Some reports from an IRS watchdog have indicted the federal tax agency for certain practices regarding offshore account disclosure. An arm of the IRS known as the Taxpayer Advocate Service has been responsible for reporting these kinds of voluntary disclosure policies aimed at wealthy Americans. According to the watchdog report, the IRS has failed to cap penalties in cases of this kind of disclosure.
A standard practice of the IRS has been to reduce the penalties for those who willingly disclose that they have hidden offshore bank accounts. These taxpayers have often accumulated this wealth from overseas jobs or from family inheritances. The discovered lack of penalty caps has been linked to higher-than-necessary tax payments for some American taxpayers. Some experts believe that this lack of consistency could undermine the IRS’s credibility in the future if the agency implements similar types of programs.
Prior IRS voluntary disclosure programs have netted over $4.4 billion USD in unpaid taxes from these kinds of offshore accounts over a recent two-year period. A renewal of this disclosure is expected to bring in more names of wealthy Swiss bank account clients who have avoided their obligatory tax payments.
Information from this IRS watchdog report reveals that the ordinary cash penalty is supposed to be a maximum of $10,000 for account holders who accidentally fail to report these assets. Willful withholding of information on foreign bank accounts can carry a penalty of up to 50% of the highest account balance for each covered year of tax nonpayment.
Each year the Internal Revenue Service (IRS) reports the most common tax deductions taxpayers forget about when submitting their income tax return. Among one of the most common mistakes taxpayers make is they forget to place their Social Security number on the form or they make a mistake when entering the information.
It is possible for some taxpayers to be overpaying so it helps to make sure you review deductions available and understand how to claim them correctly to obtain the credit. Below is a list of the most common deductions overlooked by taxpayers:
State sales tax: Taxpayers who live in a state that doesn’t impose an income tax often forget to claim this deduction. The IRS has a table that can be used to help you figure out the amount to deduct.
Charitable contributions: This includes charitable deductions from your paycheck, items purchased for a charitable event such as a fundraiser or if you drove your vehicle for charity, the IRS lets you deduct a certain amount per mile. Save all receipts and if you make a donation of 250 or more, get written confirmation from the charity.
Student loan interest: If mom or dad paid for a student loan for a child not claimed as a dependent, the interest can be claimed on your return.
Moving expenses: If you moved to take a new job, the expenses related may be deductible.
Child care credit: Having a credit can help reduce taxes owed. If your expense is paid through an account at work, it is easy to overlook but if you pay several thousand for child care it helps reduce taxes owed.
Earned income tax credit: While the rules to this may be complex, many taxpayers don’t claim it. This is considered a refundable tax credit instead of a deduction.
State tax paid last spring: If you paid state income taxes in quarterly payments or had them withheld, they can be deducted on your current return.
Energy-saving home improvement credit: This is a credit that is 30 percent equal to the cost of energy-saving improvements. The IRS provides details on qualifications for this credit.
Jury duty payments: If your employer required you to give them payments you receive for jury duty, you can claim the amount on your return.
Refinancing points: There are points that can be deducted when you refinance your home at one time. This depends on how many years are on your mortgage and you can deduct points that are remaining if you sell you r home after paying if off or refinance again.
Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to loans.
Innocent Spouse Relief has always been available as a way for taxpayers who file joint tax returns and who were not aware, nor had any kind of reason to be aware, that her or his spouse had underpaid or understated their liability for income taxes. It was designed to offer the innocent taxpayer some protection from the faults of their partners and spouses and details of how it works were to be found in Publication 971 which was entitled Innocent Spouse Relief.
The regulations detailed in Publication 971 state that innocent spouse requests that are seeking relief from liability need to be filed within 2 years from the time that the IRS begins action for collection against the spouse. The point of this time limit was always that it was established to encourage early and swift resolution while there was still evidence remaining. However it has been announced that the IRS now intends to issue new regulations stating that they will be removing this two year time limit. In doing so they have stated that the reason for its removal is that they wish to extend the period in order to assist more innocent spouses in their relief requests.
From now on the IRS will not be applying that 2 year limit to any equitable relief cases and any taxpayers who have previously been denied relief requests purely on the basis of the two year limit are now eligible to reapply if they wish to. To do so they need to fill out IRS form 8857. In addition, those taxpayers who have ongoing cases currently held in suspension are now going to be afforded the benefits of the new rules and need not restart their application. Similarly they will not be applying the two year restriction to any cases that are pending litigation that involve equitable relief and if litigation has become final, they will suspend collection under many circumstances.
All changes are effective immediately and can be found in Notice 2011-70.
Alex is a freelance journalist and financial blogger. He loves to write about football and jazz but spends most of his days writing about mortgages, credit cards and tax reduction.
The IRS typically resorts to a lien system when it has difficulty collecting taxes from individuals for a long period of time. These liens can make it hard for a person to qualify for insurance, housing, or even find a job. In effect, a lien gives the IRS access to a person’s property if the person owes enough in back taxes. This process can destroy a person’s credit rating. Since the country is working to recover from a recession, it is important that individuals have access to these opportunities to create more income. The IRS has agreed to change its lien methods so that there will be less pressure on the already strained economy.
Reducing Number of Liens
The first step in reducing the number of liens that the IRS is using is to change the amount of taxes owed that causes a lien to be placed. Until this year, a lien was put in place if an individual owed $5,000 or more in back taxes. This year, a person must owe at least $10,000 before the IRS will put a lien in place. That change alone will allow thousands of individuals to continue to make payments on their taxes without the additional pressure that a lien can cause. It will also help keep the economy moving forward because more people will be able to find work and purchase large ticket items.
Easier Lien Withdrawal
The IRS is also willing to be more flexible with individuals who are already paying on liens that were imposed previously. It is easier for someone to establish a payment plan so that they can have their lien withdrawn by the IRS. Having a lien withdrawn will immediately begin to repair the person’s credit rating so that he or she can take the necessary steps to begin paying off the tax obligation without suffering from the severe penalties a lien creates.
Delayed Payment Options
There are some ways that individuals can avoid a lien altogether. The IRS is becoming more vocal about payment options that could keep people out of serious trouble. The first step is to file your tax return on time, even if you cannot afford to make your tax payment right away. Once your return is filed, you can begin negotiating with the IRS for different payment options. The IRS will allow most tax payers to delay their payments by 30 or even 60 days in most cases.
If a short delay in payments is not enough to help you pay the amount that you owe, you can establish an installment plan with the IRS. You will need to talk with an IRS agent about your options for the plan, and you will have to pay additional fees if you must create an installment plan. Keeping an open line of communication with the IRS and cooperating as much as possible will reduce your odds of being actively pursued for the taxes that you owe. The IRS has created many ways for individuals to pay their taxes so that they do not have to resort to liens.
Jessica Bosari writes about personal finance for Billeater.com, a site that offers money-saving tips, advice and information. Visit Billeater for more ways to save.
Knowing as well as learning the ways of reducing your IRS tax debts is the only possible solution to the nerve-wracking problem. According to resent studies, it has been seen that the huge number of IRS tax defaults is due to lack of awareness than the negligence on the part of the actual tax-payers. Most people in the US do not have any inkling ways to seek IRS tax debt relief and this ignorance builds up their fearfulness that leads them into incurring more and more debt. If you too have missed your payments on your taxes and you’re not aware of the ways in which you can pay them off, here’s help for you. Have a look at the ways in which you can tackle your IRS tax debts.
Guaranteed installment agreement: If you want to make sure that you’re soon free of IRS tax debts, you can negotiate a guaranteed installment agreement with the IRS. However, you can only seek help of this option if you have dues that range above $10,000 or less. You also need to meet some more criteria like all your tax returns must be filed and the monthly installments will pay off your balance within 36 months. You also need to agree that you will pay your tax debts regularly in the near future. The biggest benefit that you can reap off the guaranteed installment agreement, you will not require filing federal tax lien. Tax liens can easily hurt your credit score, if reported.
Streamlined installment agreements: You can talk to the IRS about your financial hardship and then you may negotiate a streamlined installment agreement if the balance that you owe amounts to $25,000 or less. You need to agree that you will repay the balance within a span of 60 months. The minimum balance that the IRS will accept is the total amount owed (including the penalties and fees) divided by fifty. All your tax returns must be filed and you must agree to file your tax debts on time.
Offer-in-compromise: If you think that your present monthly income is not enough to suffice the huge amount of tax debt that you own, you can go for offer-in-compromise option. If you file an offer-in-compromise, you can offer to pay an amount that is lesser than what you actually owe your creditors. As you file your request with the IRS, they will check whether or not you are actually liable to pay off your tax debt. By opting for this debt repayment method, you can save your dollars and use it in paying off your other obligations.
Nothing can be worse than getting drowned in an ocean of tax debt. If you’re up to your eyeballs in IRS tax debt and you are looking for tax debt relief options, you can follow the points mentioned above. Pay off your taxes and lead a free of all debt obligations.
Jenney Roberts is a contributory writer of Debt Consolidation Care. She is a financial writer and has specialization in financial problems and its solutions. She holds her expertise in the Finance industry and has made significant contributions on debt consolidation, savings, planning, frugality, debt settlement etc.
Internal Revenue Service or IRS is a federal enforcement and tax assortment organization. Well, this agency poses harsh penalties against tax defaulters. However, sometimes, honest taxpayers also face such kind of problems. These kinds of problems generally arise when people fail to understand these laws properly. And in several situations, the approach of the revenue department is quite harsh. In order to cope with IRS tax difficulty – professional help is inevitable. There are several law firms that possess qualified and experienced personnel who can speak and discuss with federal officials regarding tax problems.
Although this kind of circumstances may differ from one person to another, these legal professionals are proficient enough to discuss with the representatives and can save your hard earned money in the best possible manner. They charge somewhat higher fees than what is charged by general attorneys. Moreover, the fees for education concerning your demeanor with IRS are moderately low. Even if you pay more to these professionals, it’s better don’t take the federal agency single hand-idly. If you do so, you care sure to commit mistakes, which can create several other difficulties.
When you search for these kinds of attorneys, you must keep certain things in your mind. You make certain that the lawyer is educated and possess specialized education in that particular field. In addition, check out whether he/she possess years of litigation expertise. Well, you can take other lawyers reference in order to find a professional. Moreover, there are various online firms where you can look for qualified professionals who can expediently help you avoid the IRS tax problems.
In addition to appointing experienced and well-qualified professionals, there are several other practices that can help you avoid debt penalties. Reply immediately the moment you get a letter from the IRS. By reacting frequently, you get more time to produce your case. However, you can lose a few important rights in case you fall short to act within a specified time period.
You’ve got the right to representations. As mentioned earlier, it is always a good choice to appoint attorneys to talk in your favor while coping with such kind of situations. Although you are in the mid of a conversation or audit, you may ask for assistance from a professional. In all such situations, the IRS will discontinue and rearrange the conversation. You can also look for someone to accompany you and make sound recordings. Well, in this kind of situation, you will need to notify the agency in advance i.e., 10 days in advance before the commencement of the meeting.