Tuesday, March 28, 2017

Is the IRS on Your Trail?

There is no better debt collector in the country than the IRS. It has tools and techniques in its arsenal that many private collection agencies would drool at the thought of using.

But here's the good news: unlike some fly-by-night debt collectors, the IRS must stay within the bounds of the law.

Even though it may seem like it, the IRS's primary interest is NOT making your life miserable, but, instead, is collecting your debt. Therefore, if you follow the procedures and relief formulas the IRS allows you to use, you can pay off your debt and get the IRS off your back.

The IRS gives you avenues of relief when your tax debt is too big for you to pay.
  • Offer in Compromise -  If you cannot pay your full tax liability, or if doing so would create a hardship, you may qualify to reduce your tax bill through an offer in compromise. Under this process, you determine an amount that you can pay using an IRS formula that considers your income and assets. You then submit this offer to the IRS and, pending IRS approval, you have up to 24 months to pay off the reduced amount, satisfying your debt in full.
  • Installment Agreement - An installment agreement or payment plan gives you time to pay your tax debt. If you owe, you can provide IRS financial reporting documentation on your situation and negotiate the lowest possible payment plan.  Some payment plans are referred to as partial payment plans. This is where the amount you negotiate will not cover your IRS debt within the statutory time (10 years) the IRS has to collect by law. There are instances where this is better than an Offer in Compromise. 
  • Abatement of Penalties -  You can use this strategy to eliminate the penalties the IRS dumped on you in addition to the taxes you owe. There are a number of grounds you can use to make this claim, such as undue economic hardship, the loss of property in a natural disaster, a recent death, divorce, various life events, alcoholism, depression, drug abuse and various other reasonable causes.
  • Innocent Spouse Relief -  Normally, both spouses are equally responsible for the payment of taxes on a joint return. The innocent spouse relief will remove much or all of your liability and pin it slowly on your spouse (or ex-spouse). This might apply, for example, if your spouse operates a business that you do not participate in and owes taxes as a result of that business. We usually recommend, in these cases, to file separate tax returns and avoid the innocent spouse relief negotiation.
  • Bankruptcy -  Bankruptcy is not a simple process and has many lingering effects, such as a potentially decade-long hit on your credit. However, bankruptcy can be a perfect tool in the right direction, and it can permanently eliminate some or all of your income tax liabilities, including interest and penalties.  


Is the IRS on your trail? Call us at (610) 863-8347 for an appointment today!

Friday, March 24, 2017

Last Chance to Claim your 2013 Refund

On March 1, 2017, the IRS announced that there is more than $1 billion of unclaimed Federal Tax Refunds for an estimating 1 million taxpayers that did not file their 2013 tax return.

In order to collect your 2013 tax refund, you must file your tax return by this year's tax deadline of April 18, 2017. After that date, if your 2013 return results in a refund, you will not receive the refund, but are still required to file your tax return.

Remember, there is no late filing penalty for filing a late return if you are due a refund.

Please note that if you haven't filed your 2014 and 2015 returns, the IRS may hold your 2013 refund until those returns are filed. In addition, the IRS may use the refund to offset prior Federal tax liabilities, outstanding child support, and state tax liabilities.

Don't be like many of our clients who have lost out on tax refunds!

Do you have secret cash in your vehicle?

If you have been taking the IRS standard mileage rate there is a component, let's say $0.25 a mile, for depreciation.  The $0.25 for depreciation just might hold the key to finding secret cash. Most people who use the IRS standard mileage rate assume that once they use the IRS rate, they are done, and they have nothing else to consider on that vehicle. That is incorrect. Most accountants do not take the time to find their clients' Secret Cash.

For example, if you have used your vehicle for business purposes - perhaps 90% or 100% of the time. Whatever the percentage, you or your tax preparer should know or calculate your basis in the vehicle. Your basis is the vehicle's cost minus the depreciation amount the IRS states in your mileage rate.

If you acquire a vehicle for $35,000. Then, you decide to sell your vehicle and, at that time, you have taken $7,500 of depreciation. Based on the mileage depreciation number, your car is now worth (in your hands) $27,500 ($35,000 - $7,500 = $27,500). If you sell this car for $15,000, you actually have a $12,500 loss ($27,500 remaining cost basis less $15,000 selling price). Now you have created a tax return loss in the amount of $12,500.

Beware, if you trade-in the car and buy a replacement, this will not work.  When you trade in a car, you are taking the basis of the old car and adding it to the new car cost, which most likely will never be fully depreciated.