A Tax Consultant for All Seasons

That could means several things. One possibility is that your liability has been unpaid for so long the IRS has assigned one specialist to handle collecting your liability. This person has numerous methods at his or her disposal, to determine what your ability to pay is. Another possibility is that the amount of your liability is so high they assigned a specialist.

This person  can not only levy your wages and your checking account, but pull credit reports, search court records, summons your bank for your bank statements, even interview people you know to find out how you live. The purpose of this research is to determine exactly what financial situation you are in and how much you can pay.

They first want to see if you can full pay your liability by borrowing against equity in your home, 401k or credit cards. If those are not an option or will not full pay your liability, they will look at your ability to make monthly payments–based on what they determine is and adequate standard of living.  This is not necessarily what you are actually spending. So those daily visits to Starbucks and frequent decisions to dine out may be curtailed.  In some situations they can require that you sell your home and or cars, if they are well above the standards and your liability is high.

The moral of this story is to not let your tax liability get out of hand. Contact the IRS or an Enrolled Agent to help you find the best resolution possible, before you are assigned to a Revenue Officer.

 If you have unpaid child support, certain unpaid federal obligations or unpaid state income tax, you may be subject to the Treasury Offset Program. Below I have included information from the IRS on what this program is and what it could mean to you.

The Department of Treasury’s Financial Management Service (FMS), which issues IRS tax refunds, has been authorized by Congress to conduct the Treasury Offset Program. Through this program, your refund or overpayment may be reduced by FMS and offset to pay any past–due child support, Federal agency non–tax debts, or state income tax obligations.

You can contact the agency with which you have a debt, to determine if your debt was submitted for a tax refund offset. If your debt was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt and send it to the agency you owe. Any portion of your refund remaining after offset will be issued in a check to you or direct deposited for you.

FMS will send you a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund. Contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379 (PDF), Injured Spouse Allocation. Attach Form 8379 to your original Form 1040 (PDF), Form 1040A (PDF), or Form 1040EZ (PDF) or file it by itself after you are notified of an offset. If you file a Form 8379 with your return, write “INJURED SPOUSE” at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs. If you file Form 8379 with your original return, it may take 11 to 14 weeks from the date of filing to process your return.

If you are filing Form 8379 by itself, it must show both spouses’ social security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the Service Center where you filed your original return. Allow at least 8 weeks for IRS to process your allocation request. We will compute the injured spouse’s share of the joint return for you. If you lived in a community property state during the tax year, we will divide the joint refund based upon state law. For additional information, FMS can be reached at 1-800-304-3107.

The resounding answer to that question is NO! Although most people don’t use it, the worksheet that come with the W4 is really very useful. It can prevent you from under or over withholding taxes.  No one wants to take out too much, but taking out too little can be an expensive mistake.  If you underwithhold on regular basis, the IRS can issue a Lock In letter and require that you be withheld at the Single O rate.

We see a lot of client’s who push their exemptions up to 9 or 10 to keep federal income tax from being withheld. This is a big mistake!  If you don’t pay your taxes with each pay period, you end up with 2 problems.  The first is a large amount of taxes due on April 15, that you may not be able to pay. The second is you will incur penalties for underwithholding.

If you are unsure how much to take out, just follow the directions on the W4–making allowances if  you are a 2 income family.  You are taxed on the joint income, so be sure you have enough withheld. If each of you determine you should claim Married 1, you will probably come up short. At least one of you should claim Married 0.  Also keep in mind the “Safe Harbor” rule which means you will not have to pay a penalty if you owe at the end of the year, if your withholdings are at least as much as you owed the previous year.  Other rules apply if your income levels are high. Visit the IRS website for more details. Your tax professional will also be able to advise you as to what is appropriate withholding for your specific situation.

When I tell people what I do for a living, many of them make a funny face. When I say I talk to the IRS all day, they assume it must be an awful, boring job. Being an Enrolled Agent is definitely not boring and is certainly not awful. This week I was reminded why I love what I do.

The company I work for, Effectur, has a Mission Statement–”Providing Peace of Mind for Our Clients”. This week I really saw what that can mean. We have a client whose situation he had been unable to resolve on his own and we had worked diligently, with little success to resolve–until last week. When we contacted the IRS again to determine if they had made a favorable determination on this clients case, we were at last told yes!

The client’s response of gratitude and joy at having his difficult situation resolved, is one of the reasons I love what I do. Although we don’t always get the resolution we hope for, it is gratifying when we do. Whatever the outcome, I know we have used our knowledge and experience to obtain the best resolution possible for our client. If you have a situation you cannot resolve with the IRS you can either contact the Taxpayer Advocate Service or an Enrolled Agent.

There are 2 really important numbers you need to know that can help you avoid paying extra taxes on the money you have put away for retirement. The first one is 59 1/2. If you withdraw money from you retirement accounts prior to 59 1/2 you may have to pay an 10% penalty in addition to regular income tax.  There are some exceptions to this rule though, so visit the IRS website if you need more details on what those exceptions are.

The next number you need to remember is 70 1/2. Once you reach 70 1/2  the following April 1 you are required to take a minimum distribution amount from your retirement plan. In some instances your retirement plan will notify you of what your minimum is. In others, you may need to be sure you are taking the correct amount yourself.  If you don’t take out the the minimum distribution, you may have to pay a 50% penalty of the amount you received under the minimum distribution amount.

For many retirees , this is a lot to keep up with. A tax professional can guide you through the myriad rules and regulations governing withdrawals from  your retirement accounts. If you only have one, it should be fairly simple, but if you have a mixture, like Roth IRAs, 401Ks and traditional IRA, you  made need some help. Just be aware that the penalties can be stiff if you don’ t pay attention to the 59 1/2 and 70 1/2 rules.

I was asked why some people with higher final digit Social Security Number(SSN) are getting payment before those with lower ones. Obviously that shouldn’t happen, unless the person with lower SSN’s tax return received some type of review by the IRS prior to the return being fully processed. It is my understanding that those with the higher final 2 digits won’t get their payments by paper check until June and July. However if you put your checking account info on your 2007 return, many have already have yours in your account.

If you are aware of someone with a paper check with a higher SSN,  and someone with a lower one does not have it, another possible explanation could be that they will not get one at all due to owing either the IRS, state income tax , delinquent student loans, or child support. There are other possibilities as well. If  you did not get yours and feel you should have. based on the payment schedule at the IRS website, call the rebate hot line at 1-866-234-2942.  Be prepared for a long wait–possible 30 minutes to an hour at certain times of day. Many people have not gotten their’s on time due to delays in processing their return. If you left something off your return or made an error, it will delay the processing and delay your stimulus payment being issued.

If you call, just keep your cool and remember the person on the phone had nothing to do with the processing of your payment. I had an IRS representative tell me they had been talking to anger taxpayers all day, and then got a call from a lady who waited a long time just to say thank you. I don’t imagine they get to many of those calls!!

You’ve submitted your financial statement to the IRS and they won’t allow all your expenses because they are over the standards. What now?? The IRS has national standards of what they will allow for housing, food, transportation, etc based on where you live. Your personal expenses may be well over their standards. Sometimes if you can prove these expenses they will allow some of them.

If your expenses are not allowed, and you will still be able to pay your debt within the 5 year payback time, you may be allowed a 12 month lifestyle adjustment. What this means is that you payment is lower now to allow you to change your lifestyle, like getting a less expensive house or car. After 12 months, your payment will go up to what the IRS has determined.

This process can be confusing and Effectur is a company that can help you navigate the rough waters of the IRS. I am an Enrolled Agent, and every day I talk to the IRS on behalf of our clients to get them in the best resolution possible. If you have tax debt and need help,follow the link above and take a look at what Effectur can do to provide peace of mind.

If you have a student in college, like most parents, you are looking for ways to save money. One option is saving money on your taxes. There are several options for reducing your taxes for money you paid on tuition and fees. Each option has different rules, and they all have income limitations that squeeze out a lot of middle class parents. The single parent takes a real hit.  You have the same income restrictions as a single person putting their  own way through school.

The Hope Credit has a single income limitation of a Modified Adjusted Gross Income of 57,000 for singles and 114,000 for married couples filing jointly. The Life Time Learning Credit has the same. The Tuition and Fees Deduction has the highest at a Modified Adjusted Gross Income of  80,000 for singles and 160,000 for married couples filing jointly. Heads of Household get no additional break here.

All these credits and deductions have other rules about who can claim them and what expenses are allowable. The IRS website has the details in its Publication 970.  So visit the IRS website or contact a tax professional to determine which if any of these deductions are right for your situation.

If  you are one of millions of taxpayers who have tax debt that you feel your are unable to pay, there is hope. An Enrolled Agent can represent you before the IRS. This means you have someone in your corner who has passed rigorous exams  given by the IRS. Once these exams are passed, the IRS checks the person’s background and determines if they will allow them to be enrolled to practice before the IRS. To pass these exams an Enrolled Agent must study tax regulations and understand how to represent the client before the IRS.

Once an Enrolled Agent is admitted to practice, he or she can, with a signed Power of Attorney, represent you and speak to the IRS on your behalf. As an Enrolled Agent at Effectur, I talk to the IRS everyday on behalf of our clients. Our goal is to provide peace of mind to our clients. To do this we examine your situation and determine which of several options is best in your situation. We work to negotiate the best allowable resolution.

While we do have to work within the rules set by the IRS, an Enrolled Agent may be aware of options that most taxpayers may not know exist. So if you have tax debt that is keeping you up at night and are ready to move forward, contact an Enrolled Agent who can help you get your life back on track.

If you have chosen or are thinking about choosing an LLC  designation for your company, you have several choices to make. If you are the only member of you LLC, you can elect to be considered a disregarded entity for tax purposes. This means you will file a Schedule C, E or F with your 1040.  If you chose to be taxed as a corporation, you need to file a Form 8832.  This is the election form you must complete to notify the IRS that you want to file as a corporation. Additional information is available from the IRS website.

If there are two or more members of your LLC, you also need to complete the Form 8832. Your options here are to either file as a Partnership or a Corporation. Be sure you understand the implication of that decision before you make a final determination.  If you are unsure which options are best for your particular situation, contact an Enrolled Agent or other tax professional.