Tax Relief with Timalyn Bowens

Episode 49:  In this episode, Timalyn continues the discussion began in Episode 48.  Today, she’s explaining how to qualify for an offer in compromise.  She’ll also provide information regarding how to apply for it.

NOTE:  Click here to listen to Episode 48.

What Is the IRS Considering when You Apply for an Offer in Compromise?

Remember, the offer in compromise allows you to settle your tax debt for less than you actually owe.  The IRS doesn’t approve this option for every tax payer who applies.  The IRS provides a pre-qualifier tool to see help you see if you qualify. 

The IRS is considering 4 factors:

1. Your Ability to Pay
2. Your Income
3. Your Expenses
4. Your Assets

When it comes to your ability to pay the IRS also considers your age. Your medical condition and medical history also comes into play.  Do you have a disease or condition that might prevent you from working? This, along with your level of education all impact what the IRS considers to be your ability to pay.

The IRS will analyze your earned and passive income.  Earned income is produced as a result of an action or activity you perform or something you did to in the past. Passive income considers  investment income, dividend income, and interest income.

Your expenses can be subjective.  What you consider a necessary expense may not be allowed by the IRS. If this is the case  you may have to increase your initial offer.  Remember, the IRS provides national standards that are used to determine an individual’s ability to pay. 

In Episodes 38 and 39, Timalyn discussed using IRS Form 433-F.  This form helps to calculate your disposable income, for an installment agreement.  You’ll can use IRS Form 433-A (OIC) for the offer in compromise. 

Are You Eligible for an Offer in Compromise?

Before you pursue this route, you need to have all of your required tax year returns filed.  Timalyn comments that this commonly refers to the last 6 years of returns.  Employers must also have all of your IRS Form 941s filed.  These are the Employer’s Quarterly Federal Tax Return forms.  The same goes for your 940 FUTA (Employer’s Annual Federal Unemployment Tax Return).  You also need to be up-to-date on your required estimated payments (listen to Episode 21).

Additionally, you can’t be in an open bankruptcy proceeding.  If you’re applying for an offer in compromise for the current year, you need to have filed a tax extension, if it’s tax season. 

Timalyn stresses that you need to make sure you have all of the above completed and filed before you even begin the offer in compromise process.

Substantiation of Your Expenses

Along with the 433-A (OIC), you must provide all of the information necessary to substantiate your expenses.  This includes, mortgage information showing your required monthly payment amount and where you are on those payments.  If you are leasing (renting), you’ll need to supply a copy of the lease and proof of payments. 

Form 656-B

This is the booklet you’ll use in applying for your offer in compromise.  It includes important information about additional documents, including IRS Form 656 and the non-refundable $205 application fee.  Make sure you are using the most current version of these forms.

You’ll also need to include the initial payment for each Form 656 you are submitting.  It’s important that you have a separate check or money order for each one.  The application fee is also a separate check. 

Designate Your Payments

The application fee and the initial payment(s) will be applied to your tax debt.  Timalyn recommends designating payments to a specific tax year and tax debt.  It’s going to take several months (maybe 6-9), to find out if the IRS has accepted your offer in compromise. 

If they reject it, you won’t receive the money back, so at least you’ll know where it’s going.   

The IRS Can Still File a Lien Against You

It’s possible for the IRS to file a tax lien while they’re reviewing your offer.  In Episode 3, Timalyn explained what this is and how it might impact you. 

The IRS will suspend other tax debt collection efforts (including garnishing your wages, levying your bank account, etc.). 

What If the IRS Rejects Your Offer in Compromise?

If this happens, your assessment and collection period will be extended.  If you were hoping your CSED (Collection Statute Expiration Date) would lapse, that’s not going to happen.  They’ll add the time it took to process the offer. 

Make all required payments detailed in your offer during the time the IRS is processing (i.e. evaluating) your offer.  One option is the lump sum cash payment.  This is 20% of whatever amount you were offering.  The remaining balance due must be paid in 5 or fewer payments.  Again, be sure to make those payments while you’re waiting for a written response from the IRS.

The other payment option is to make periodic payments.  Basically, continue to pay the same amount as you sent for your initial payment, each following month.  If they accept your offer, simply continue paying your monthly installments until the tax debt is fully repaid.  You only have 24 months to pay the debt in full, using this option.  Those 24 months have to be before the CSED lapses.

A failure to make the required payments nullifies your offer, even if the IRS was going to accept it.   

Timalyn points out that during this process, you don’t have to make payments on an existing installment agreement. 

The 2-Year Automatic Acceptance

Your offer is automatically accepted if the IRS doesn’t make its decision in a period of 2 years, from the date they receive your offer and supporting documentation.  Timalyn strongly recommends you mail correspondence to the IRS using certified mail.  The post office will return a receipt with a specific date the IRS received the offer.  This is the date you use in determining your 2-year window.   

Remember, before you go down this road, it’s important that you determine if you even qualify for an offer in compromise.  Again, refer to the beginning of this episode during which specific forms were explained.

You should really consider working with an experienced tax professional who handles tax relief cases.  An offer in compromise is extremely complicated and isn’t something most people should do on their own.   

In addition to all of the filings, if the IRS actually accepts your offer, you MUST meet all of the offer terms listed in IRS Form 656, Section 7.  The IRS won’t release any existing tax liens, until your offer terms are satisfied. 

Need Tax Help Now?

If you need answers to your tax debt questions, book a consultation with Timalyn via her Bowens Tax Solutions website.  Click this link to book a call.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either. 

As we conclude Episode 49, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode. 

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 48:  In this episode, Timalyn explains an option some people have in resolving their tax debt.  This option is referred to as an offer in compromise.  Understand that not every tax payer qualifies for this, but you hear commercials about it all the time.

Note:  This is a complex topic and deserves more than a quick, 15-minute episode to fully explain it.  The plan is to cover this topic in 2 separate episodes.  The next episode will explain how you qualify for an offer in compromise, while this episode explains what an offer in compromise is.

While not every taxpayer will qualify for the offer in compromise, the vast majority (90%+) would actually qualify for an installment agreement (Episode 10).  This may be the better option for many people. 

An important reason Timalyn is covering this topic is so that you can understand “WHY” you may or may not meet the criteria for an offer in compromise option.  Regardless of what you may have seen on the Internet, filing on your own is not something you should do, if you’re in serious tax debt.  When you hire someone for tax representation, that person takes on the responsibility of speaking on your behalf before the IRS. 

Offer in Compromise – Doubt as to Collectability

This is an agreement that settles your debt for less than the amount owed.  Again, this is the hook used by many of the commercials you may have heard.  The partial pay installment agreement would do the same thing without exposing your assets to a potential liquidation requirement.   

The IRS will not accept your offer if there’s a chance the liability can be paid in full, in a lump sum or in an installment agreement.  The streamlined installment agreement typically has a 72-month pay-off term.  If you’ve already been working to get yourself in a better situation to be able to pay your taxes, and you owe $10,000 or less, you may have the option of a guaranteed payment plan. 

Even though you might think you can’t repay your debt via an installment program, remember, the IRS has some additional discretion, because they are limited by the CSED (the Collection Statute Expiration Date).  However, if they determine you would be able to pay off your tax debt before the CSED, they would reject an offer in compromise. 

Owe $100,000 or more in Tax Debt?

Getting an offer in compromise approved will require an additional level of authorization.  This would be granted by the IRS District Counsel. 

Some people refer to the Offer in Compromise as the fresh start initiative. The program began in 2011.  It changed the computation for a taxpayer’s future income.  It also extended the amount that can be repaid for student loans, as an allowable expense.  Episode 38 goes into more detail as Timalyn discusses IRS Form 433-F. 

Offer in Compromise – Doubt as to Liability

You would submit this when there’s a genuine dispute as to the existence of a tax debt, or the amount of the tax debt.  It’s used when there’s a likely error by the IRS in assessing the tax debt. 

The offer must be greater than $0 and based on the amount you believe is the correct amount of tax liability (not what the IRS is claiming you owe). 

The Doubt as to Liability option will require you to submit IRS Form 656-L. 

The Doubt as to Liability option is typically used after an audit was performed and tax was assessed.  However, you had incomplete documentation at the time.  Now, the supporting documentation you’ve found shows you really don’t owe the amount indicated by the IRS.   

Offer in Compromise – Effective Tax Administration

This is when the amount owed is not in dispute.  There are assets that could be liquidated to pay the debt, but exceptional circumstances exist that would result in an undue economic hardship, if full payment of the debt would be required.  The same would exist if paying the full tax debt would be unfair or unequitable.

Timalyn provides an example of an elderly individual living on a fixed income.  Even if this person owned his/her home, selling the home to pay the taxes would make it very difficult from a financial standpoint, assuming the person were to live another 10 years, or more.  Social security retirement benefits are really not enough to live off of, given today’s inflationary environment.  The cost of living is relatively expensive, so adding a rent payment would make it nearly impossible. 

In the above example, this individual might be an ideal candidate for the offer in compromise – effective tax administration option. 

Need Tax Help Now?

If you need answers to your tax debt questions, book a consultation with Timalyn via her Bowens Tax Solutions website.  Click this link to book a call.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 48, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 47:  In this episode, Timalyn discusses three top issues arise involving your taxes after a divorce. Divorce happens and Timalyn has worked with many clients who are caught in this situation.  While she’ll focus on 3 important issues, that doesn’t mean those are the only issues related to divorce and taxes.  Today, she’ll address filing status, claiming dependents moving forward, and dealing with a joint tax liability after the divorce.  With that being said, let’s listen to Timalyn.

Note to Tax Professionals:  Timalyn is going to be teaching a class on Divorce and Taxes via the myCPE platform.  She’s previously provided a class to subscribers of Think Outside the Tax Box.  Those classes take a deeper dive into topics such as property settlements and transfers, Qualified Domestic Relation Orders (QUADROs), etc.

Determining Your Optimal Filing Status

Timalyn begins by discussing whether the divorce was amicable or not.  If the divorce was not finalized by the end of the tax year, then technically and legally, the couple can still file as married filing jointly.  If there’s a tax liability, you want to consider not filing jointly because that will be just one more thing tying you together. 

Another option is to use the status, married filing separately.  This could make sense if you and your soon to be ex-spouse aren’t getting along, but a refund is expected.  You wouldn’t have to worry about splitting the refund.  If there’s a liability, because you filed separately, you wouldn’t have to worry about the other person’s tax liability. 

If you were to choose married filing separately, you’ll be in the same tax brackets as if you were filing as a single.  Therefore, more of your income is going to be taxed at a higher rate.   

Here are some quick examples:

●      Married Filing Jointly – the standard deduction is ~ $27,000 for 2023 returns.

●      Married Filing Separately (e.g. Single) – the standard deduction is ~ $13,000.

Therefore, the person filing separately or as a single, will remain in the 10% and 12% tax brackets for a shorter period of time compared to someone who is filing using the status married filing jointly.  This couple wouldn’t jump to the 22% tax bracket until the reach almost $110,000 in gross income. 

However, a person using married filing separately, or as a single, they’ll jump to the 22% tax bracket when they get to ~ $55,000 in gross income. 

The thing to remember is that if you had your W-4 withholdings set as married filing jointly, assuming  you made $50k and your spouse made $60k, your withholdings are only going to cover 12%.  So, the spouse making $60k will still have withholdings closer to 12%.  But, after separating if that spouse files using married filing separately, they will now be getting taxed at the 22% bracket.

By working together as the divorce proceeds, you may be able to agree to file using married filing jointly to receive the best tax benefit for both parties. 

The IRS 1040 provides a spot so you can file an additional form enabling a couple to split the tax refund so that it goes into 2 separate accounts.  The court may need to decide how the allocation will be made. 

How to Handle Dependents for Tax Purposes After a Divorce

If dependents are involved, an important consideration is the determination of whether the couple was separated at all, during the tax year.  If they were separated (not cohabitating), did that occur in the last 6 months of the year?   

Assuming the couple wasn’t living together during the last 6 months, but one parent took care of more than 50% of the dependent’s expenses:

●      The parent who did not have the child could file married filing jointly (if the other spouse agreed) or married filing separately.

●      The parent who did have the child could file married filing jointly (if the other spouse agreed), married filing separately or file as head of household (because for the last 6 months they were legally separated and they did maintain the household, incurring more that 50% of the dependent’s expenses). 

Filing using the head of household status gives you a tax bracket that is lower than married filing separately, but not as low as married filing jointly.  The jump to the 22% bracket won’t happen as quickly and the standard deduction will be ~$19,000 (for the 2023 tax year).

Timalyn strongly advises that your either have a tax professional prepare your taxes during this period, or that you at least consult with one.  You have some options and you want to make sure you select the best one for your particular situation.

NOTE:  If you were divorced as of December 31^st of the tax year, then married filing jointly and married filing separately are not available to you.  You have the options of filing as a single or as head of household (if you qualify).

Which Parent Gets to Claim the Child?

If the divorce is amicable, you could have the custodial parent complete IRS Form 8332.  This is an important form.  It’s a Release or Revocation of Release of Claim to Exemption to Child by Custodial Parent.  Because there are no longer exemptions for a child or children, it’s an all or nothing situation.   

The custodial parent gets to claim the child tax credit.  However, the custodial parent can use Form 8332 to release the child tax credit to the other parent. 

Depending upon the divorce decree’s designation of the custodial parent, it’s that person who needs to sign the release, designating which year(s) it will apply.  It’s during that year or years the non-custodial parent can claim the child. 

Understand, there is nothing to block a child from being claimed when you e-file.  It can be a race to see who claims the child first.  If a return is submitted including the child’s social security number as a dependent, it blocks the other parent’s return from being accepted – if that child was already claimed. 

This is why the IRS Form 8332 is so important.  If you did have the right to claim the child, you have the 8332 to support your position when you take it to the IRS. 

Many people don’t realize the IRS trumps your divorce decree.  Even though the family court designated the custodial parent, the IRS is going to look at specific rules.  This includes the number of overnight stays during a particular tax year.  It also considers which parent maintained the household where the child lived, as well as who paid more than 50% of the expenses. 

If the parents were even on the overnights and expenses, there are tie-breaker rules.  Again, these are just a few reasons why the tax law is different than your state’s family law.  Form 8332 can eliminate the frustration and games.  It can protect both of the parents, down the road.

For more information on which parent should claim the child, listen to Episode 19.  There’s also a related article on Tax Tips with Timalyn.   

Dealing with Joint Tax Liability after a Divorce

If you had a tax liability while you were still married, it is a joint tax debt, regardless of what the divorce decree states.  The IRS considers both individuals responsible.  There may be a way for you to claim injured spouse relief or possibly innocent spouse relief.  Timalyn has published episodes on both topics.  Remember, there are specific timeframes for making these claims and your specific state jurisdiction may have guidelines.

If you think you are eligible for innocent spouse relief, book a consultation with Timalyn at Bowens Tax Solutions. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 47, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 46:  In this episode, Timalyn discusses 4 various options you have to handle your IRS debt, if you cannot pay it in full.  While you need to pay your tax debt, there are ways to do it so that you’re not overly burdened.  In addition to the lump sum payment, she’ll explain the offer in compromise, installment agreements, currently not collectible status, and bankruptcy. 

Have You Received an IRS CP504 Notice?

If this is a letter you’ve already received, then you know the IRS is notifying you of their intent to levy.  The reality is you’re now in a tough situation.  While you haven’t been able to pay your tax debt, you most likely haven’t communicated with the IRS about your particular situation.  Now, the IRS is going to have the right to access your bank account(s) and decide how much they are going to take. 

The Offer in Compromise

You’ve probably heard about commercials claiming you can settle your tax debt for pennies on the dollar.  In reality, many people won’t qualify for this option.  This is sometimes referred to as the Fresh Start Program, which was implemented by Congress.  However, the Fresh Start Program isn’t just about the Offer in Compromise.   

There are ways to qualify for the Offer in Compromise.  You may be able to claim the debt doesn’t actually belong to you.  This is “Doubt as to Liability.”  Unfortunately, this may be very difficult to prove.  “Debt as to Collectability” means the IRS probably won’t be able to collect the debt from you.  “Effective Tax Administration” is another claim you may be able to use to qualify.

The IRS has a pre-qualifier tool on its website, so you can see if you might be able to qualify for the Offer in Compromise resolution.  In Episodes 39 and 40, Timalyn discussed IRS Form 433-F.  By completing this form, you’ll have a good idea of whether you’d qualify for the Offer in Compromise option.  The form will help to prove your ability to pay or lack thereof. It also takes into consideration your health, age and education.  These are factors the IRS will use to determine if you qualify. 

Any offer you make will have to include a certain percentage of the equity you have in specific assets.  If you have a lot of equity in your home or other assets (including your retirement portfolio), the IRS could require you to sell one or more of the assets to create funds available to pay your tax debt.  So, if that’s your situation, the Offer in Compromise might not be the preferred option for you. 

It’s important for you to consider working with a qualified professional who will help you to best represent your situation to the IRS. 

Installment Agreements

Timalyn discussed this option in Episode 10.  These are generally various payment plans you can have with the IRS.  There are 3 popular options:  Streamlined, Regular and Partial Pay.  Timalyn prefers the Partial Pay Installment Agreement because it looks at your assets, but focuses on your income and your expenses.  Assuming you can’t pay off your tax debt before the Collection Status Expiration Date (CSED), the IRS will still want as much as they can get from you. 

Establishing an installment agreement may be a good option, based on your specific situation. 

Currently Not Collectable Status

Timalyn explains that this option temporarily puts your tax account on hold.  You’ll still complete the IRS Form 433 to prove that you really have nothing left after calculating your income and deducting the allowable expenses. 

The IRS cannot put you in a financial hardship to pay your taxes.  There may be a difference in what you consider a necessary expense and what the IRS considers.  These would include your rent/mortgage and monthly car payment. 

Now, this does not mean you never have to pay the tax debt.  Interest will continue to accrue during the period of not collectable status.  But as Timalyn discussed, the IRS only has the option of collecting the debt before the CSED.  The IRS will not levy you during the Currently Not Collectable (CNC) period. 

Once the period has passed, the IRS can require you to submit documentation to see if you should still qualify.  If this sounds like a good option for you, listen to Episode 18, where Timalyn explains how to temporarily put your tax account on hold.

Bankruptcy

Now, admittedly, this won’t be the right choice for everyone.  However, if you qualify, you can use this to eliminate certain types of debt.  Timalyn cannot provide legal advice about bankruptcy, because she is not an attorney.  She does have relationships with bankruptcy attorney to whom she can refer you, if you need this option.

There is a 3-year, 2-year and 240-day rule, you need to understand. You can’t have any fraud claims, no taxes related to a trust and no Substitute for Return (SFR) on your account.  The tax debt you’re trying to discharge must be at least 3 years old.  It must have been filed with the IRS for at least 2 years.  Additionally, no other tax assessments can have been made by the IRS during the past 240 days. 

Assuming you meet the above qualifications, that tax year is eligible for bankruptcy.  However, if there is a tax lien, even if you bankrupt the tax debt, you’ll still have to repay the amount covered by the lien. 

Again, this may not be the best option, but depending upon your situation, it may be the option you can use. 

Final Words of Advice

As Timalyn has advised in previous episodes, it’s important to remember to breathe.  She invites you to contact her to see if she would be able to represent you.  The majority of her clients come owing 6-figures or more to the IRS, they may be facing an audit or even worse, they are actively being levied by the IRS.  Don’t wait for that to happen to you. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 46, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 45:  In this episode, Timalyn discusses IRS Notices.  She’ll explain what they are, why you’re receiving your IRS notice and how to read it.  Then, she’ll provide some insights into the 3 types of IRS Notices that are currently being sent out fairly aggressively by the IRS. 

Love Letters from the IRS

Timalyn lightheartedly refers to notices and communications from the IRS as love letters.  In all reality, they can be extremely serious and require immediate attention.  Once a client hires Timalyn to help resolve tax debt issues, she also receives copies of the same letters.

What Is an IRS Notice?

This is written correspondence from the IRS to the taxpayer.  It can address a number of issues including a balance due, updates on activity on your account or if any changes to a tax return have been made. 

Not every IRS Notice involves bad news.  Nonetheless, receiving one can cause anxiety.  For example, during the pandemic some people received notices of stimulus payments or confirmation of payment of the advanced child tax credit, etc.  If you’ve filed an amended tax return or you find a refund you were due, the IRS will also send you a notice.

Some IRS notifications are issued to inform you of why you are receiving an IRS communication and what you need to do to resolve any potential issues. 

IRS CP503 Notice

The bulk of the notifications being sent to taxpayers are CP503 notices.  In Episode 29, Timalyn explained the IRS CP14 notice (demand for payment of unpaid taxes).  The CP503s are different. 

The CP503 notification is the second notice and a reminder of an unpaid tax balance due.  If you have a tax liability when you submit your tax return, you’ll receive a CP14.  Then, if the balance hasn’t been paid, the IRS will issue a CP501 (the first notice for balance due).   

IRS CP504 Notice

Timalyn explains that the IRS CP504 notification is the one you really need to be concerned with, if you receive it.  This is a final notice and balance due.  The CP504 is also notification of the IRS’ intent to levy.  In Episode 5, Timalyn answered the question, “What Is a Tax Levy?”   

Basically, the Intent to Levy is the IRS telling you they have the legal right to take money owed from your personal bank account or business bank account.  The IRS also has the legal right to contact your employer to request a garnishment (funds to be withheld) from your paycheck, which are then sent to the IRS.  The latter can happen regardless of whether you are a W-2 employee or 1099 independent contractor.  The IRS can also require the employer to make backup withholdings. 

Don’t Put Your Head in the Sand

If you have received notifications from the IRS, don’t ignore them.  In many situations, the IRS is willing to work with you.  However, if you don’t open the letters and fail to respond, you’re going to run out of options and the IRS will run out of patience.

How to Read the IRS Notice

The office address of the IRS will tell you which actual office is sending the notification.  It also signifies the level of importance of this particular IRS notice.  If the address has a local address and the name of an IRS representative, your case has been assigned to an IRS revenue officer. 

Your assigned IRS revenue officer is the only person you’ll be able to communicate with, going forward.  He/she is the only IRS contact with whom you can correspond or speak with on the phone about your tax debt situation.  These revenue officers are already overloaded with cases, you just added to his/her workload. 

At the top right of your IRS notice, there is a designation of the type of notice you’re receiving.  This could be the CP501, CP503 or the dreaded CP504 (the Intent to Levy).  Timalyn comments that there are other types of notices, but these are the more common ones being issued, at this time.  Remember, there are also notices of Accuracy-Related Penalties if you failed to report all of your income or miscalculated a deduction/credit. 

The IRS Notice also provides information regarding the deadline for you to respond.  There may still be a way to deal with this, even if the deadline has passed.  However, you need to take action, quickly. 

You can appeal an IRS decision if you’ve received an IRS CP504 (Intent to Levy) notification.  You have the option of trying to contact the IRS via telephone (good luck).  You may also want to pull your tax transcripts to identify where you might disagree with the IRS and what information they are using to support their claim. 

The IRS Notice should also include a copy of the Taxpayer Bill of Rights.  It grants you the right to tax representation.  In Episode 10, Timalyn explains how to set up a payment arrangement with the IRS.

Bowens Tax Solutions specializes in tax representation.  Consider booking a consultation to speak about your tax debt situation and potential options. 

In Episode 37, Timalyn explains the Tax Relief Journey.  It’ll explain the 3 phases of tax relief.

In closing, Timalyn urges you to make sure you read any IRS notification you may already have.  These can become extremely serious, but there are steps you can take to resolve the issues. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 45, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

As 2023 comes to an end and we look forward toward 2024, Timalyn Bowens, America's Favorite EA, shares a few brief comments for her audience.  It's been a long road, full of interesting twists and turns.  Next year promises to bring more of the same.  However, Timalyn is grateful for opportunity to continue her mission to close the tax literacy gap, one taxpayer at a time.  She wishes you Happy Holidays for you, your family and your business.  

Episode 44:  In this episode, Timalyn discusses issues related to tax audits.  The fear people have about being audited is often paralyzing.  It’s a serious issue and you need to be prepared to both avoid it and to know what you need to do if it happens.  There are steps you can take to ensure your business is audit-ready.

There’s No Such Thing as an Audit-Proof Return

Regardless of what some tax professionals might claim, there’s no way to guarantee you won’t be audited.  There are different types of audits and the selection “triggers” vary.  The IRS has the Discrimination Function System that produces a DIF score.  This system rates the potential for change based on past IRS’ experiences with similar returns.

The IRS can track returns for similar businesses, using categories such as NAICS codes.  This code describes your type of industry.  When they look at a collection of similar returns from the same industry, they can determine averages for specific data points, such as expenses, credits, etc. for your reported income level.  If your DIF score is out of that range, it could trigger an audit. 

Irregularities can also raise flags.  For instance, if all of your figures on your tax return are round numbers, that would seem odd and could result in an audit. 

The IRS has a whistleblower program.  They pay snitches who were correct about something they alerted the IRS to regarding someone else’s tax filings. 

It Doesn’t Mean You Did Anything Wrong

Timalyn emphasizes that just because you’re being audited, it doesn’t mean you did anything wrong.  She explains that for 2023, there was a 0.4% chance that taxpayers would face an audit.  Lower income individuals actually had a slightly higher chance. 

Don’t Fear the Boogey Man

An audit isn’t as scary as it sounds.  It’s a review or exam of your tax account and your financial information to ensure proper reporting.  If you keep good records and don’t inflate/deflate your income or expenses, is there really anything to fear?  You have the information and it’s accurate.  As long as you can prove that information was reported correctly to the IRS, you should be fine. 

If your records are extremely unorganized, you had to guess at certain dollar amounts or someone else guessed for you, the audit may become a problem for you. 

Correspondence Audits

This is where the IRS will contact a taxpayer to request specific information.  If you’ve received an audit notice, or a field audit where the IRS agent comes to you, Timalyn recommends you don’t handle this on your own.  It doesn’t matter how good your records are. 

Yes, you may be able figure out how to handle the process, but you’re going to be at a disadvantage and the opportunity to make a mistake is significant.  This is not something you should simply search for on YouTube.  You need an experienced tax professional who knows how to deal with the IRS and the rights you have, during the audit process. 

If you’ve received an audit notice, you can book a tax relief consultation with Timalyn.  She also has an episode on what you need to look for when hiring a tax professional.  Episode 23 is titled, “Which Type of Tax Professional Do I Need?”  In the show notes for that episode, there’s a link to Episode 16, “How to Choose a Tax Professional.”  Both are full of valuable information for your consideration. 

When you receive a Correspondence Audit, the IRS may not explain specifically why they are requesting the information.  It can be a significant source of anxiety.  Make sure you respond to the IRS in a timely manner.  Timalyn suggests responding before the deadline, in case something else needs to be addressed.  If you have good records, this will be much easier.

Do You Already Have a Tax Power of Attorney?

If you already have a tax power of attorney, you’ve already authorized this person to speak to the IRS on your behalf.  They’ve filed submitted IRS Form 2848, so they will also receive the correspondence from the IRS. 

Don’t assume the person who prepared your tax return is receiving the same correspondence you have received from the IRS.  Unless they’ve submitted Form 2848, the IRS does not have the authorization to speak with that tax preparer and vice versa.

Prepare Your Business for an Audit

This is the best thing you can do, especially because of the random nature of IRS audits.  Timalyn re-emphasizes the importance of good record keeping.  You have to be able to substantiate everything you entered on your tax return.  This applies to both income, expenses and credits. 

There are many ways people have committed fraud by overstating their income when applying for the PPP loans, SBA loans, or a mortgage.  These are reasons the IRS may require you to substantiate your income.  Good financial statements, based on accurate bookkeeping can help you to prove you received the income you claim, even if you don’t have a 1099 to back it up.  Your bookkeeper or accountant will reconcile your bank account.  The financial reports should reflect your income.  Make sure the person who prepares your financial statements has access to your bank statements.  If they are doing it without access, you may be setting yourself up for a significant issue or issues.

The same record keeping applies for your expenses.  It’s why business owners should not co-mingle their business and personal funds.  During an audit, explaining the different purchases will be more complicated if you can’t determine whether they were for business or personal reasons.  

You Need a Bookkeeper

This person is a valuable resource.  It’s something Timalyn often recommends you outsource.  A business owner can waste a lot of time trying to do their own bookkeeping.  You should definitely understand your financial records, but the time spent doing all of the record keeping and reporting could be better spent generating more revenue.

The 3-H’s of Record Keeping

Timalyn suggests there are questions to consider related to record keeping. 

●      How long should you keep your records? 

●      How should your store your records?

●      How do you deliver your records?

Episode 20 specifically deals with how long you need to retain your tax records. 

Don’t Create More Problems for Yourself

If you’re being audited, remember to only provide the IRS what they are asking for.  Make sure the support for those records is readily available.  Timalyn uses the example of someone who was asked to show income for a number of years.  However, because they didn’t have good records, they instead decided to turn over all bank statements to the auditor.  This resulted in the auditor finding even more questionable transactions that were flagged. 

If you’re going through an audit, you typically wouldn’t know how to handle the IRS.  Even good intentions can lead to many more problems.  That’s why you should work with a tax representation professional who is familiar with the process and can best represent you.  Check out Episode 33, “What Is Tax Representation?”  Just because someone prepared your taxes doesn’t mean they’re equipped to represent you.

As 2023 comes to a close and tax season looms, you need to ask yourself if your business is audit-ready?  Do you have good financial records?  How are we handling the 3-H’s of record keeping?  Is our tax preparation professional asking questions about our records?  It’s time to get ready.

One step you can take is to book a tax relief consultation with Timalyn.

If you are a tax professional who would like to help taxpayers with their audits, Timalyn strongly suggests joining her Tax Pro Representation Journey community.   

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either. 

As we conclude Episode 44, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 43:  In this episode, Timalyn discusses the Corporate Transparency Act (CTA), which is not necessarily tax related, but US Treasury Department is in charge of the CTA.  It’s a topic many will approach their tax professionals for explanations and advice.  Timalyn will explain what it is, who’s in charge of it and who it affects.

The Corporate Transparency Act was passed in 2021.  It’s currently scheduled to go into effect on January 1, 2024.  There is pressure to delay the date, but as of now, it remains set for January. 

What is the Corporate Transparency Act?

The Corporate Transparency Act is a law to enhance the transparency of entities and entity structure.  Over the years, people have chosen to start businesses in certain states to shield specific information from the general public or other considerations.  This concept is used for good purposes, and unfortunately it can be used for bad purposes (some of which may even be illegal).

The Corporate Transparency Act requires that companies must provide the government information about the owners and beneficiaries of the business.  It’s an effort to reduce potential illicit activities. 

Who Is Responsible for Enforcing the CTA?

The Financial Crime Enforcement Network (FinCEN) is who will be enforcing the reporting requirements under the Corporate Transparency Act. FinCEN is housed within the Treasury Department, along with the IRS. This is one reason that individuals will think that this is a tax issue. 

If you have overseas bank accounts or are in a business that has them, you may already be familiar with FinCEN.  Timalyn explains that organizations or individuals having $10,000 or more in cash or other assets must submit an annual report to FinCen. This form is known as the FBAR.

The Corporate Transparency Act reporting requirement is actually a legal issue, not a tax issue.  For this reason, Timalyn advises you to reach out to an attorney for advice, especially if you don’t know if you have to comply with the CTA reporting requirements. 

Who Needs to Comply with the Corporate Transparency Act?

Almost all legal entities will  fall under the Corporate Transparency Act reporting requirements.  If you registered a business as a corporation, LLC or an LLP, you are required to file the Beneficial Ownership Information report (BOI).  The BOI information that is to be reported includes:

●      Full Legal Name of the Beneficial Owner

●      Date of Birth

●      Social Security Number

●      Government Picture ID

●      Current Address of the Individual

●      Address of the Business Entity 

Who is a Beneficial Owner?

Timalyn explains they are people who exercise substantial control over the entity, either directly or indirectly.  You would also be considered a beneficial owner if you own over 25% of the company. 

It’s usually people who are responsible for major decisions related to the company.  The same person may also work in the day to day operations. 

Are there Exemptions for Certain People or Types of Organizations?

Yes.  In fact, there are currently 23 exemptions.  For information on these, subscribe to Tax Tips with Timalyn.  As more information becomes available, Timalyn will post it on this blog, along with other useful information for business owners

Here Are 5 Entities Exempt from the BOI Filing Requirement

●      Governmental Authorities

●      Banks

●      Credit Unions

●      Tax-Exempt Entities

●      Accounting Firm

If you are an accountant, Timalyn recommends you subscribe to her blog, at www.AmericasFavoriteEA.com.  You’ll find plenty of useful information for accounting and tax professionals.

What is the Deadline for Filing the Beneficial Ownership Information Report?

As of the recording of this episode, if your entity is formed after 01/01/24, you have 90 days to after the official start of your business file with FinCEN.  If your business was open prior to 01/01/24, you have the full year to gather and submit the information for the beneficial owner(s).

Please don’t procrastinate on filing the BOI.  If you already have the required information, go ahead and file it.  Remember, this doesn’t get filed with your tax return.  You’ll file the BOI on the FinCEN website. 

What if I’m Late in Filing the BOI?

There is a $500/day civil penalty if you are late in filing your report.  If you are found to be engaged in fraudulent or illegal activity by FinCEN, you will be subject to up to 2 years in prison and/or up to $10,000 in a criminal penalty.   

If you have trouble filing the report, Timalyn advises you to reach out to an attorney. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 43, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 42:  In this episode, Timalyn speaks to individuals and business owners.  Tax debt can be a serious issue, both financially and emotionally.  When it comes to taxes, you need to have a plan.  Failing to plan is planning to fail.  But, what is tax planning? 

What Does Failing to Plan Look Like with Taxes?

Assume last year you didn’t like your tax bill.  It is now November and you are  just beginning to think about your taxes, you didn’t really have a plan for 2023.  You should have been developing tax reduction strategies and implementing them much earlier.  Timalyn recommends looking at tax reduction strategies before the year even starts.

Another way people fail to plan for taxes is by not seeking out the advice and guidance of an expert in their industry.  If you have a retail business you don’t need a tax professional who focuses primarily on the transportation industry.  If you have real estate properties, it would be better to work with a tax professional who understands real estate investing. 

Tax law has different ways of applying tax credits and deductions for different tax industries.  You need a specialist who understands the nuances of your specific industry segment. 

Don’t Rely only on the Internet for Tax Planning Advice

Assume you Googled “Tax Planning” or some other phrase and found Timalyn.  Not every piece of advice applies to your particular situation.  Rather, treat that information as a starting point.  Dig deeper for a tax expert who is closely aligned with your type of business.  Tax strategies are not universally or equally effective for everyone. 

Developing an Effective Tax Plan

An efficient tax plan will involve tax strategies customized to fit your lifestyle, your goals and focused on reducing your tax liability over time.  There’s no one-size-fits-all strategy.

Roth IRA vs. Traditional IRA

For instance, a Roth IRA is a popular savings tool. Contributions to a Roth IRA are paid with after-tax dollars.  They will not reduce your tax liability in the current year.  The good news is that the dollars you put in, and the interest that accumulates, won’t be taxed when you pull them out.  Now, a traditional IRA is paid with pre-tax dollars, which would reduce your current year’s tax liability. The down side is that you’ll eventually pay taxes on the money when you pull it out, years from now.

Are you making more money now, during your working years, than you will be in your retirement years?  It might not make sense for you to invest in a Roth IRA instead of a traditional IRA, depending upon your specific situation and your specific goals.  This is especially true if you are concerned with reducing your tax liability during those earning years.  This is why it makes sense to work with a tax planner as well as a financial advisor when planning your retirement.

Should I Hire My Minor Child to Work in My Business?

This will probably be a separate episode in 2024.  If you’re interested in learning more about this option, subscribe to Timalyn’s blog, Tax Tips with Timalyn. 

Does Your Tax Professional Give You This Type of Advice?

Before you get upset with your tax professional, ask yourself, “Have I asked for tax strategies or have I asked for a tax plan?”  You may not realize it, but tax planning is a different service.  It’s generally not included with tax preparation service.  It’s an investment in your future.   

Many tax professionals assume you already know there’s a difference between tax preparation and tax planning.  If you need the latter, ask your tax professional if they provide that service and if it’s something you can invest in to lower your tax liability.  If not, they may be able to refer you to someone or maybe it’s time for you to spend time looking for a tax planning professional.  As a starting point, check out Tax Relief with Timalyn Bowens episode 16 , How to Choose a Tax Professional.   

Invest in Your Future

Spending money to hire an experienced tax planning professional will usually save you money.  It’ll also give you some control over your tax bill and tax liability.

You tax bill is what you owe after everything you’ve already paid in during the year.  While everyone has a tax liability, if you’ve properly implemented an efficient tax plan, you may be able to avoid a tax bill.  Timalyn is going to go into more detail about this on her YouTube channel, in the upcoming weeks.  Be sure to subscribe to it, so you’ll know when that information is published.

Please consider sharing this episode with your friends and family. This information may be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 42, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

f you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 41:  In this episode, Timalyn talks specifically to business owners.  There’s a possibility that you either owe taxes now, or that you will owe them in the future.  As a person whose focus is on achieving your business goals, let’s assume you’ve hit your income goal for the year.  As you begin to pull together your information, you suddenly realize you owe taxes.  Maybe you actually owe more this year than you did last year.  Are you beginning to worry that the more you make, the more you’ll owe?  Timalyn will provide 3 ways to reduce your business tax liability.   

Timalyn begins by setting up a scenario many business owners are familiar with, because a tax liability can cause a lot of stress and even throw you off of your game.  But, it doesn’t have to be that way. 

Tip #1:  Be Proactive

Let’s not worry about issues in the past.  This is about moving forward by taking proactive steps to reduce your tax liability by investing in your business. You do this by hiring experts.  Timalyn comments that she receives the best return on her investment when she invests in herself.  The same is true for investing in your business. 

On September 18, 2023, Timalyn launched the Tax Pro Representation Journey.  This is to help other tax professionals.  When you invest in an industry expert to help you in your business, the return on that investment should be at least 2 to 3 times what it cost you.  As an example, 75% of the tax professionals in Timalyn’s program brought in new clients within 3 weeks of beginning her program.  It’s a perfect example of how investing in yourself, as a business owner, can have a significant impact on your progress. 

Tip #2:  Consider Hiring Financial Experts

Having another set of eyes on the situation can be a big benefit.  But what type of financial expert should you consider hiring?

The Value of a Bookkeeper / Accountant

In Episode 16, Timalyn discussed, “How to Choose a Tax Professional.”  The same steps apply to hiring a bookkeeper.  The bookkeeper is managing historical data.  In other words, when and where you spent money.  Remember, the fees you pay your bookkeeper are also tax deductible.

The value of tracking the historical data is that it enables you to make income projections.  Trend data is a good way to make projections about your specific business.  You can also consider how you are performing relative to your industry.

The data will also highlight areas of weakness you may need to address.  You may notice certain expenses are unusually high.  By knowing your numbers, you’ll have better insight into how your business is performing.  This is especially important when a problem exists.  Once you uncover it, you can develop a plan to effectively deal with it, much earlier than if you’d simply waited until the end of the year.

A bookkeeper can also highlight areas of opportunity.  For example, you may be able to outsource an activity.  Knowing your numbers enables you to make an informed decision as to whether you can afford to outsource and/or hire.

Tip #3:  Consider Investing in a Tax Plan

Tax preparation is not the same as tax planning.  You should expect to pay an additional fee for tax planning services.  Tax planning is specific to you and your business.  You’ll have customized strategies designed to help you.  However, not all tax professionals are tax planning experts.  While Timalyn can do tax planning, she specializes in tax relief and she’d refer you to a trusted colleague for tax planning services. 

Timalyn will be posting more information about reducing your tax liability on her blog, Tax Tips with Timalyn.  She’ll also be launching a video series on her YouTube channel.  Be sure to subscribe to both of these free resources. 

Please consider sharing this episode with your friends and family. This information may be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 41, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 40:   Have you ever filed your tax return and then realized something doesn’t look right on the return?  You have the right to file an amended tax return to correct mistakes and/or oversights.  Timalyn will explain what this is and why you should file it.

IRS Form 1040-X

The IRS Form 1040-X Amended Individual Tax Return is the form you’ll use to correct your original return.  There are other types of amended returns. Form 1065-X  is used for Partnerships, Form 1120-X  and 1120S-X  are used for Corporation and S-Corporation amendments.  For today’s episode, Timalyn will focus on the 1040-X.

What Is a Continuous Use Form?

The IRS Form 1040-X is considered a continuous use form.  This means the IRS isn’t updating this form each year.  If your return is for 2020 or later, you’ll use the same form. 

You Found a Mistake, So Now What?

It’s possible that by filing the 1040-X, you could be able to reduce your tax liability based on the new (amended) information.  Even if it doesn’t reduce your liability, it may still reduce the penalties and interest.

Timalyn uses the example of how business owners may have overlooked the Sick and Family leave credit during the COVID years.  There are 2 resources you may want to review to see if you are eligible for the credits:

• Sick and Family Leave Credits for Self-Employed Taxpayers
•  Is there a Tax Credit for Self-Employed Workers Affected by the Coronavirus?

The 1040-X is used to correct a 1040, 1040-SR (for seniors) or 1040-NR (for non-residents).  It can be used to make adjustments for credits or deductions originally missed, it can be used to claim a carry-back due to a loss or unused credit.  The 1040-X can also be used to make certain elections, after the prescribed deadline.

The 1040-X shows your original information and then shows how the additiona information changes the originally submitted return.

You can use the form to correct a genuine mistake.  If the IRS doesn’t correct a math mistake, you could use the 1040-X to make the correction.  If you are worried about being assessed with an accuracy-related penalty, listen to Episode 28. 

In Episode 25, Timalyn discussed Tax Basics 101.  A credit against tax owed may need to be entered, because if the IRS corrects a math error, it may not address other issues related to that new information.  Timalyn provides an example of this from a recent client’s situation. 

Don’t Procrastinate

Timalyn explains that you must move in a timely manner when you realize there’s an error on your return.  IRS form 1040-X must be filed within 3 years of the date you filed your original return, if you are now claiming a credit or refund, or within 2 years of the date you paid the tax, whichever is later.  Note, the 3-year window does include extensions. 

While this episode primarily deals with mistakes on your federal tax return, you may also need to review your state and local tax returns. The current 1040-X be e-filed. The 1040-X for 2019 and prior tax years cannot be e-filed.  Timalyn uses the example of someone who either did or didn’t claim their child, this may need to be amended, once the error is identified. 

Injured Spouse Relief

This was covered in Episode 15.  You can use it to protect your share of a refund if your spouse owes back taxes, child support, or any other government entity entity. Timalyn also wrote an article about it.  Make sure you include an updated injured spouse form with the 1040-X if a credit or refund is due.  For more information on the form watch Timalyn’s video .

Don’t Intentionally Manipulate Your Income to Get a Mortgage

If you’re trying to get a mortgage and you intentionally file fraudulent information or try to manipulate the tax return so you qualify, you may be committing mortgage fraud.  The 1040-X shouldn’t be used, after you’ve qualified using false information.  If you need to generate additional income to qualify for a loan, focus on doing that and avoid the legal liability.

If you’ve enjoyed this episode, please leave a review on the podcast platform you are streaming on or Google.

Please also consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either. 

As we conclude Episode 40, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 39:  In this episode, Timalyn continues her discussion of the importance of IRS Form 433-F when negotiating with the IRS.  You may want to review Episode 38, which is Part 1 of the discussion.  It’ll help you to better understand today’s episode.

To listen to Episode 38, click here.

What Is IRS Form 433-F?

This is the Collection Information Statement.  This is the form the IRS uses to collect a wide range of financial information including your income, debts, expenses and assets.  When you’re attempting to negotiate with the IRS, you’re asking them to understand that you are unable to pay the full amount of your tax debt, at this time.  They obviously want the full picture about your financial situation, so the information you enter onto this form is the starting point. 

If you’re working with a tax professional to represent you in a tax debt negotiation, but they haven’t discussed the Form 433-F, it’s probably a red flag.  For tax professionals who aren’t using this form with your clients, you may be doing them a disservice.

In Episode 9, Timalyn explained the 3 Phases of Tax Relief.  These are the investigation, compliance and negotiation.  IRS Form 433-F substantiates what you can actually afford to pay and why.  It’s not uncommon for your and the IRS to have differing opinions on this answer. 

Today, Timalyn explains the detailed information you need to input on the form.  Again, if you haven’t already listened to Episode 38, this might be a good time to listen to that brief episode.  She’ll also discuss what you will need to substantiate as proof.  Finally, she’ll help you to know if you’ve completed the form properly.  Basically, “Is it right?”

In Episode 38, Timalyn discussed why you’ll need to use this form if you’re requesting an installment agreement, because you’re unable to pay the tax debt within 72-months or before the Collection Statute Expiration Date (“CSED”).  This includes whether you owe $25,000, but can’t pay it off within 72-months, or if you more than $50,000 but you could pay some of the tax debt.

Understanding the Detailed Information

The IRS wants to know you bank account(s) information.  This helps to prove your cash flow.  If your name is attached to an account, you’ll need to list it. 

Do you have lines of credit?  If so you’ll need to list this information.  This includes your actively used credit cards and the credit card numbers.  They want to see what you’re purchasing.  Are you using these cards for necessities or is it for discretionary items, like steak dinners, concerts and vacations? 

The IRS will want to know about your assets.  You’ll need to submit the account numbers for retirement accounts including 401(k), IRA, Pensions and brokerage accounts.  It would also include the VIN for any vehicles (i.e. cars, motorcycles, boats, etc.) you may own.  They’ll look at what you owe verses how much equity you have in those vehicles.  There’s a possibility that the IRS could require you to sell a vehicle to pay your tax debt.  

Timalyn advises you not to try to lie about your vehicles/assets.  The IRS will eventually find out about them.  This is especially true if you’ve posted pictures of it/them on your social media.  It’s best to be upfront and honest.

In one situation, a client has several vehicles and assumed the IRS would see how much he was paying on the loans, so that would obviously reduce his available cash flow to pay the tax debt.  In reality, the IRS looked at the situation differently.  As Timalyn explains, she had already advised him of what would happen, and it turns out she was right.  Friends, listen to your tax professional.  She/he has been through this, many times.  They’ve studied it.  And most importantly, you’re paying for their advice in the first place.

You’ll also need to provide any loan numbers and balances.  The IRS wants to see what you owe and actually, when you incurred that debt. 

There’s more information you’ll need to include, but the above should give you an idea of the types of information. 

Substantiating the Debt

You’ve listed the assets on Form 433-F.  Now, you need to list the expenses associated with the assets.  As Timalyn explains, if you have a vehicle, you’ll need to supply at least the last 3 months of insurance payments.  You may pay your premium on a semi-annual or annual basis.  No problem, you’ll simply divide the payment by 6 or 12 to get a monthly expense amount.  Any payment information should also match your bank account records. 

You’ll need to substantiate all liabilities.  For instance, you’ll need to show credit card and/or loan payments.

If you own or rent a home/condo/apartment, you’ll need to supply a copy of the mortgage or lease agreement.  This is all about proving the debt you’re claiming to owe and the payments you’re making toward those debts. 

Pay Careful Attention to Your Expenses

Expenses are handled differently from debt obligations.  For this reason, you should consider working with a tax professional, who is familiar with tax debt negotiation. 

Certain expenses can be compared to what are called the National Standards or Local Standards.  Timalyn explained what National Standards are and how they can be used to your advantage in Episode 9.  The IRS sets certain levels of acceptable expenses based on various areas of the country.  It’s possible you can list the national standard defined amount, even if you don’t actually pay that much. 

A word of caution, you should consult with a tax professional on this point.  The IRS will find out, if you’re trying to make false representations on IRS Form 433-F. 

By using the limits allowed in the Standards, this can help to substantiate and ultimately lower the amount you’re able to pay as part of your IRS Installment Agreement.  The fact is, you’re using the IRS guidelines to do it. 

Understanding Your Cash Flow

Timalyn explains that any income you receive will need to be substantiated.  This includes non-taxable income, such as social security retirement benefits. This will be factored in as income, even if it may not be taxable. 

If you work a W-2 job, you’ll need to provide all pay stubs for the last 3 months and yes, this must match your bank account information.

Alimony payments will need to be included on IRS Form 433-F.  This is true even if it was ordered as part of a divorce prior to the Tax Cuts and Jobs Act.  You’ll also need to show any child support payments. 

Don’t Go It Alone

If you’re going to negotiate with the IRS, don’t go at it alone.  Even if you don’t hire a tax professional to actually represent you, you should schedule a meeting with one to at least get advice for how you should handle it. Having an experienced tax professional on your side could save you much more than what it cost you to hire them in the first place.

If you’re a tax professional and you would like to become better skilled at helping your own clients, consider signing up for Timalyn’s Tax Pro Journey.  It’s a private podcast, including an article subscription and a private group community. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 39, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 38:  In this episode, Timalyn is going to discuss a document that’s often used in tax relief negotiations, IRS Form 433-F.  In her previous episode, she addressed the tax relief journey to try to make it easier to understand.  Today, she’ll do the same with a form that plays a big role in your negotiations with the IRS.

NOTE:  Timalyn points out that you need to make sure you’re using IRS Form 433-F.  There’s a similar document, IRS Form 433-F (OIC), that’s used when you’re making an offer in compromise.  However, the “OIC” version is not the form for today’s discussion. 

Timalyn is on a mission to fill the tax literacy gap, one taxpayer at a time.  While she uses these forms all the time, she realizes that most taxpayers don’t fully understand what they are or why Timalyn is asking for certain information that goes on them.  She understands what information the IRS is going to request, so having the correct information can both speed up the process and help to move the negotiations forward.

It’s a Collection Information Statement

The 433-F is more detailed than your IRS Form 1040.  The form provides supporting information for an installment agreement, which allows you to pay your tax debt in installments, rather than in a lump sum. 

If you are going to apply for an installment agreement on your own, and it’s not a streamlined agreement (meaning you can’t pay it back within 72-months or before the Collection Statute Expiration Date – CSED), you’ll need to provide the IRS with additional information to support your situation.   

Timalyn explains that if you owe more that $50,000, you will be required to submit specific financial information, using IRS Form 433-F.  

If you are applying on your own and it is streamlined, you can use IRS Form 9465 to request an installment agreement.  For more information, watch Timalyn’s video.  The IRS will charge you a $225 set-up fee.  However, if you do it online or over the phone, the fee is only $31. 

If you plan to apply for an installment agreement on your own, consider purchasing Timalyn’s Guaranteed Installment Agreement e-book.  It will walk you through the process and to get your plan set up quicker.

What is the purpose for the 433-F ?

This form collects your current financial information used to determine how you can satisfy your debt.  This applies to an individual or a small business owner.  The IRS wants you to prove why you’re going to need more than 72-months to pay the debt.  The form gathers that information. 

You’ll use this form to report your income over the last 3 months.  Remember, it may have changed since you filed your tax returns. 

Timalyn takes a minute to explain why you should probably seek a consultation with a tax professional who has specific experience in tax relief.  That information will be extremely helpful, even if you decide not to ultimately hire him/her to represent you in this process.

While the IRS wants the last 3 months, you actually might want to provide the last 6, 9, or 12 months, because certain factors, such as a period of unemployment, may change the picture in your favor. 

Timalyn explains the IRS is really trying to analyze your cash flow.  Some jobs pay weekly, while other sources of income such as social security only pay monthly. 

Over the past 12 years as an enrolled agent, Timalyn knows the IRS is also looking at what you owe other people or companies.  Having other required payments will limit your cash flow, but it’s not that easy. 

The IRS will consider your credit card balance and your available credit.  They may determine you could use some of the available credit to pay your tax debt. 

Additionally, the IRS will review your assets.  For instance, do you have equity in your vehicles?  How much do you owe on the loans?  How much are the monthly payments?  What is the fair market value of the vehicle(s)?  Realize the IRS may require you to sell some assets to pay your tax debt.  Starting to get the picture?

Are You a Business Owner?

If so, the IRS wants to know about your accounts receivable balance.  The IRS can consider you’re A/R because it could increase your normal cash flow.  You need to be open and honest in your negotiation with the IRS.  If they think you’re playing games, they will be much more difficult in striking any type of arrangement with you.  In fact, they could simply decide to issue tax liens on specific tax years.   

Do I Have to Provide All of This Information?

Timalyn’s answer is, “it depends.”  The IRS has the right to specific information when you’re involved in a negotiation with them.  Remember, you owe them and are at their mercy.  If you’re trying to establish an installment arrangement, you’re asking them for a favor (even though we may not look at it that way).   

On the other hand, there are National Standards and Local Standards.  If your expenses fall below these levels, you still get the benefit of the allowable standard.  It’s like taking advantage of the standard deduction on your tax returns.  Be sure to listen to Episode 39 for more information in this scenario.

This is complicated, so you may decide to get a consultation with a tax professional.  You can sign-up for a tax consultation with Timalyn.  There is a fee, but you’ll have a full hour for her to review your specific situation and give you a diagnosis.  You can later decide to hire her or you can decide to hire another tax professional.  Either way, you’ll have solid advice and will be better prepared to take the next step.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 38, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact. 

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 37:  In this episode, Timalyn describes what happens during the process of you retaining tax representation.  She provides explanations of what’s going to happen during the 3 phases of tax relief.  Timalyn walks us through the onboarding process, the investigation phase, compliance and negotiation.  While she’ll step in to represent you, it’s still a partnership and she’ll need your assistance. 

Timalyn begins by mentioning Episode 9, which explains the 3 phases of tax relief.  However, people still have questions about the process itself.  This discussion is based on her process.  Other tax professionals may do it differently, and that’s okay. 

The Onboarding Process

Everything begins with a consultation.  While Timalyn offers a number of free resources, the consultation provides you the opportunity to ask her specific questions about your situation.  She’ll create a roadmap showing you how to resolve your tax debt issue.

While not every situation requires you to hire a tax professional to resolve the issue, some do.  In Episode 36, Timalyn focused on the trust fund recovery penalty related to payroll tax issues.  That type of issue definitely justifies hiring a tax professional. 

If you decide to hire Timalyn within 14 days of your consultation, she’ll credit you the cost of the initial consultation.   

4 Things Timalyn Needs, before She Begins 

The first is an engagement letter.  It outlines the services she’s offering, when payments are due, what you can expect from Timalyn and what she will expect from you.  The letter must be signed before the work begins.

The second is a completed IRS Form 2848.  This is a form designating Timalyn to act as your Tax Power of Attorney.  This form is then sent to the IRS.  It authorizes her to speak directly to the IRS on your behalf.

The third item is a signed Form 7216, which gives her permission to use a 3rd party software to pull your transcripts and evaluate your data.   

The fourth item Timalyn needs is your payment for her services.  In her firm, Timalyn typically breaks the pricing up by each phase.  She goes on to explain that at a minimum, the investigation phase has to be paid for, before the work begins.

Timalyn charges different fees depending upon whether you owe more or less than $100,000. 

If your tax issue is $50,000 or more, she will need your financial information.  Expect a detailed questionnaire from Timalyn. 

The Investigation Phase

This is when Timalyn begins communicating with the IRS and evaluating your tax transcripts to identify any missing returns and to determine what penalties have been assessed.  She’s also going to work with you to understand if you were going through something that may be eligible for abatement (i.e. “forgiveness”). 

Once this is completed, she’ll schedule a case update with you.  At this point you’ll be able to decide if you can move forward on your own, or if you’ll still need Timalyn to continue working on your resolution.  If she’ll need to be involved, Timalyn will provide a price for the compliance process.

The Compliance Phase

This is where it really becomes a partnership.  Efficient communication and information is critical.  When any missing returns are prepared and submitted, this will alter the amount of tax debt and that typically results in additional penalties may be assessed. 

A second case update will be scheduled to review your completed returns before they are filed.  You’ll need to sign and file them.  Timalyn may be able to e-file the returns, using IRS Form 8879. 

The Negotiation Phase

At this step, you are still in a partnership with Timalyn, assuming you’ve retained her to represent you.  She’ll continue to speak to the IRS on your behalf.  However, she’ll need your financial information including current expenses, debts, and asset information. She needs to have the information in a timely manner (refer back to your engagement letter).   

IRS Form 433-F is the most common document Timalyn and the IRS will use during the negotiation.  It’s a detailed summary of your financial situation.  Remember, the IRS wants its money, but the information on this form can help prove to the IRS that there’s only so much available. 

There’s a chance you may qualify for a temporary hold on the collections by having your debt classified, Currently Not Collectible (“CNC”).  Listen to Episode 18 to learn more about this.

If you’re not eligible, you may still qualify for an installment agreement, which Timalyn covered in Episode 10. 

There’s also the option of making an offer in compromise.  Timalyn has videos describing the offer in compromise on her YouTube channel.  Here are a couple:

1)    Offer in Compromise:  Do You Qualify?

2)    What is an Offer in Compromise?

This was a lot of information.  The main point is that you’ll need to stay in communication with your tax professional.  Don’t disappear.  By ignoring or responding slowly, you’ll delay resolution of your tax debt and may incur additional interest on the back taxes.

IF YOU ARE A TAX PROFESSIONAL

Before she goes, Timalyn wants to remind tax professionals that on September 18, 2023, the Tax Pro Representation Journey, a private podcast and article subscription will launch.  Make sure you take a look at the information and subscribe.  

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 37, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 36:  In this episode, Timalyn continues with a topic related to payroll taxes.  Today, she’ll discuss the Trust Fund Recovery Penalty.  It’s one of the biggest tax penalties the IRS can use.  The penalty can be up to 100% of the taxes owed.  Does she have your attention yet?  Let’s listen to Timalyn discuss how to avoid this penalty.

In episode 28, Timalyn discussed the IRS Accuracy-Related Penalty.  This penalty can be 20% of the miscalculated tax.  That seems like a big deal until you learn about the Trust Fund Recovery Penalty, which can be up to 100% of the unpaid taxes.  Additionally, there’s no cap on the amount eligible for the penalty.

The Trust Fund Recovery Penalty can be assessed to the business, but also to people the IRS deems responsible for the payroll taxes not being paid.   This extends to people that may not even be the owner of the business.  You may still be held responsible according to the IRS’ rules. 

What Is the Trust Fund Recovery Penalty?

Timalyn explains the trust fund is the taxes withheld by the employer, on behalf of the employee.  Each private-sector employee has submitted a form W-4 instructing how much should be withheld for income taxes. In addition to those taxes money Social Security and Medicare tax (FICA) are also withheld from wages.  Those withheld funds are held in a  “trust.” 

As previously stated, the Trust Fund Recovery Penalty is 100% of the trust fund tax.  This is the employee’s portion of FICA and the income tax withheld.  The employer is required to submit those funds to the IRS.  If the employer willfully neglects to submit these fund, they are evading taxes.  This is significantly different from avoiding taxes.  Timalyn focuses on the important distinction between tax evasion and tax avoidance in Episode 34.

How Long Does the IRS Have to Assess the Penalty?

The IRS has 3 years to assess the Trust Fund Recovery Penalty.  If you haven’t made an arrangement to pay those taxes, you need to address it ASAP.  The IRS actually has 10 years to collect the taxes.  Refer to Episode 5 for an explanation of the Collection Statute Expiration Date (“CSED”).  This date is established, once the penalty has been assessed.

As stated in Episode 35, payroll tax penalties can be charged as civil penalties or as criminal charges.  So, beyond the financial aspects, there’s also a risk of incarceration if you’re found to have willfully not collect or didn’t truthfully calculate the taxes. 

Why Is the Trust Fund Recovery Penalty so Harsh?

The answer is two-fold.  First, if this penalty applies, you’ve been a tax evader.  Second, if you haven’t paid the taxes withheld from the employee, the IRS also considers you a thief.  You’ve stolen funds from your employee and the IRS.

Because you didn’t pay the taxes withheld, the employee won’t receive the benefit of the tax payments they thought were lawfully paid.  If there’s a tax refund, the IRS is coming after you because now they’ve paid out money that was never paid to them in the first place. 

Additional Penalties Can Be Assessed

Before assessing the TFRP the IRS will assess other penalties as well. They will still assess you with the failure to deposit penalty and the failure to file penalty if you didn’t file the proper payroll returns. Once the IRS adds the TFRP on top of that it can cause a serious financial leak in your business, possibly resulting in you closing.

If you’re exposed to payroll tax penalties, including the TFRP, you need to communicate with the IRS.  Don’t let the problem grow worse.  Timalyn explains that communication is key.  The IRS may be willing to work with you.   

Who Can Be Held Responsible?

At the beginning of the episode, Timalyn mentioned the penalty can be assessed to more individuals than just the business owner.  Any person responsible for withholding, accounting for, depositing or paying specified taxes – and willfully failing to do so.

The above scenario could include the company treasurer, an accountant, an officer, director, shareholder, or even a bookkeeper.  If you have an employee responsible for payroll activities or anyone who has signing authority on certain checking accounts.

Any or all of them can be assessed the Trust Fund Recovery Penalty.  Remember this is 100% of the unpaid withholdings. Imagine how financially devastating this could be. 

Can I Get the IRS Trust Fund Recovery Penalty Removed?

Yes.  If the IRS deems you were not responsible for the negligence.  There will be interviews and required proof, but it may be possible.  However, penalty abatement with payroll taxes can be very complicated.

If you’re involved in this type of situation, Timalyn highly recommends hiring a tax professional to represent you.  She explains tax representation in Episode 33.  That episode also has a link to help you decide on which kind of tax professional might be best for you.

You can book a consultation with Timalyn to review and discuss options related to your specific situation. 

A point to remember, it will probably be best for you to hire a separate tax professional to represent you, instead of trying to have the same professional represent the business and all impacted parties.  There could be a potential conflict of interest.  You want to make sure someone is representing your best interest.  It’s important that you get the help you need to address this situation, before it gets any worse.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 36, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode. 

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 35:  In this episode, Timalyn focuses on the importance of payroll taxes.  Paying employee taxes is a cost of doing business.  If you have classified actual employees as independent contractors, you are guilty of tax evasion.  The penalties are severe. 

The IRS Test to Determine Classification

Properly classifying people who work for you is an important responsibility.  The IRS has an online test to help you determine whether an individual should be classified as an employee or as an independent contractor or some other valid classification.

If you are an employee working as an independent contractor (often for cash), why would the employer do this? They aren’t looking out for you. They’re looking out for themselves, avoiding to pay employee taxes.  This is tax evasion. 

What Are Payroll Taxes?

Timalyn explains that at the federal level, payroll taxes are comprised of 3 different taxes:

●      Federal Income Tax – your tax withholdings based on how your completed your W-4. 

●      FICA Taxes – social security and Medicare taxes.

●      FUTA – an annual tax paid by employers called the Federal Unemployment Tax Act.  It’s paid on the first $7,000 of earning for each employee.

Timalyn explains that if the IRS finds you guilty of tax evasion via misclassification, you’ll be assessed significant fines and penalties over and above the actual taxes you neglected to pay. 

Annual Payments, Quarterly Payments and Tax Deposits

Payroll taxes can be complicated.  The FICA tax the business withholds is usually 7.65% of the employees’ wages.  There’s also the obligation for the business to pay another 7.65% of the wages.   

On an annual basis, employers are required to send out IRS W-2 Forms by January 31^st.  You may also be required to complete the IRS W-3 Form, which is a reconciliation of all of the employee W-2 Statements.  You’ll also file IRS Form 940, for the federal unemployment tax to be paid by the employee. 

On a quarterly basis, employers will file the IRS Form 941, which is for the employer’s quarterly federal tax return.  This reports the income tax and FICA tax withheld for each employee.  It also shows the FICA taxes paid by the employer (that other 7.65%).

Employees have taxes withheld during the year, on an on-going basis.  These withholdings are considered deposits, which will be used to offset your end-of-year tax liability.  Timalyn explains that once your payroll tax liability reaches a certain level, you need to understand your deposit schedule for the withheld taxes.

If your quarterly deposits are less than $2,500, you can send a payment with the Form 941, without getting penalized.  It can be either e-filed or mailed.  The payment itself can be sent electronically via the EFTPS or a check can be mailed.  If you use the e-file option and the EFTPS, there’s an advantage of having an electronic stamp showing when you completed these actions. 

If your quarterly deposits are higher than $2,500, you need to make the payment by the 15^th of the following month.  So, if you are submitting this monthly, your April deposits would need to be sent in by May 15^th and so forth. 

Timalyn notes that there’s a threshold that would require you to make deposits semi-weekly deposits.  So, in this case, a company’s payroll deposits of any payroll taxes withheld would need to be made within 3 days of having run the payroll. 

If You Fail to Meet Your Obligations

As Timalyn mentioned at the outset, there are severe penalties if you fail to meet your payroll tax obligations.  The IRS can assess civil penalties including:

●      Failure to File

●      Failure to Deposit

●      Trust Fund Recovery Penalties (one of the biggest tax penalties)

o   It can be up to 100% of the tax owed

o   A $15,000 deposit that wasn’t made, could be assessed another $15,000 penalty

▪       Plus, the original $15,000, the Failure to File and Failure to Deposit penalties

You have to keep up with your payroll tax obligations.  If you let them get away from you, they can potentially drive you out of business.

The IRS can also file criminal charges including imprisonment and fines.  It’s considered a felony to willfully not collect or truthfully account for the tax.  This is why making sure you’re using the proper classification of anyone working for you.  You can be put in prison for up to 5 years and be fined up to $10,000.   

If you are a business owner and you know you have a payroll tax issue, consider booking a consultation with Timalyn, via here Bowens Tax Solutions website.  Click this link to sign-up for your paid consultation.

Additional Resources

The upcoming Episode 36 will focus on the Trust Fund Recovery Penalty.  Be sure to listen in 2 weeks.

If you are a tax professional, the Tax Pro Representation Journey will launch on Sept 18, 2023.  This is a group with a private podcast and article subscription for tax pros interested in representing taxpayers facing back tax issues.  This will include weekly tips to help you grow this area of your business.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 35, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode. 

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 34:  In this episode, Timalyn discusses the seemingly controversial topic of tax evasion vs. tax avoidance.  These terms have very different meanings, although some people mistakenly use them interchangeably.  She’ll explain the terms and how to help you understand whether you’re attempting to do something illegal, or extremely (legally) beneficial.

Tax avoidance is a legal strategy used to minimize your tax liability.  The bulk of today’s episode will explore tax evasion.  She will discuss the underground economy and why you need to stop participating in it.  You could go to prison and be required to deal with your back tax issues. 

Tax Avoidance

You can think of tax avoidance as legal steps you can take to reduce your tax liability and to maximize your after-tax income.  Timalyn begins with the step of investing in a tax planner to help you with a strategy to minimize your taxes.  This is classified as tax avoidance and it’s perfectly legal.  Timalyn lists some common tax avoidance tactics:

●      Claiming your home office deduction as a business owner

●      Itemizing your mortgage interest as a home owner

●      Itemizing charitable contributions 

Common but Illegal Tactics that Are Considered Tax Evasion

●      Paying someone in cash so they don’t have to report taxable income

●      Receiving cash payment and not reporting the taxable income

●      Paying a babysitter in cash, but not issuing a 1099 if required

●      Requesting to be paid in cash so you "don't have to report it"

Remember, the IRS wants you to report anytime money is exchanged for goods or services.  We have a voluntary compliance system.  The IRS relies on you to perform your civic duty.

Now, this may seem controversial to some (or many), but remember, Timalyn’s goal is to fill the tax literacy gap one taxpayer at a time.  She’s offering this advice to help you to better understand taxes and to help you to stay out of trouble with the IRS.

Timalyn provides a tremendous amount of free information on her podcast and on her  YouTube Channel.  If you’d like personal advice, based on your specific situation, you can book a paid consultation with her. 

The Underground Economy

Surprisingly, many of us are probably participating in the underground economy without thinking, or realizing, we’re doing it.  Consider these everyday activities:

●      Selling or buying something at a garage sale

●      Paying cash or accepting cash for tutoring

●      Paying cash or accepting cash for raking leaves or shoveling snow

The IRS knows these activities happen, but they can’t really track it.  However, some people purposefully take advantage of the activities to avoid paying taxes.  If the IRS proves that you have engaged in tax evasion, they will assess penalties in addition to the back taxes owed.

Tax Evasion

This is defined as the failure to report income or the deliberate underpayment of taxes.  If you are a W2 employee, taxes are normally deducted from your paycheck, based on your W-4 .  If you deliberately complete your W-4 without having any taxes withheld, it’s considered tax evasion. 

If you are a traveling nurse who will make 6-figures or more in a tax year, you should definitely make sure you are not going “exempt” on your W-4.  It’s deliberately underpaying your taxes.

If the IRS pursues and proves you are committing tax evasion, you will be forced to pay your back taxes and penalties.  However, Timalyn explains that you can also face up to 5 years in prison.  Is it really worth the risk? 

Timalyn reminds us that Al Capone was ultimately convicted of tax evasion, because they were having problems convicting him on other charges.  He was sentenced to more than 5 years because they were able to add additional charges.  Martha Stewart and Willie Nelson were both penalized for crimes related to tax evasion.  Actors Nicolas Cage and Wesley Snipes also ran into legal problems involving taxes. 

Timalyn also provides the example of a North Carolina man sentenced to a 36-month prison sentence for tax evasion.  He didn’t file individual tax returns for 20 years.  He fraudulently filed W-4s that falsely claimed he was exempt from federal and state income tax withholdings. 

You May Not Be Required to File Federal a Tax Return

There are some circumstances in which you may not be required to file a federal return.  Some of these include:

●      You only receive social security income and no other sources of income

●      Your earned income is lower than the standard deduction and you have no other sources of income

By the way, if you failed to file a federal tax return you were required to submit, you may have forfeited your right to any refund that may have been payable to you, based on the length of time that has elapsed.

Remember, if your tax returns are late by 5 months or longer, you could be assessed a Failure to File penalty of up to 25% of the tax liability.  Under specific circumstances, you may be eligible for Reasonable Cause Penalty Abatement, which erases the penalty. 

If you have unfiled tax returns and you know you owe taxes, you’ll be assessed with the Failure to Pay Penalty.  You need to seek out an experienced, qualified tax professional to help you with your situation.  In Episode 33, Timalyn explains Tax Representation and how it can help you.   

The bottom line is that it’s time for you to be proactive in resolving your tax debt issues.  As Timalyn mentioned early in this episode, she encourages you to review the free information she’s provided on YouTube and in the previous episodes of this podcast.  If you’re ready to talk about your options, book an appointment with Timalyn.  There’s link in the below paragraphs.  The IRS is serious about tax debt.  Timalyn Bowens is serious about helping you to resolve it.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 34, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 33:  In this episode, Timalyn takes a step back to explain what she means when she uses the term tax representation.  She mentions it in podcasts, but it’s term people may not fully understand.  If you have tax problems with the IRS, there’s a good chance tax representation is exactly what you’re looking for, right now. 

Before she begins, Timalyn takes a minute to thank her listeners for helping her to reach 1,000 subscribers on her YouTube channel!  She sincerely appreciates your support and helping her to continue on her mission to fill the tax literacy gap, one taxpayer at a time.

You Have Rights as a Taxpayer

Timalyn begins with a story about a client who set up an installment agreement with the IRS to pay the tax debt.  However, this person was struggling to make the payments.  You have a right, as a taxpayer, to not have to incur a financial hardship while paying the tax debt.  There are ways to navigate this process.  It often involves having a tax professional that understands your rights to represent you.  There are issues that can be negotiated to help you meet your obligations, while at the same time enabling you to do so in a reasonable fashion.

Defining Tax Representation

According to the Internal Revenue Manual (IRM), tax payers have the right to representation.  It means you can let your tax representative communicate with the IRS, on your behalf.  While the IRS can and will still mail you communications, in most situations they can’t force you to attend meetings if you have an authorized representative. 

The IRS cannot call you directly, if you’ve hired a tax representative.  Again, this is a protection you have under the taxpayer bill of rights.  Your representative will submit IRS Form 2848, informing the IRS that they have your permission to represent them.

The tax representative you hire must be credentialed.  There are only 3 types of tax professionals who can officially represent you in front of the IRS.  These three are:  a tax attorney, a certified public accountant (CPA) or an enrolled agent (EA).

What Is an Enrolled Agent?

An enrolled agent specializes in taxes.  An enrolled agent has an extensive 3-part test they must pass to qualify as an EA.  This is a special designation by the IRS enabling the EA to represent clients in all 50 states as it relates to IRS tax matters.

Generally speaking, once you’ve hired a tax representative, you won’t have to attend meetings requested by the IRS.  This is something your representative will do for you.  However, it’s important to understand there are exceptions, such as if the IRS formally sends you a subpoena to appear, via a summons.

Timalyn explains that in most situations, if the taxpayer is in an interview or conversation with the IRS, they have the right to stop the proceeding by asking to consult with a tax representative.  The taxpayer will need to show the IRS Form 2848 to prove he/she has a designated representative.

Once hired, Timalyn will execute the Form 2848, provide a copy to her client (the taxpayer) and file a copy with the IRS Centralized Authorization File, also known as the CAF unit.  Once it’s been filed and processed, the IRS will automatically see Timalyn is representing the taxpayer and therefore, the IRS must call her instead of the taxpayer.  If the IRS mails letters to the taxpayer, they are required to copy Timalyn. 

It’s important to note that an EA is NOT an employee of the IRS.  They are a tax professional authorized to represent taxpayers before the IRS.  Timalyn works for you, not the IRS.

What if I Can’t Afford to Hire a Tax Representative?

There are situations in which an individual may not be able to pay for the services of a tax attorney, a CPA or an EA.  Don’t panic.  If you can’t afford representation, you still have a right to representation.  The IRS has a special program to address this situation.  It’s the Low Income Taxpayer Clinic (LITC).  The nearest LITC can be located either via the above link, or by calling 1-800-829-3676. 

There are guidelines to determine if you qualify to use the LITC.  Timalyn reminds us that the definition the IRS uses and your definition of being broke aren’t necessarily the same.

The LITC is independent from the IRS and also from the IRS Tax Advocate Service (TAS).  The TAS is there to help with the IRS systems aren’t working correctly and may be abusing your rights.  The LITC works for you to make sure your tax debt payments don’t place you in a financial hardship.  Again, this is part of your rights under the law.

The LITC can represent you in tax audits, appeals and in tax collection disputes both before the IRS and in court. 

If you still need help deciding which route is best for you and your specific situation, book a consultation with Timalyn.  This link will take you to the Tax Relief Consultation page on www.BowensTaxSolutions.com.  There is a fee for this consultation.  Before you book this appointment, you’ll want to have specific information available.  This includes your actual questions, the amount the IRS alleges you owe, a rough idea of your income and your latest tax notice. 

After the call, you’ll have a roadmap for the next steps you should take.  If Timalyn takes you on as a client during the 14 days after the meeting, the fee for the consultation will be credited toward her fee for tax representation.  It’s important that you take the first step in proactively addressing your back-tax situation.  Whether this means hiring Timalyn, handling it yourself or seeking out the services of a different tax professional, take action now.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 33, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 32:  In this episode, Timalyn will discuss the process remove a tax lien.  She recently taught a class to a group of tax professionals.  Many of them had questions related to this topic.  Based on their responses, she thought this would be a good topic to share with actual taxpayers who follow her podcast.

If you’re dealing with this situation, you’ve probably already received the IRS Notice of Federal Tax Lien.  The IRS files this with your county clerk’s office.   

What Is a Federal Tax Lien?

Timalyn explains that it’s when the IRS “calls dibs” on your property, until your federal tax debt is paid.  Even if you’re not a homeowner, it applies to any property (real or personal), such as a car.  The lien is attached and will enable the IRS to recover its money from the proceeds, if that asset is sold.  A business may have accounts receivables. The lien also attaches to this so that the IRS gets paid from those receivables or other business property.  In fact, the IRS can even attach a lien to your retirement funds.  This is a serious situation.

In Episode 7, Timalyn explained the Collection Statute Expiration Date (“CSED”).  It’s the last day the IRS can legally collect on a tax debt.  Federal tax liens also have a similar date.  They are self-releasing within 10 years of the date they were filed, as long as the IRS doesn’t re-issue a lien for specific years.   

What if I Haven’t Received a Notice of Federal Tax Lien?

This doesn’t necessarily mean you’re in the clear.  The lien is issued after the tax is assessed and after a CP14 has been issued.  The CP14 gives a date by which the payment must be made.  If you fail to comply with that deadline, there is a silent tax lien.   

Due process has been followed for the lien to exist. It just hasn’t been sent to the county clerk’s office. That’s why it’s referred to as a silent lien. This is important to note because the IRS can issue a tax levy, as discussed in Episode 5 without filing a lien with the county clerk.

What if I Can’t Pay the Tax Debt?

As Timalyn discussed in Episode 10, you may have the option of setting an IRS installment agreement.  If you owe less than $10,000 and have been tax compliant for the past few years, it may be a guaranteed option.  Check out Timalyn’s e-book, How to Guarantee a Pay Plan with the IRS.

Assuming you’ve already received the tax lien, how do you remove it?

4 Ways to Remove a Federal Tax Lien

The first way:  Pay the Debt 

This is not sarcasm.  It’s the obvious solution, if you can do it.  Things happen and situations change.  Once the debt is paid, the tax lien will be removed within 30 days.  The amount required can include the tax debt, any penalties and any interest that has accrued. Call the Centralized Lien Office at 800-913-6050.  You’ll want to verify the total amount owed, request the years with a tax lien issued on them and importantly, to request a Payoff Letter.  This letter will be necessary if you’re going to sell an asset with a lien attached. 

Timalyn discussed selling a home with a tax lien in Episode 4.  The Payoff Letter would be needed by the title company, so you can prove how the lien will be resolved, without delaying or preventing the sale.

The second way:  A Discharge of Property

This process will usually take about 45 days.  You’ll request that the IRS remove the tax lien so the property can be gotten rid of.  You’ll have to provide specific information on the IRS Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien.  The information will include:

●      The Fair Market Value of the Property

●      Who Is Interested in Purchasing the Property

●      The Sale Price (to determine the proceeds available to pay off the tax debt)

●      And other, related details

The third way:  Subordination

This does not eliminate the lien.  However, with subordination, the IRS agrees to stand aside to allow another creditor to get its share before the IRS.  They’ll potentially do this if they feel it’s in their best interest.  Timalyn give the example of someone with an installment agreement who is struggling to meet the agreed upon payments.  If another debt could be eliminated, it would enable more money to be applied to the installment agreement payments.

The fourth way:  Requesting a Lien Withdrawal

If your tax debt is less than $25,000, you’re setup with a direct debit installment agreement, you have no defaults related to the agreement, your most recent tax returns are filed, your tax withholdings are in order (or you’re making your estimated quarterly payments) and you’ve made 3 consecutive payments on the agreement, a good faith request for lien removal can be made.

You’ll need to complete IRS Form12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. 

Is Bankruptcy an Option for Back Taxes?

This is a misconception many people have.  You cannot put a tax return into a bankruptcy unless it meets a 3 year, 2 year, 240-day rule.  As of the recording of this episode in 2023, your 2022, 2021 or 2020 tax debt would not qualify. 

Additionally, if you have a federal tax lien, you should not put that into the bankruptcy.  The IRS has a secured interest, via the lien, and you’ll have to pay it back anyway. 

Bankruptcy may be a viable option for debts unrelated to tax lien.  If this is your situation, Timalyn suggests you work with both a bankruptcy attorney and a tax professional to make sure your bases are covered. 

Timalyn is the owner and lead accountant at Bowens Tax Solutions and they can assist with tax lien removal.  If you want to work with someone else, at least you now have good information to help you understand the process.  If you would like to work with Bowens Tax Solutions, make sure you book your tax relief consultation with Timalyn.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either. 

As we conclude Episode 32, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

 Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact. 

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.

Episode 31:  In this episode, Timalyn focuses on preventative care for business owners.  Today, she’ll focus on sole proprietor taxes.  She reminds her audience that over 90% of the clients she works with, who owe back taxes they can’t pay, are business owners.  Many of these clients are single-member LLCs, also referred to as sole proprietors.  Let’s listen to Timalyn as she continues her mission to fill the tax literacy gap, one taxpayer at a time.

Spotting the Red Flag

Timalyn begins by commenting about a common question she receives.  “I’ve filed my personal taxes, but can you file the tax returns for my business?”  This is a red flag.  Individual tax returns are due in April, but returns for a some corporations and partnership are due earlier.  If the person asking the question is a single-member LLC, the tax information related to the sole proprietorship should have been filed as part of the individual tax returns.

What is a Sole Proprietorship?

This classification refers to any business that’s unincorporated.  Any individual who sets up an unincorporated business is considered to be a sole proprietor.  This would apply to an Uber or Lyft driver and many other types of individuals exchanging services for payment. 

Many people don’t actually realize they are a business, for tax purposes.  This can lead to confusion and potential problems down the road.

What’s the Difference Between a Sole Proprietorship and an LLC?

A Limited Liability Company (LLC) is a state-designation.  There’s no actual advantage relative to federal taxes when you’re a single-member LLC.   

A single-member LLC is the same as a sole proprietorship, at the federal level.  It changes if there are multiple members of the LLC.

Timalyn explains the Federal 1040 tax form is used for both individuals and single-member LLCs.  However, the LLC will also file the IRS Schedule C, as part of the tax return.  This is what she referred to at the beginning regarding a red flag.  There is no separate tax return for a single-member LLC (also known as a sole proprietorship).

The IRS Schedule SE is also an integral part of the tax return.  This is the form used to calculate the self-employment tax liability.  Timalyn recorded an episode on self-employment tax.  You can also watch her YouTube video explaining how to calculate the self-employment tax liability.  It’s roughly 15.3% of income of your net income. 

The tax rate for a sole proprietor is directly related to the tax rate for the individual’s ordinary income. 

You can use IRS Form 1040-ES to calculate your quarterly estimated tax payments.  Timalyn explains quarterly estimated tax payments in Episode 21.  If you’re going to have a tax liability of $1,000 or more, you’re required to make these payments.  Remember, we have a pay as you go system.  It has nothing to do with whether you received a tax refund last year.  If you make more than the IRS standard deduction, you’re going to have a tax liability. 

A Quick Tip for W-2 earners with a Side Hustle

One way to deal with the issue of quarterly tax payments is to adjust your withholdings taken out of your W2-based paycheck.  This can relieve the pressure of having to make these manual payments.  Remember, if you’re a sole proprietor this business income and your W2 earnings all go into the same pot for tax purposes. 

For more information on filling out the IRS 1040-ES, watch Timalyn’s YouTube video.

State Obligations with a Single-Member LLC

So far, Timalyn has focused on federal taxes.  Now, let’s briefly transition to state taxes.  She uses Kentucky as a basis for the following information.  It’s important to note that each state is different, so check with your state’s Department of Revenue. 

Kentucky requires single-member LLCs to submit an Annual Report by June 30^th of each year.  This enables you to update or confirm basic information about your business.  In Kentucky, it also requires a $15 fee as of the time of this recording.   

Kentucky single-member LLCs also include the Kentucky Form 725 with their end-of-year tax returns.  The current fee is $175. 

Additionally, you may also have local tax requirements. Be sure to check with your local tax authority.  In the Louisville area, it’s the Metro Louisville Revenue Commission.  Louisville requires businesses to submit Form OL-3, which is an occupational license.  The tax rate is 2.2% on your net profit.   

In summary, single-member LLCs are sole proprietors and have specific forms required for taxes.  Rather than trying to know everything you need to know about taxes, Timalyn recommends you work with a qualified tax professional whom you trust.  They will be able to make sure the proper forms are accurately completed.  If you’d like help determining which type of tax professional to hire, please listen to Episode 23 and Episode 16.

If you’d like to learn more, consider purchasing Timalyn’s course:  Business Taxes 101.  She’ll teach you about the other business entities and the obligations required for each. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 31, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.