contribute to the strife. This can be particularly true where spouses file a joint tax return, which the both sign as tax payers. If the information provided on the tax return is false or inaccurate, the IRS has historically viewed both spouses as liable for the resulting assessments. If the relevant taxes were not paid, the IRS would also look to both spouses to pay the delinquent amount. In worse case scenarios, this can include criminal charges for tax evasion.
Fortunately, the IRS has modified its view of the liability of joint filers. The IRS now recognizes that innocent spouses can’t control their deadbeat former spouses. It allows such innocent spouses to claim three types of tax relief:
1. Innocent Spouse Relief
2. Relief by Separation of Liability
3. Equitable Relief
If the IRS comes after you for the tax liability of a former spouse, you can seek tax relief under these three theories if you meet all the following requirements. First, you filed a joint return with inaccurate information. Second, you didn’t know of the inaccuracies and didn’t have any reason to. Finally, taking into consideration the situation, holding you liable for the tax would be unfair.
The IRS will evaluate your application and render a ruling on your application. The IRS may agree to simply waive any tax claim against you and go after the deadbeat spouse as the sole debtor. Alternatively, the IRS may split the tax into a his and her account, only requiring you to pay one half of the amount due. While this may not sound great, it will immediately cut your tax bill in half.
In rare cases, you can seek equitable relief from the IRS. Equitable relief simply is another way of saying making you pay the tax would be manifestly unfair. You must show you and the spouse did not transfer assets as part of an fraudulent scheme, didn’t transfer assets with the intention of evading taxes, didn’t intend to commit fraud, didn’t pay the taxes due and you didn’t know what your spouse was up to. Equitable relief claims need to be handled very carefully as the IRS views them with a very cynical eye. Nonetheless, they are a last step that can be taken when all else has failed.
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Compromising With The IRS
June 18, 2009 by Taxcut Editor
Filed under Personal and Business Taxes, Tax Resolution
Few things threaten your well-being like the harassment and anxiety of persistent tax problems. Most people make 3 mistakes that get them in trouble with the IRS. They procrastinate. They attempt to represent themselves. They hire sub-par representation and now are in MORE need of help than ever before.
These are the kind of services a Tax Attorney can provide: Offer in Compromise Cases, Penalty Abatement Petitions, Full Audit Representations Business Strategy Sessions. Preparation and Filing of Tax Returns.
Settle taxes for Pennies on the Dollar owed, Stop IRS wage and bank levies (garnishments), Have property liens lifted, get affordable installment agreements, File bankruptcy against the IRS, Have penalties and interest forgiven, Reduce taxes by running out the IRS’ time to collect.
Offer in Compromise: Settle your taxes for Pennies on the Dollar owed Professional law offices can help get you a favorable settlement with an experienced IRS tax attorney. The IRS’ Offer in Compromise program allows taxpayers to settle their tax debt.
What is an IRS offer in compromise?
It settles your tax liability for less than the full amount owed, providing you can prove you don’t have the ability to pay. Depending on how much you can afford, you really can pay “Pennies on the Dollar Owed” in taxes.
If it is done correctly – this option could save you an enormous amount of money, and is the best strategy for most taxpayers. You should take extreme caution. You should hire a professional with knowledge of the IRS’ procedures.
This professional should determine the least amount that the IRS will accept from you. If the Offer is not submitted correctly it will be rejected, or you may be required to pay more than is necessary.
An Offer in Compromise may save you a LARGE amount of money. Do you know that the IRS only has a limited time to collect your back taxes?
Let a Professional Tax Attorney determine when the IRS’ time limit to collect taxes runs out.
In most cases the IRS has only a limited time to collect the unpaid taxes. You must CAREFULLY evaluate exactly when that time period will run out.
Your troubles may be solved. and moreover: If the IRS’ time has run out, or if it will run out soon, your troubles may be over.
Delaying tactics may be used to stall the IRS while their time runs out. Once the IRS is out of time, they MUST stop ALL collection action against you.
The IRS MUST release all property liens
TAX RETURNS – FAILURE TO FILE
Many people fail to file Individual Income Tax Returns for a variety of reasons. Some reasons are innocent, although the most common is the fact that people can’t afford to pay the taxes.
When this happens it becomes difficult to get back into the system. “I filed for 1998. I couldn’t pay for 2000, so I did not file. Then I was afraid to file for 2001. I haven’t filed since then. What can I do now?”
If you do not file Income Tax Returns you commit a criminal offense. However, no one who has voluntarily filed back returns before being caught has ever been criminally prosecuted. That is the first key: filing BEFORE they catch you.
IRS Penalties
Some IRS penalties can be as high as 100% to 150% of the original taxes owed. Even if you could pay the taxes owed, the extra penalties will make it impossible to pay off the entire balance.
The IRS imposes penalties to punish taxpayers and keep them in line. The IRS does forgive penalties. Before you pay the IRS any penalty amounts, you may want to consider requesting the IRS to not punish you because it wasn’t your fault.
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TurboTax Versus Your Accountant- Which is Better?
April 29, 2009 by Taxcut Editor
Filed under Tax Resolution
I practice public accounting in a Seattle suburb. Around this time of year, that means I get lots of calls from people who need a tax return prepared or some tax question answered.
One of the most common questions is, “Can I get by with something like TurboTax (from Intuit) or TaxCut (from H & R Block)?”
The Case for Tax Software
My usual recommendation? Most people can and should use a tax software program like TurboTax. The programs should be easy to use if you’ve got computer experience. Especially after the first year you use the software.
The programs are also really good at catching the usual errors. And they easily handle the most common tax questions or problems that the individual tax payer is likely to encounter.
What’s more, the price is right. Tax return preparation fees vary by region and the skill of the tax accountant. But just to give you an example, I charge close to $400 for a typical individual tax return.
In comparison, you can often find tax preparation software selling for between $25 and $50. That’s a huge savings compared to an accountant.
The Exceptions to the Rule You Should Use Tax Software
In a handful of special cases, tax software (in my opinion) isn’t as good a choice. Specifically, I recommend people spend the extra money on a good enrolled agent or certified public accountant in two situations:
Special Circumstance #1: You’ve got carry-forwards for things like capital losses, alternative minimum taxes, or passive suspended losses.
In each of these cases, to prepare this year’s tax return, you need to grab data from previous year’s tax returns. Accountants and professional tax software like your accountant uses track these carry-forward items extremely carefully.
In comparison, many tax payers don’t know which items need to be carried forward. TurboTax and TaxCut, by the way, do know. And as long as you keep using the same software on the same computer, you should be okay.
However, if you get a new computer and forget to transfer your tax files or if you bungle the file transfer, you could lose thousands of dollars of tax savings.
Special Circumstance #2: You’ve got more than one tax return to prepare. For example, you’ve got both a business tax return (like an S corporation, limited liability company or partnership return) to prepare and you’ve also got your individual tax return to prepare.
In this case, you should consider the business return when you prepare the individual return. And vice versa-you should consider the individual return when you prepare the business return.
As good as the tax software programs are, the programs can’t know as you’re preparing one tax return about the other returns you’ll need to prepare as well. And that lack of insight means the tax software can’t recommend tax accounting choices on one return that let you minimize the taxes you’ll pay on another return.
In comparison, a good accountant will consider your individual tax liability as he or she makes accounting choices on your business return. The accountant, for example, will consider your individual tax bill when depreciation methods are selected on the business return.
Seattle CPA Stephen L. Nelson has written more than 150 books, including the bestsellers on Quicken and QuickBooks. Formerly an adjunct tax professor at Golden Gate University, Nelson also edits the do-it-yourself [http://www.llcsexplained.com]forming an llc and [http://www.scorporationsexplained.com]forming an s corp web sites.
Article Source: http://EzineArticles.com/?expert=Stephen_Nelson http://EzineArticles.com/?TurboTax-Versus-Your-Accountant–Which-is-Better?&id=458139
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Hire the Tax Pro? – Or No
April 25, 2009 by Taxcut Editor
Filed under Tax Resolution
At tax time many years ago, I faced reporting a series of securities 
transactions on my federal and state tax returns. Before I came in for my appointment with my CPA, she asked me to detail each of the (as it turned out to be) too-many stock transactions: Date bought and sold, basis, name of security, etc.
Later, when I picked up my return and I saw my accountant’s bill — guess what? She billed me for each item as if she had independently gone through my pile of records herself.
Now, I don’t mind paying for someone’s work. But I found myself both doing the work, and then paying her for it again! Ever since that time, I decided that the best thing for me would be to use one of the many time saving software products to complete my yearly taxes.
Yet, despite my own frustrating and expensive experience, there are still many instances when using a tax professional is not only warranted, but desirable.
Now that once again it’s “tax time” which route should you take? Should you do your own taxes, or look to a professional to do them?
In general you might seriously consider hiring a professional to do your taxes if you fall in one or more of the following circumstances:
You are confused about the filing process (but on the other hand, who isn’t?)
Of course, this is a common problem. It is especially true if (for whatever reason) you usually do your return by hand: There are so many forms and instructions. If they are confusing to you, you might want to consider hiring a professional.
However, as an option, you might instead consider using a tax preparation program like Turbotax (Turbotax.com) or Kiplinger’s TaxCut (Taxcut.com). These programs ask detailed questions — and provide significant assistance in weaving through the important issues.
But, if the thought of using a computer program is still daunting, or if you feel uncertain about it, I suggest that you use the professional.
You are in business for yourself (and feel that you should stick to what you know best)
If you have a business, there are many additional complexities. Also, the more complex your business transactions and format, the more you might benefit from going to the accountant for help. Professionals may be able to assist you through the complexity of the federal and state returns and schedules relating to business entities.
You have screwed up in the past
If you have made errors in the past, you might be best off leaving it to the tax pro. The fact that you might have had prior errors may indicate a complexity — or even a problem — which might be better addressed by an accountant, enrolled agent, or tax attorney.
You were audited in the past (and lightning indeed can strike twice!)
A past audit might be another reason. This is especially true if the condition giving rise to the earlier audit would again appear on your current return. It is quite possible that your return will be “flagged” once again by IRS. A professional could assist you — especially if you find yourself under scrutiny.
For example, if your large number of charitable deductions in prior years interested the IRS, the fact that you again have numerous deductions this year might generate another audit.
Consider this also: If you have a professional do your return, he she might be in a better position to handle the audit. The professional in that case would be defending their own return — one which they prepared. As the saying goes: Your accountant or agent will have a “dog in that fight.” It’s always good to have a committed advocate.
But take heart: even after April 15th, the birds will still chirp, the flowers will still bloom. Whatever you do, though, pick the strategy best for you, and let’s all hope that the maximum amount of “green” not only remains in the yards and fields, but also in your bank account.
As a a licensed attorney located in the Los Angeles San Gabriel Valley, Larry Stratton is in a position to coach and advise you, and to help you plan for your future. [http://www.strattonplanning.com]The Law Offices of Larry D. Stratton specializes in estate planning, business formation and appellate practice. Larry Stratton also blogs on estate and financial planning issues at [http://www.plannersthoughts.blogspot.com]Planner’s Thoughts
Larry Stratton is a graduate of Whittier College School of Law, which is a member school of the ABA and the AALS. He has represented numerous clients in the California Court of Appeal, and is admitted to practice in all California courts, the Ninth Circuit Court of Appeal, and also the United States Supreme Court. From 1983 to 1984, he was a member of the Whittier Law Review.
Larry Stratton is also a Registered Investment Advisor, and currently speaks on estate and financial planning topics in Southern California.
Article Source: http://EzineArticles.com/?expert=Larry_Stratton http://EzineArticles.com/?Hire-the-Tax-Pro—Or-No?&id=409286
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2009 Stimulus Package: What’s In It For You — and When
April 22, 2009 by Taxcut Editor
Filed under Tax Resolution
Note: The changes won’t affect the 2008 tax returns that individual taxpayers are filing now, except in a very small number of cases. So most taxpayers can file now, and not miss out on the new tax breaks that begin this year.
However, owners of small businesses might want to act now to advantage of the bill’s substantial business tax breaks. Learn more at our TurboTax site, 2009 Stimulus Package for Small Businesses.
The new American Recovery and Reinvestment Act, according to the White House, will give a direct tax break to 95 percent of workers and their families . It includes tax breaks that provide a financial boost to everyone from the unemployed, to families with children and children in college, to first-time homebuyers and new car buyers. Some families could save more than $13,000 total from all of the breaks the package provides
As more details about the tax changes become available, TurboTax will post them here, so check back often.
Workers
Making Work Pay Credit: Workers and the self-employed would get a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers, and up to $800 for couples filing jointly.
The IRS will get the money to taxpayers by adjusting the withholding tables, thereby boosting paychecks. The increase could be as much as $40 per month per worker, depending on when the withholding tables are changed. Self-employed workers will claim the credit on their tax returns. In the meantime, they can reduce their estimated tax payments for 2009.
For single tax filers, the credit will begin phasing out at an Adjusted Gross Income (AGI) of $75,000. For couples filing jointly, the phaseout zone will start at $150,000 of AGI. (Adjusted Gross Income is your total income from wages and other income minus certain adjustments, such as deductible IRA contributions and alimony paid.)
Unemployed
Reduced taxes on unemployment income: Normally, people receiving unemployment benefits must report them as income and can be taxed on them. The new bill makes the first $2,400 of unemployment income nontaxable.
Lowered cost for COBRA health insurance: This is a valuable benefit for workers who lose their health insurance when
they lose their jobs. This government subsidy should help more unemployed people afford to keep their
insurance.
First-time homebuyers
First-time Homebuyer’s Credit: The tax package increases the $7,500 first-time homebuyer credit to $8,000 for primary residences purchased between January 1, 2009 and November 30, 2009, and eliminates the requirement that the credit be repaid, as long as the house isn’t sold within three years.
College students and their families
Expanded Hope Credit: The Hope Credit for college costs is increased to $2,500 for 2009 and 2010, covering 100 percent of the first $2,000 of tuition and related expenses per year and 25 percent of the next $2,000.
The credit is available for all four years of college, up from only two years, and covers the cost of books. It is 40 percent refundable, and begins to phase out at $80,000 of Adjusted Gross Income for singles and $160,000 of Adjusted Gross Income for married couples.
The bill also allows tax-free distributions from Section 529 College Savings Plans to cover computer purchases.
New car buyers
New car sales tax deduction: Buyers of new cars, light trucks, SUVs, motorcycles and motor homes during 2009 can deduct the state sales or excise tax they pay, even if they don’t itemize their deductions.
This break starts phasing out for single taxpayers with Adjusted Gross Income over $125,000 and couples with AGI over $250,000.
Families
Expanded Earned Income Tax Credit (EITC): More couples who file jointly and have children will qualify for the Earned Income Credit.
The tax package starts the phaseout range at $21,420, an increase of $1,880. Also in 2009, the credit increases for families with three or more children to 45 percent of the first $12,570 of earned income, up from 40 percent.
Enhanced Child Tax Credit: Plus, the Child Tax Credit will cover more low-income earners: For 2008, the credit is refundable to the extent of 15 percent of an individual’s earned income in excess of $8,500; for 2009 and 2010, that floor drops to $3,000.
Retirees, veterans and the disabled
One-time payment of $250: Because the payroll tax credit only goes to employees and the self-employed, the bill adds something for others as well: a one-time payment of $250 to recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income payments, and pension and disability benefits from the Veterans Administration.
Government retirees who don’t get Social Security will also get a one-time refundable tax credit of $250 in 2009.
Homeowners
Extended energy-saving credits: The 10 percent tax credit for energy-saving home improvements climbs to 30 percent and is extended through 2010. Improvements that qualify for the credit include energy-efficient skylights, windows and outer doors, along with energy-saving water heaters, central air conditioners and biomass stoves.
The bill also eliminates individual credit caps for the different types of property, and instead imposes a $1,500 cap on all qualifying property.
Middle-income taxpayers
One-year “patch” on the Alternative Minimum Tax: To keep millions of middle-income taxpayers from being forced to pay the Alternative Minimum Tax (AMT) for 2009, the measure increases the minimum tax exemptions to $70,950 for couples filing jointly and $46,700 for single filers. Otherwise, the exemptions would top out at just $45,000 for couples and $33,750 for singles.
Small businesses
Small businesses would most likely be affected by the following changes:
Bonus depreciation
Special 50 percent, first-year bonus depreciation is revived for assets bought and placed in service during 2009.
Loss carrybacks
Businesses that averaged $15 million or less in gross receipts over the past three years will be allowed to carry back losses for five years instead of two. The easing applies only to 2008 losses.
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