irs issues

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 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 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.

Episode 30:  In this episode, Timalyn discusses her mission to fill the tax literacy gap.  Many people, including business owners, don’t fully understand their taxes and what they sign each year.  Timalyn will highlight some upcoming opportunities to help you to learn more.

Welcome to the 30^th episode of Tax Relief with Timalyn Bowens.  Timalyn begins with some quick stats about podcasts.  There are roughly 4,000,000 podcasts.  However, in 2022, only 500,000 of those podcasts were considered “active.”  To qualify, there only had to be 1 episode published in 2022.  Thanks to your interest, this podcast continues to grow.

What is the Tax Literacy Gap?

Timalyn defines this as the space between information people know about taxes, and what they should know.  When you sign your tax returns, you accept responsibility for the information contained in those forms.  The IRS can and will hold you both liable and accountable for the information you provided.

One of the challenges our society faces is that taxes aren’t typically taught about in school for t individuals or business owners.  Nonetheless, you’re expected to understand it because you have to sign documents related to your taxes each year. 

Timalyn’s passion is to help the average taxpayer to fill in the gap between what you know and, again, what you should know.  She’s been surprised by the reaction some of her clients have when the lightbulbs begin to light up because they actually are beginning to make sense of their taxes.  Knowledge is power.  Remember, your tax returns are legally binding documents.  It’s important to understand what you’re signing and submitting to the IRS.

Another Insight Timalyn Learned

As Timalyn continued to grow her practice, she began to realize that even highly-successful business owners are horrible at taxes.  Admittedly, most don’t want to have the same depth and breadth of tax knowledge she has.  However, it’s important that they understand the implications of what they’re signing.

Working with Older Retirees

Timalyn comments about some of her older taxpayers who have come to her because they owed taxes each year.  Many retirees don’t fully understand how some small changes to their pension and social security withholding can reduce the end-of-year tax liability.  Again, it’s the tax literacy gap was showing up.

You Can Reduce Your Tax Literacy Gap

One of the resources Timalyn provides is her Tax Tips with Timalyn blog.  She also offers another subscription blog, on the Americas Favorite EA website. 

Do you know about Timalyn’s YouTube channel?  She has informative videos available for anyone who wants to know more about their taxes.

Timalyn explains that at her core, she’s a teacher.  Taxes just happen to be her area of interest and expertise.  She’s committed to being even more intentional about providing new and insightful resources this year.   

As part of this commitment, she’s bringing back “Writing Wednesdays.”  She’s going to have a new blog post available each Wednesday.  They’ll be featured on her America's Favorite EA blog, referenced at the beginning of this section.  Be sure to subscribe!

Who is she trying to help with this blog?

●      The average taxpayer

●      First-generation business owners

●      Retirees

●      Other tax professionals

Timalyn is Launching New Resources

On September 18^th of 2023, Timalyn will launch 2 exciting, interactive opportunities. 

She’s launching “The Family” for business owners.  It’s a 2-hour meeting, twice per month, focusing on tax and financial questions.  This is a paid subscription-based program.

“The Cousins” is a different group is a little more intimate.  An application for entry into the is required and it will be limited to 5 people per cohort.  The program will last for 6 months.  It’ll meet twice per month.  This will be a mastermind-style experience.  Members will have the opportunity to add on a 1-1 meeting with Timalyn as well.

If you are interested in participating in being part of the Family or becoming a Cousin, contact Timalyn via her Americas Favorite EA Contact Page, to let her know.  She’ll be happy to provide you with more details.

For Tax Professionals

If you are a tax professional, don’t forget about Timalyn’s Tax Pro Circle.  While she teaches other topics, she’s going to focus on instructing other professionals who are pursuing resolution and representation as an area of service.  This will also be an application-only program.  Please get in touch with Timalyn via her America's Favorite EA Contact Page. 

Timalyn hopes this provides a sense of where she’s going over the next 3-5 years, as it relates to filling in the tax literacy gap.

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 your life.

As we conclude Episode 30, 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 29:  In this episode, Timalyn discusses the IRS CP14 notice.  You’ll receive this form if you owe unpaid taxes to the IRS.  It’s a demand for payment.  So, what do you do now?  Timalyn will provide all the information you need to know to handle this issue.

Timalyn begins by pointing out that the IRS wants you to set up an account and ideally receive notifications electronically.  This may or may not be the best route for you.  Receiving important notices in the mail may be a better way of making sure you don’t miss out on important communications.

What is an IRS CP14 Notice?

This is an official communication from the IRS informing you of taxes you owe, the specific amount, and it serves as a demand for payment. 

CP actually stands for “Computer Paragraph.”  Understand this is a computer-generated form that no human has handled.  Also, understand that the IRS can and does make mistakes.  It may not be accurate.

The CP14 provides the following information:

●      The amount due

●      The tax year related to the unpaid taxes

●      The date the payment is required to be made

What Should You Do if You Receive a CP14 Notice?

Timalyn explains that your first step is to remember to breathe.  Next, carefully review the information provided.  Compare that information to the copies of your IRS returns.  Do they match? 

If You Think the CP14 is incorrect, Review the 3 Phases of Tax Relief

In Episode 9, Timalyn explained these phases.  First, review your IRS transcript online.  It will tell you when your return was filed, any balance due on the account, and any payments already made.  Sometimes, payments can cross in the mail and this is why you may have received a CP14, even though you paid your taxes.

Timalyn wrote a blog post titled:  “How to Get Your IRS Transcript in 3 Steps.”  This is a good resource if you don’t know how to review your tax transcript. 

What if You Do Owe Unpaid Taxes?

Timalyn released a podcast episode (Episode 22) outlining your options if you can’t pay your tax bill.  You’ll want to determine how long it will take you to pay the taxes you owe.

If the balance is less than $10,000 and you’ve tax compliant, you may be eligible for a guaranteed installment agreement allowing you 36 months to pay it off.  Timalyn has an e-book on her website, which you can purchase.  It will walk you through this process, step-by-step.

If you owe more than $10,000 but less than $50,000, you may have the option of setting up a streamlined installment agreement.  Timalyn discusses IRS installment agreements in Episode 10.

It’s also possible to get the IRS to temporarily delay any collection activities.  Your status would be classified as “Currently Not Collectible.”  This takes effort because you have to be able to prove to the IRS that you’re unable to pay, at this time.  This is usually due to financial hardship.  You and the IRS may disagree on “reasonable” living expenses.  Listen to Episode 18 for more information.

Timalyn urges you to make every effort to pay off your tax debt as soon as possible.  The IRS can and will assess significant interest and penalties based on your unpaid taxes. 

How to Avoid this Issue in the First Place (a Bonus)

While the IRS has been lenient since the pandemic, they still have continued to issue tax liens and levy bank accounts.  You can avoid getting into this situation by making estimated tax payments. 

Self-employed individuals make estimated tax payments on a quarterly basis.  Doing so can help you avoid an underpayment penalty.  W-2 employees already make estimated tax payments through their withholdings. 

Interestingly, Timalyn points out that as a business owner, you don’t have to wait until the end of the quarter to make the payments.  In fact, you can make tax payments on a monthly or even bi-weekly. 

By paying into the IRS, you can create a cushion in case life happens.  Even though you are planning to pay your quarterly payment, an unforeseen emergency can creep up and cause you to have to cover the cost of expenses you didn’t anticipate.  It happens.

If not being able to pay your taxes is a reoccurring problem, consider getting tax planning advice.  You may be able to reduce your overall tax liability during the year. 

The Taxpayer Bill of Rights provides certain rights, such as the right to representation.  Take advantage of that right. 

If you are a tax professional, Timalyn provides a LinkedIn Live Event on Tuesday at 11:00EST.  It focuses on how to negotiate with the IRS on behalf of your clients.  Follow Timalyn on LinkedIn.  You’ll need to sign-up for the events.

The next episode is #30!  Timalyn encourages you to listen to the beginning of Episode 10 to see what a milestone that actually was.  Episode 30 will be even more special. 

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 your life.

 

As we conclude Episode 29, 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 28:  In this episode, Timalyn discusses the IRC 662 Accuracy-Related Penalty.  She’ll explain what it is, how it can be issued against you and how to avoid it.  She’ll use the example of a live case involving Beyoncé Knowles-Carter. 

Timalyn begins by explaining how a case is in the US Tax Court, part of the Taxpayer Privacy Act no longer applies.  This is why she’s able to find public information about the case involving Beyoncé.

What is the Accuracy-Related Penalty?

This penalty applies if you underpay the tax required to be shown on your return.   Individuals have 2 common accuracy-related penalties.

The first is negligence or disregard of the rules or regulations.  The second is a substantial understatement of income tax. 

Timalyn explains that negligence is when someone doesn’t make a reasonable attempt to follow the tax laws, when preparing a tax return.  Disregard means someone carelessly, recklessly or intentionally ignore the tax rules or regulations.

Examples of Negligence

Not keeping records to prove you qualify for specific credits and/or deductions is a simple example.  For instance, if you are claiming a child on your return, you need to be able to prove the child exists and that you have the right to claim him/her.

Another example would be not claiming income shown in an information return, such as on a W-2 or 1099. 

Finally, not checking the accuracy of a deduction or credit; especially when it seems too good to be true.

Examples of a Substantial Understatement of Income Tax

An individual can be hit with this penalty if he/she understates the tax liability by 10% of the tax required to be shown on the tax return or $5,000 (whichever is greater). 

A business owner might claim a deduction based on Section 199a Qualified Business Income Deduction.  The penalty would apply if income is understated by 5% of the tax required to be shown or $5,000 (whichever is greater). 

How to Avoid the Accuracy-Related Penalty

·      Don’t claim a credit or deduction for which you don’t actually qualify.

·      Claim all required income when completing your tax return.

Timalyn reminds you that the IRS may be slow, but they’re not stupid.  They will eventually find out and assess various penalties.  In previous episodes, Timalyn has discussed the Failure to File Penalty (which can be up to 25%).  If you are facing an Accuracy-Related Penalty, it can be up to 20% of the portion of the underpayment due to negligence or disregard.  It’s also 20%, when a substantial understatement is made.  This means a penalty of 20% of the amount you understated.  You’ll also be assessed the interest related to these issues. 

Can I Get the Accuracy-Related Penalty Removed or Reduced?

Timalyn explains that it might be possible, but listen to her episode on First-Time Penalty Abatement. 

You have the burden of proof as to why the penalty should be removed or reduced.  You’ll have to show that you acted in good faith and can show a reasonable cause as to why it happened.  Timalyn explained Removing Penalties for Reasonable Cause, in Episode 12.

If you want to book a consultation to discuss your specific situation, you can schedule an appointment at https://bookingbowens.as.me/schedule.php.  This is on the website for Bowens Tax Solutions. 

Avoiding the Penalty by Substantiating

As Timalyn stated earlier, it may be possible to avoid the Accuracy-Related Penalty, but you have to be able to prove why it shouldn’t apply.  You need to report everything required, and to be able to explain why something as omitted from the return, or isn’t actually required. 

Beyoncé Knowles-Carter vs. US Tax Court

According to public information, for the tax year 2018, her tax return showed a deficiency of $805,850.  Per the Internal Revenue Code Section 662a, she was accessed an accuracy-related penalty of $161,170. 

In 2019, another deficiency of almost $1.5 million.  Per the Internal Revenue Code Section 662a, she was accessed an accuracy-related penalty of $288,549. 

Now, as Timalyn explained in Episode 26, there is a IRS Collection Due Process.  You also have the right to appeal an IRS decision, which she covered in Episode 27. 

Beyoncé deducted $761,455 on her Schedule C7.  The IRS disallowed that deduction.  She and her advisors will have to prove the deduction was ordinary and necessary.  They will also have to substantiate the deduction by showing the expense was actually paid.  Timalyn advises you should always keep receipts, because your bank statements may not give the full picture. 

 

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 your life.

As we conclude Episode 28, 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 27:  In this episode, Timalyn is relaxing after the federal tax deadline.  Today, she’ll discuss the IRS appeals process.  Timalyn will discuss how to make an appeal and how it affects your current situation.

You might find it helpful to go back and listen to Episode 26 on the IRS Collection Due Process.  It sets up today’s topic.

Let’s face it, nobody like to pay taxes.  As an enrolled agent, Timalyn represents taxpayers in IRS proceedings.  There are times when she doesn’t agree with a decision made by the IRS.  That’s when IRS appeals offer a chance to revisit a particular issue, on behalf of the taxpayer. 

Timalyn discusses a time she had to contact the IRS about a tax refund they forgot to issue to her.  For some reason, they couldn’t simply apply the balance to an upcoming tax payment.  She had to go through the same process other taxpayers have to experience.  In the end, the issue was resolved without the need for an IRS appeal. 

Making an IRS Appeal

When you have a tax liability, you know you need to pay it to the IRS.  However, there are times when you dispute the amount the IRS proposes you owe, as well as penalties and enforcement actions. This is when you need to file an appeal.  In Episode 26, Timalyn explained that the IRS Appeals Office is an independent organization.  They can look at the situation objectively.

When Can’t I Make an Appeal?

There are certain reasons you cannot use as a basis to appeal an IRS decision.  For instance, you can’t appeal based on what you feel are moral reasons, religious reasons, political reasons, Constitutional reasons or what’s called “conscientious reasons.”

However, any other basis is considered fair game enabling you to make an IRS appeal. 

What Happens When I Appeal an IRS Decision?

Timalyn explains that the first step is a conference with your local appeals office.  It sounds more intimidating than it really is.  The conference may be in person, via written correspondence, or via telephone.  You can hire an authorized representative to handle your appeal.  Episode 23 outlines the 3 types of tax professionals who are authorized to represent you regarding IRS issues: 

●      A Tax Attorney

●      A Certified Public Accountant (CPA)

●      An Enrolled Agent

Types of IRS Appeals

The first type of appeal is a “Small Case Request.”  This is for issues less than $25,000.  You’ll need to include a brief statement regarding the original IRS decision and what you are requesting to appeal.  You need to specifically include the issue with which you disagree. 

You only have 30 days, from the date on your notice (not the date you received it), to submit this information. 

The second type of appeal could involve more than one tax period or is $25,000 or more, this is called a “Formal Protest.”  There is more required with this appeal. 

Here’s what you’ll need to include with your Formal Protest:

●      Taxpayer’s full name, address and daytime phone number

●      Statement outlining why you want to appeal the decision

●      Include a copy of the letter Proposed Tax Adjustment (sent by the IRS)

●      List the tax periods or years

●      Include a list of changes you don’t agree with, including your rationale for the disagreement

●      You must include facts substantiating your reason for disagreeing with the IRS

●      Include any law or authority used as the basis for your disagreeing

●      Don’t forget to sign everything you’re submitting.

●      State that you are signing “Under the penalties of perjury, you are signing that you believe the information your submitting is true, correct and to the best of your knowledge, complete.”

This is a serious process.  It’s not meant to enable you to game the system or to cause additional delays. 

For Tax Professionals and Representatives

Remember, we are required under IRS Circular 230 to sign and submit a similar statement regarding the validity of the information you submit on behalf of your client.  Cover your bases and ensure your client is being forthright. 

What Can be Appealed with a Formal Protest?

You can use this process to:

●      Appeal an offer in compromise

●      Appeal issues related to an exempt organization or an employee plan

●      Appeal issues on behalf of partnerships and S-Corps

You wouldn’t use the Formal Protest to:

●      Appeal an installment agreement

●      Appeal a tax lean

●      Appeal a tax levy

Remember, you do have options.  The IRS is not always correct in its decisions.  The IRS Appeals process helps to ensure you are treated correctly.  After all, back taxes shouldn’t ruin your life.

As we conclude Episode 27, 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 25:  In this episode, Timalyn goes back to basics as it relates to taxes.  She’ll discuss some common tax terms people misunderstand.  Reviewing the basics will help you be prepared to sign your tax returns with confidence.  Today, she’ll discuss our progressive pay system and 5 basic tax terms.  Let’s get started.

Timalyn has a blog post you might find helpful, 15 Tax Terms Every Taxpayer Should Know.  She also has a YouTube video on the topic.   

Term #1:  Tax Return

The tax return is the form you use to file your taxes.  For most individuals, you’ll use the IRS Form 1040.  Businesses have different forms.  For instance, a partnership will file using the IRS Form 1065.   

These forms are different from a tax refund.  Timalyn’s heard people confuse the terms.  A tax refund is the money you get back after filing your tax forms, if you have overpaid. 

Term #2:  Taxable Income

A lot of people are confused by this term.  This isn’t simply based on the income you generate.  The IRS allows for a standard deduction.  It decreases your taxable income.  Timalyn uses the example of a married couple.  For the 2023 tax year, assuming they use married filing jointly, the standard deduction they can use is $27,700.  Assuming their combined income is $100,000, they will be taxed on $82,300 (after the deduction).   

 Timalyn’s YouTube Channel has several videos about how to properly complete your W-4, depending on your specific situation. 

Term #3:  Tax Deduction

This is often confused with tax credit.  A tax deduction reduces taxable income.  There are other deductions including mortgage interest, charitable contributions, etc.  The deduction isn’t an amount you’ll receive as part of your tax refund.  It reduces the overall amount on which you’ll be taxed. 

Term #4:  Tax Credit

A tax credit most often is actually better than a tax deduction.  A tax credit reduces the actual tax liability.  Timalyn uses the following example.  Assume someone has a tax liability (after deductions) of $2,000.  Also assume that person has a child under 17 years of age.  If they meet other criteria, they can claim the child tax credit.  For the 2023 tax year, the amount of the that credit is $2,000.  Applying this credit would completely offset the tax liability.  Tax credits are applied on a dollar-for-dollar basis.  They would owe nothing. 

Tax Term 5: Tax Liability 

Don’t assume you don’t have a tax liability because you get a refund . Unless you make less than the standard deduction, you actually do have a tax liability.  For a single person, or someone who is married filing separately, they have a tax liability if they earned $13,850.  If you are filing head of household in 2023, you have a tax liability if you made over $20,800.  During the year, your employer is withholding taxes, based on your W-4 elections.  So in reality, you’re paying the tax liability as you go.   

Business owners should be making quarterly estimated payments.  These payments are made to cover your estimated tax liability, at the end of the year. 

On the IRS Form 1040, page 2, your tax liability is listed.  This is before any tax credits are applied.  Next, your automatic withholdings and/or estimated quarterly tax payment are factored in.  Remember a refund simply means you overpaid.  It’s not income.

Our Pay-As-You-Go System

We have a “progressive” pay-as-you-go system.  As Timalyn explains, assume you’re in the 22% tax bracket.  Not all of your income is taxed at that rate. 

Returning to the example of a married couple earning $100,000.  Our current tax brackets show that income over $89,450 and below $190,750 is taxed at 22%.  We need to subtract the 2023 standard deduction of $27,700.  This results in taxable income of $82,300 (100,000 – 27,700).  This would be taxed at the 12% level, per the tax schedules.  The IRS taxes the first $22,000 at 10%.  Income after the first $22,000, but under $89,450 is taxed at 12%. 

Every taxpayer pays 10% on part of their income.  Another part will be taxed at 12%, assuming they earned more than $22,000.  Income over $89,450 is taxed at 22%.   

This can sound pretty confusing.  If you have any questions at all, please send them to Timalyn via the Contact Me page on her website.  Timalyn’s goal is to help fill the tax literacy gap, one taxpayer at a time, not confuse you more. 

As we conclude Episode 25, 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 20:  In this episode, Timalyn explains the retention requirements for tax records.  As an individual or a business, you need to hang on to your tax records for a period of time.  It’s a common question Timalyn gets and today, she’ll walk you through what you need to do.  Be sure to grab your pen and paper.

How long should I keep my tax records for an audit?

There’s not one single answer to the question of how long you need to retain your tax-related documents.  There are different scenarios to be considered.  In general, you need to look at:

• The Action
• The Expense, and
• The Event

If the action, for example, is the purchase of a home, Timalyn recommends maintaining the tax records related to that purchase for as long as you own the property.  If the expense is for a business-related activity, you should keep the record for at least 3 years. 

Remember, if you are claiming an item/expense on your tax return, you have to be able to substantiate the cost.  Your bank statements aren’t proof of the expense just how it was paid.  You should keep a third-party document such as a sales contract or receipt.  While your bookkeeper will need the receipts, your tax professional will assume you have the documentation.

Refunds

Remember, you have 3 years to amend a return and claim a tax refund.  As an example, Timalyn uses a 2019 tax return, filed by April 2020.  In order to claim the refund, you would have 3 years from the original due date or 2 years from when the tax was paid, whichever is later. 

The IRS will usually apply that refund to an existing tax debt or a balance from a different year.  Yes, you still get the benefit, but you might not get an actual check refund.

The Tax Transcript

Your tax transcript is a good place to start when you’re trying to determine when you paid your taxes.  In Episode 7, Timalyn discussed the importance of your tax transcript.  If you think you overpaid your taxes in a particular year you can verify your payments with your transcript.

Bad Debt Loss or Worthless Securities

Timalyn explains that the IRS recommends you keep bad debt and worthless security tax documents for a period of 7 years.  However, bad debt really only applies to companies on an accrual basis for their accounting.  Those using a cash basis don’t have bad debt, per se.  Yes, you still may have unpaid invoices, but this is an accounting term with a specific meaning.

Income Not Reported on the Tax Return

You should keep your tax records for 6 years, if all of your income was not reported on the tax return and if the unreported income is more than 25% of your gross income.  Not reporting all of your income isn’t something Timalyn recommends, but she is commenting on an IRS recommendation.

Do I Need to Keep My Tax Records Indefinitely?

You can avoid this simply by filing your tax return.  Interestingly, the IRS actually recommends keeping your records indefinitely, if you don’t file your returns.  Timalyn explains that the IRS has 10 years to collect a tax debt, based on when it was assessed.  If you didn’t file, the tax was not assessed.  Therefore, keep the tax documents.

Remember, if you don’t file a return, the IRS can file a Substitute for Return (“SFR”).  This is considered a tax assessment.  When this occurs, that 10-year collection window begins. 

Using a different example, if you properly file your tax returns, you will not be required to keep your tax records indefinitely.  If your return was fraudulent, you do need to maintain your tax records.  Understand, the IRS can come after you even if it’s well beyond the 10-year collection window if the information on the return was fraudulent. 

This is one of the reasons you should work with a knowledgeable tax professional to prepare and file your taxes.  In Episode 16, Timalyn explains how to choose a tax professional. 

Employment Taxes

If your small business pays employees, your tax documentation retention rules are different.  This includes IRS Form 941 (Employer’s Quarterly Federal Tax Return) and the employee information used to prepare it. IRS Form 940 (Employer’s Annual Federal Unemployment Tax Return or “FUTA”) should also be kept. Don’t forget your W-4s, W-2s showing how you determined the employee’s contact and withholding information.  These records should be retained for 4 years after the date due or the date paid.

The Importance of Filing the Return

In some circumstances, a business or individual may not have the money to pay their tax liability.  Even if this is the case, you should still file the return to avoid the Failure to File penalty, which she explains in Episode 2. 

How to Store Your Tax Documents

Timalyn recommends storing your paper documents in a fire-safe container.  Remember, you have the burden of proof, so preserving your documentation is your responsibility.

It’s a good idea to make an electronic version of your documents.  It’s easier to store them and takes up less room.  You would then be able to shred the paper documents.

There was a lot to consider in today’s episode.  The key is to ensure you have the documentation you need and that you can easily find it if you ever need to do so.  Exercising proper document retention can help you to deal with any problems that may arise down the road.  Remember, back taxes shouldn’t ruin your life.

As we conclude Episode 20, 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.americasfavoriteea.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 19:  In this episode, Timalyn explains a tax issue related to separated and/or divorced parents, as it relates to claiming a child for tax purposes.  This topic is confusing to parents, other tax professionals, and even some family law attorneys.  Remember, regardless of what the divorce decree states, this issue is governed by federal tax law.  They are completely different and guess which one has more authority?

According to a Pew Research article, the US has the largest percentage of children living in single-parent households.  So, if this is your situation, you’re not alone.  In fact, 23% of the people under 18 live with one parent.  As common as this situation is, the rules for which parents should claim the child on taxes are often misunderstood and handled incorrectly. 

The IRS’ Definition of Custodial Parent

The definition used by the family court may not be the same as the IRS’ definition.  The IRS considers the custodial parent to be the one the child lives with most nights.  This is the parent who gets to claim the child on his/her tax return.

Based on the above definition, you may find it helpful to record the specific nights the child stays in your home.  It will be proof to help you substantiate your status as the custodial parent to the IRS. 

IRS Tie-Breakers

These exist in the event the child spends an equal number of nights with each parent.  Remember, federal law supersedes state law.  The IRS is federal law.  Your divorce decree is based on state law.

Tie-Breaker #1:  Which Parent Has the Highest Adjusted Gross Income (AGI)?

The AGI is explained in Timalyn’s video, 15 Tax Terms Every Taxpayer Should Know.  It’s actually listed on your tax return.

Tie-Breaker #2:  The Parent with the Highest AGI, if Nobody Else Can Claim the Child as a Qualifying Child

When the parents don’t have custody of the child, this enables a grandparent or foster parent to claim the child.

Tie-Breaker #3:  A Person with the AGI Higher than Either Parent, if the Parent Can Claim the Child as a Qualifying Child, but Does Not

This comes into play when someone such as a great-grandparent or other individual has custody of the child.  If their AGI is higher than either parent and neither parent claims the child, the great-grandparent or other individual can claim the child. 

While these rules exist, it doesn’t necessarily prevent someone else (i.e. the other parent) from claiming the child on their taxes.  So, what can you do if this happens to you?  Timalyn will explain that in a few minutes.

How Can a Non-Custodial Parent Still Claim the Child?

If the divorce was cordial, it may be easier to accomplish this step.  The other alternative is to negotiate the completion of IRS Form 8332, as part of the divorce settlement, if applicable.  This is a Release or Revocation of Release of Claim to Exemption for Child by Custodial Parent. 

Before the 2017 Tax Cut and Jobs Act, the child tax credit was expanded and the standard deduction was doubled, but the exemptions were eliminated.  Form 8332 enables a non-custodial parent to claim the child tax credit, the additional child tax credit, and possibly credits for other dependents and educational credits (i.e. the Lifetime Learning Tax Credit and the American Opportunity Tax Credit). 

Form 8332 does not enable the non-custodial parent to claim Head of Household status, the Earned Income Credit, or the Dependent Care Credit.

Keep the 8332 in Your Back Pocket

You’ll want to make sure you keep a copy of the completed IRS Form 8332.  It will help you to substantiate that you have the right to claim the child for specific years. 

In the event the non-custodial parent is no longer able to claim the child, the custodial parent is to complete a new 8332 to revoke the authorization initially granted to the non-custodial parent.  You’ll probably need to consult with your attorney to determine if the non-custodial parent has actually lost the right to claim the child.

Until the IRS Form 8332 is complete, the IRS will use its Tie-Breaker Rules in making the determination, regardless of the divorce decree.

What Can You Do if the other Parent or Individual Claims the Child without Authorization?

There is another IRS form,  866-H-DEP available to deal with this situation.  Your tax filing for the year in question must be mailed in, not e-filed.  This form must accompany your tax filing.  It outlines which supporting documents you will need to prove you should be able to claim the child, not the other person.  You will need to provide Form 8332 if you have it as well as the cover and signature pages of your divorce decree.  Your normal tax documents will need to be submitted too. 

You also need to send a copy of the above packet of information to your state agency. 

The IRS will review your claim and the other e-filed return, which claimed your child.  They’ll use the Tie-Breaker Rules first.  The IRS Form 8332 will help you to prove you had the right to claim the child for that particular year.

If you’re dealing with this type of situation, make sure you’re working with a qualified tax professional with experience resolving this issue.  If you need help finding a tax professional, listen to Episode 16, How to Choose a Tax Professional. 

If you aren’t able to claim the child, you may have a resulting tax liability.  Timalyn encourages you to remember to breathe.  As she often says, “back taxes shouldn’t ruin your life.”  If you’ve listened to this episode, you have the information and steps required to successfully claim the child.  It’s time to take action.

As we conclude Episode 19, 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.americasfavoriteea.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 18:  In this episode, Timalyn provides information on how to temporarily delay IRS collections.  Notice, these delays are temporary, not permanent.  The holidays can be difficult for many people.  There are people who have felt so overwhelmed that they chose suicide as a way out from the weight of their back taxes. Timalyn hopes this episode will provide some light and hope so that won’t be an option for you.

Before Timalyn begins, she reminds listeners of a valuable resource, if you are considering ending your own life:  National Suicide Prevention Hotline:  1-800-273-8255 (available 24/7).  There is also a Crisis Text Line available.  Just text HELLO to 741741. 

Currently Not Collectible

This is the formal name for the status you’ll request to temporarily delay IRS collections.  This doesn’t mean the debt will go away.  It simply means the IRS agrees that you currently can’t afford to pay your tax debt. 

Your definition of can’t afford to pay and the definition used by the IRS are often different.  Timalyn explains you’ll have to prove a substantial change in income and provide your expenses.  If you’ve downloaded Timalyn’s Back Tax Negotiation Checklist, you know that you should also look at the national standards for living expenses.  These standards show what the IRS will allow for certain expenses, based on your family size and where you live. 

Proving Your Income

If you’re self-employed, you may use a merchant processing system, such as Square or PayPal.  This system can make it easier to track your income.  Before you contact the IRS, make sure you have your paystubs and the merchant processing report.  You’ll also need to be able to prove how many people are living in your home.  This may be indicated on your previous year’s tax return.  Remember to be ready to explain a death in the household or birth that has increased the number of people in the household. 

IRS Collection Actions

Once your tax account has transitioned to currently not collectible, the IRS will not enforce collection activities.  Again, this is temporary.  This hold does prevent a tax levy, which Timalyn explained in Episode 5.  However, this may not prevent a tax lien.  This topic was discussed in Episode 3. 

Your Tax Debt Will Grow

Timalyn explains that even though you may temporarily avoid further collection actions, your IRS tax debt will grow.   Tax penalties and interest will accrue.  Still, the IRS has a limited amount of time to collect a tax debt.  It generally has 10 years, unless a tolling event extends that window of time.  In Episode 7, Timalyn covered the 10-year limit and discussed tolling events. 

Currently not collectible status is not considered a tolling event.  It does not extend the time the IRS has to collect the tax debt.  The clock is ticking and may work to your advantage.

IRS Forms You May Need

The IRS may require you to submit IRS Form 433-F, the Collection Information Statement.  Business owners will also be asked to submit IRS Form 433-B, Collection Information Statement for Businesses.  These statements will include your assets, income sources, and expenses.  Again, you’ll want to compare your expenses to the national standards. For a list of forms and things, you should take into consideration download your free copy of the Back Tax Negotiation Checklist today.

Can I Handle This by Myself?

Timalyn comments that some individuals may be able to complete and submit these forms successfully.  Having an experienced tax relief specialist on your side can certainly help you to avoid mistakes like accidentally submitting the wrong information. 

You can contact the IRS at 1-800-829-1040.  When you eventually get connected with an IRS representative, he/she may be able to help you to determine if you qualify for currently not collectible status.  Completing the IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals will help you to determine if you’re eligible, without having to wait on hold with the IRS.  If you’re not eligible, you’ll need to set up a payment plan.  Timalyn explained setting up an IRS installment agreement in Episode 10.

If your debt is under $25,000 and you think you can afford to pay it off within 36 - 72 months you may qualify for a guaranteed payment plan. If that’s the case you can download a copy of Timalyn’s E-book, Guaranteed Payment Plan, where Timalyn walks you through how to set up that arrangement online or by phone.

The Taxpayer Advocate is a free resource available through the IRS.  They can also help you through this process.  They can be reached at 1-877-777-4778. 

Hire a Tax Professional

If this is the option you want to choose, the advice and service won’t be free, but it will be worth your while.  For a detailed explanation of what you should consider when hiring a tax professional, listen to Timalyn in Episode 16. 

Whichever route you choose, it’s important that you keep the faith and take action to resolve your tax debt.  There are numerous resources provided in the show notes for this episode.  As Timalyn commented at the beginning of this episode, people can feel overwhelmed.  Those feelings can build and result in tragic choices.  It doesn’t have to be that way.  Please consider sharing this episode with your network of contacts and friends.  Back taxes shouldn’t ruin your life and they definitely shouldn’t end your life.

As we conclude Episode 18, 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.americasfavoriteea.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 17:  In this episode, Timalyn reminds us that we’re 6 weeks away from the end of the year.  With that in mind, she’s offering 3 overlooked tax deductions for business owners.  These deductions are not income-restricted.  You can make as much as you want and still be able to put these tax deductions to work for you, assuming you actually made money in your business.  It’s time to get your pen and paper.  Let’s join Timalyn for today’s discussion.

What Can You Do to Reduce Your Tax Liability?

Timalyn begins with this important advice.  Don’t wait until you’re 6 weeks away from the end of the year to think about tax planning. Invest in a 2023 tax plan.  This will enable you to be proactive, rather than reactive.

What Is a Tax Deduction?

To qualify, an expense must be both ordinary and necessary.  Buying a yacht in your company name is nice but not always considered ordinary or necessary.  Therefore, you would want to make sure it meets all of the qualifications to be a legitimate tax deduction.

A tax deduction reduces your tax liability, but it’s different than a tax credit.  As an example, Timalyn assumes XYZ Company had an income of $80,000.  It made an ordinary and necessary purchase of $20,000.  The taxable income is now $60,000.  For more on this, check out Timalyn’s blog post, “15 Tax Terms Every Taxpayer Should Know.” 

Tax Deduction #1 - The Self-Employment Tax Deduction. 

This is not listed on your Schedule C or your 1120.  It’s actually listed on Schedule 1 of your 1040.  This deduction is half of the amount of your self-employment tax.  This tax is a business owner’s share of social security and Medicare.  Sole proprietors (Reminder: single-member  LLCs are sole proprietors) and partners pay self-employment tax. Timalyn explained self-employment tax in more detail in Episode 8 of Tax Relief with Timalyn Bowens. 

A W-2 employee only pays half of the social security and Medicare tax (FICA).  The employer pays the other half and receives a tax deduction for this expense.  This is the logic behind granting the self-employment tax deduction for sole proprietors and partners.

Click here to watch Timalyn explain, what self-employment tax is.

Timalyn reminds business owners that the expense must have actually been incurred in order for them to be eligible to take the deduction.  Self-employment tax is roughly 15.3%, so you would be able to deduct half of that amount. 

Did you miss the self-employment tax deduction for the previous year or years?  If you answered yes, you may want to check out Episode 16, “How to Choose a Tax Professional.” 

Tax Deduction #2 – Self-Employed Health Insurance Deduction

Before she begins, Timalyn stresses the difference between various insurance expense items on Schedule C and health insurance expenses.  The self-employed health insurance deduction is listed on Schedule 1 of the 1040.  Insurance premiums paid for you, your spouse and any children under the age of 27 are deductible.  There are 2 important caveats. 

• First, you have to have made a net profit in your business for the year being reported.
  • This is for sole proprietors or partners.
  • A W-2 employee of their own S-corps, assuming they are more than 2% shareholder also qualify.
• Second, you can’t deduct this expense if you are eligible to be on another insurance plan, such as your spouse’s group plan offered by his/her employer.

It’s important that you consult with a qualified, tax professional.  There are some important guidelines that need to be considered.

Check out Timalyn’s GoodRX article, What Is the Self-Employed Health Insurance Deduction? Are You Eligible? for more details on this deduction.

Tax Deduction #3 – HSA Contributions

An HSA is a Health Savings Account.  You are required to have a high-deductible health insurance plan, to qualify for an HSA.  If you’re eligible for the 2022 tax year, you can contribute up to $3,650 as an individual.  If you’re 55 years old or older, you can contribute an additional, “catch up contribution” of $1,000.  If you have a family high-deductible plan, you can contribute $7,300, for 2022. 

The funds in your HSA enable you to pay for healthcare expenses with tax-free money.  Contributions to your health savings account lower your taxable income.  Any balance left in the account at the end of the year will automatically rollover to the following year.  It’ll gain tax-free interest and will not impact the eligible contribution limit for that following year.

It’s a terrific option, if you qualify for it.  Here are some additional resources for your review:

• How to Open an HSA if Your Self-Employed
• 77 Items that Qualify as HSA-Eligible Expenses for 2022

Timalyn hopes these 3 overlooked tax deductions for business owners are helpful.  You may have been aware of 1 or more of them.  However, she encourages you to share this info with other business owners who may not be familiar with these tax deductions.  They’ll thank you.

As we conclude Episode 17, 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.americasfavoriteea.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 15:  In this episode, Timalyn discusses injured spouse tax relief: how do you know if you qualify, the difference between an “injured spouse” and  an“innocent spouse” .  She’ll also provide information about the proper IRS form to use when filing for Injured Spouse Relief.

Click this link to go back and listen to the previous episode on Innocent Spouse Tax Relief.

What Qualifies You as an Injured Spouse?

To begin, you have to have filed a married filing jointly with your spouse.  You then have a portion or all of your tax refund taken to satisfy a debt of your spouse's. 

For example, perhaps your spouse owes back taxes from a previous year (even if it was before you were married).  When you file as married filing jointly, the IRS now looks at both of you since your refund is also your spouse's refund. Your joint refund will be offset by their debt.. 

Can the IRS only Offset a Federal Tax Debt?

The IRS can  offset your refund to satisfy federal tax debt, state tax debt and unemployment compensation debt.  If your spouse owes back child support, the IRS can also take your tax refund to offset this debt.  The IRS can also do this to satisfy other federal non-tax debts, such as outstanding student loans.

Seeking Injured Spouse Tax Relief

Regardless of whether you knew about your spouse’s back tax situation or not, you may be able to seek relief for your portion of the tax refund that was taken.

Innocent Spouse Tax Relief

Remember, innocent spouse relief is valid if there was fraud on your returns that you didn’t know about, or wouldn’t have reasonably known about.  This fraud could include an understatement of income or maybe your spouse used “creative deductions” to reduce your tax liability. 

Be sure to go back and listen to Episode 14, if you think you qualify for Innocent Spouse Relief. 

Protecting Your Tax Refund

If you know there’s a chance your spouse has back tax issues, you can file IRS Form 8379 the Injured Spouse form.  You should file this form with your tax return to prevent the IRS from taking your portion of the tax refund. 

Can I File IRS Form 8379 after I Filed My Taxes?

Yes, you can file an 8379 after you file your taxes. It's possible you weren’t aware of the back tax debt or other debts.  You’ll need to file it each year that your refund may be taken to satisfy the eligible debts. 

How Long Do I Have to File Form 8379?

Timalyn explains that you must file the form within 3 years of the due date of the original return. 

Timalyn recommends that you file the form electronically.  The IRS has a significant backlog of returns.  If you file the paper form, your form may get delayed or even lost.  If you file electronically, it can reduce the processing time to about 11 weeks.  If you’re filing IRS Form 8379 after you’ve already filed your returns, the IRS takes about 8 weeks to process the form. 

Consult with a Tax Professional

You should discuss this with your spouse and a qualified tax professional to help you  file this form.  There are important factors to consider, such as the proper allocation of your portion of the refund versus your spouse’s portion.  It’s possible your W-4 withholdings may further complicate the allocation calculation.

Resources from Timalyn

• Click this link to watch Timalyn’s video on How to Properly Fill-Out a W-4 for Married Filing Jointly.
• Click this link to watch Timalyn’s video on IRS Form 8379.
• Click this link to find out how to get your tax transcripts in 3 easy steps. How to Get Your Tax Transcripts.

Timalyn wants you to stay in control of your tax situation.  The resources above  will help you  prepare to file your tax return with 8379 so that your tax refund is protected.

Do You and Your Spouse Owe $100,000 or more in Back Taxes? 

Timalyn can help you.  She has a free training on how to negotiate a $100,000 or more debt with the IRS.  Click here to get access to the training.  Feel free to share this training with other people.

As we conclude Episode 15, 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.americasfavoriteea.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 10:  In this episode, Timalyn discusses installment agreements related to your tax payments.  She’ll explain how to set them up with the IRS when you can’t pay your taxes in full.  Grab your pen and paper and let’s get started.

Interesting Facts

Did you know, according to a recent study by Amplify Media, Apple podcasts features over 2 million podcasts?  However, 26% of those only have 1 episode.  Of the 2 million+, 64% of them have fewer than 10 episodes.  For this reason, Timalyn is pretty excited to be launching her 10^th episode today.  If you are new to this podcast, feel free to visit the website and listen to previous episodes.

What Is an Installment Agreement?

An IRS installment agreement is a payment arrangement between you and the IRS.  If you are a  qualified taxpayer, you can set it up or it can be handled by your authorized representative.  Your representative must have Form 2848, Power of Attorney and Declaration of Representative on file with the IRS. .  An authorized representative is empowered to negotiate, on your behalf, with IRS. This is what Timalyn does when she steps into her client’s shoes.

You Must be Compliant

A qualified taxpayer is a compliant taxpayer.  This means your tax returns for prior years have been filed and you are making payments on the current tax year.  This is through paycheck withholding or for business owners, which means filing your quarterly, estimated tax payments.  In Episode 2, Timalyn discussed the importance of getting the missing returns filed. Timalyn also addressed compliance in Episode 8.

Owe $10,000 in Taxes or Less?

If you owe $10,000 or less in taxes, have no missing tax returns, haven’t defaulted on a previous tax plan during the past 5 years and could pay off the tax debt in 36-months, you may qualify for a guaranteed installment agreement.

Timalyn has written an e-book with step-by-step instructions on how to set up a Guaranteed Payment Plan.  You can click here to purchase this e-book via her website. 

If you owe the IRS more than $10,000, keep listening.

Interest Accrues on Your Installment Agreement

You may be exposed to interest and penalties on the balance of your tax debt.  In Episode 7, Timalyn explained the importance of tax transcripts.  These may help you to get some of the penalties removed. 

How to Apply for Your Installment Agreement

You will use IRS Form 9465 to begin the process.  There is a significant IRS backlog, so Timalyn doesn’t recommend filing tax forms on paper.  Rather, you should consider filing electronically.  The Form can be filed along with your tax return.

Timalyn walks you through completing IRS Form 9465, step by step in the video IRS Installment Agreement.

Is There a Cost to Set Up an IRS Installment Agreement?

Timalyn explains there’s a $31 monthly fee to set up the plan.  Also, you will still accrue penalties and interest, until the balance is paid.  Low-income taxpayers may be eligible to have the $31 fee waived. 

Note, that the IRS will take the $31 monthly fee based on a debit card installment agreement for your bank account or as a payroll deduction.  The direct debit method is usually required if your balance is $25,000 or more.

Owe the IRS $25,000 or More?

If you decide not to set up a direct debit installment agreement, the IRS may file a tax lien to make sure you don’t try to avoid paying them.   You’ll also pay a higher set-up fee. The non-direct debit installment agreement setup fee is $130, plus the penalties and interest accrued.  Low-income taxpayers will pay a fee of $43, instead of $130.

Avoiding a Revised Payment Plan Fee

Timalyn explains the importance of setting up the plan correctly.  You want to avoid submitting the wrong information about your address or other information.  There is a $10 fee to correct it.  If you change your bank account, there’s a $10 fee.  Bottom line, make sure you thoroughly review your paperwork before submitting it to the IRS.

Streamlined Installment Agreement

What if you owe more than $10,000 and you don’t qualify for a guaranteed installment agreement?  If you can pay off your tax debt in full over 72 months, you can qualify for a streamlined installment agreement. 

As long as the Collection Statue Expiration Date (CSED) doesn’t expire before the 72-month period you should not have to submit your financial information.  Timalyn explains the importance of your CSED when negotiating with the IRS in Episode 7.  However, to avoid having to submit your financials, your tax debt must be lower than $50,000.

Remember, if you owe between $25,000 and $50,000, you still may have to deal with an IRS tax lien, if you don’t have a direct debit installment agreement in place. 

Owe $50,000 or more to the IRS?

You can still set up an arrangement, but you’ll be required to submit your financial information.  It’s now more complicated. You’ll be required to submit IRS Form 433-F Collection Information Statement.

Owe the IRS $100,000 or more?

This situation is even more complex, but it can be done.  Timalyn works with people in this situation. The IRS will require your financial information. This includes your financial investments and business assets.  You’ll use IRS Form 433-F to show how much you can afford to pay the IRS. 

Remember, back taxes don’t have to ruin your life.

You Don’t Have to Do This Alone

If you’d like to speak with Timalyn and her team about your specific situation, visit www.BowensTaxSolutions.com .  Penalties, interest, and other fees are building.  Don’t wait to address your tax issues.

As we conclude Episode 10, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Google Podcasts, Spotify, 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.americasfavoriteea.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 2:  In this episode, Timalyn begins talking about what you should do if you’ve missed the tax filing deadline.  This issue is more common than people would think.  Okay, it happened.  Now what?  Let’s listen to Timalyn, America’s Favorite EA explain what you need to know and how to begin resolving this issue.

The first action item is to breathe.  It’s not the end of the world, but it’s also not time to simply sit back and procrastinate even longer.  Timalyn explains the importance of filing that return as soon as possible.  There are many penalties including the failure to file penalty.

Failure to File Penalty

This is different from the failure to pay penalty.  It’s often overlooked.  The IRS can assess a penalty of 5% of the outstanding tax debt, per month.  The penalty can increase to a maximum of 25% of your outstanding tax liability.  It can quickly add up.  It’s difficult to defend the fact that you didn’t file.  Again, it actually happened (or in this case, didn’t happen).

Currently, the IRS has a backlog of 24.1 million returns.  Just because you put your return in the mail, it may not count.  You could file your taxes online (electronic filing) or if necessary, send your tax return via certified mail.  If your return is sitting in that mountain of backlogged returns, the IRS may not count it as having been received.  This could trigger the failure to file penalty.

There are some legitimate reasons for not filing your taxes on time.  Timalyn explains there are “reasonable cause” justifications, but it’s still something that is up to the IRS to accept or reject.  For example, if you’re a single person who was in the hospital during the tax deadline, you may be able to get the failure to file penalties either reduced or eliminated.  This is referred to as abating the penalty. 

As an enrolled agent, Timalyn is able to work directly with the IRS in defense of her taxpayer clients.  She is an advocate who will formally request the penalty abatement.  There are legitimate reasons, and the IRS may decide to accept them.

Tax Filing Extension

One option for an individual is to file a tax extension.  This can get the taxpayer an additional 6 months to file his/her taxes.  However, it’s not automatic.  You have to file for it.  Importantly, it doesn’t mean you don’t have to pay.  This is simply an extension for you to file at a later date.  Filing for an extension can help you to avoid the failure to file penalty.  Even so, you may still incur a failure to pay penalty.

Failure to Pay Penalty for Business Owners

For business owners, this is usually incurred because they are not on a standard payroll system and may not have done withholdings during the tax year.  Business owners are responsible for making quarterly, estimated tax payments.  

If a business owner has not made quarterly payments, he/she can be exposed to:

• An underpayment penalty
• A failure to file penalty

These compounding penalties can quickly, and effectively, increase your total tax liability.  This is an important reason to consider tax planning.

Are You Receiving IRS Letters?

The IRS will send you a letter if you have failed to file.  Even though the IRS may have your tax information from your employer, they don’t have documentation of the deductions to which you are entitled.  Timalyn explains why you don’t want the IRS to file your return for you, called a Substitute For Return (SFR).  If this happens, the SFR may significantly overstate your tax liability.  The penalties would accrue based on this overstated balance.  It is in your best interest to file your return, even if it’s late.

The next IRS letter is a Notice of Tax Due and Demand of Payment.  There could be multiple request for payment, before the IRS sends an Intent to Issue a Tax Lien letter.  A federal tax lien alerts creditors know the IRS has a right to any money and assets you may have.  The IRS can send a Lock-In letter to your employer requiring them to withhold and remit a portion of your paycheck.  This is commonly referred to as a garnishment.  

You Still Have Options

Even if you are receiving these letters, you have the option of contacting Timalyn Bowens for assistance with your tax issues.   You need to take action before the situation worsens.  Timalyn has created the Back Tax Negotiation Checklist.  It’s available on her website.  It’s a free download.  You can also book a time to speak directly with Timalyn via her tax solutions website.

The key is to realize it’s time to be proactive.  Timalyn explains how negotiating with the IRS is a privilege, not a right.  You have the right to present information designed to justify your tax deductions.  But actively negotiating with the IRS is something an enrolled agent is licensed to do, on your behalf.  

Timalyn talks with the IRS nearly every day, on behalf of her clients.  She points out that people often don’t realize what they are required to disclose to the IRS, and what they aren’t required to disclose.  This is an important factor she uses during negotiations.  It can allow clients to take advantage of standard allowances available to them, if they only knew about them.

Establishing a Payment Plan

Once the negotiations have concluded, a payment plan may need to be established.  Depending upon the amount of your outstanding tax liability, you may have the right to establish a guaranteed payment plan.  The IRS can approve a 36-month payment plan, without filing a tax lien.  Timalyn has an e-book available for taxpayers owing $10,000 or less.  It will walk you through the specific steps to get this properly set up.

A streamlined agreement is another type of payment plan.  This is for taxpayers owing $25,000 or less.  You may be able to get up to 72-months to pay your existing tax liability.  

It’s important to remember there is a fee to set up the payment plans and interest continues to accrue on the balance.  

Timalyn can also evaluate whether a taxpayer should consider filing a bankruptcy.  She is not an attorney, but can determine what tax years are eligible for bankruptcy after pulling your transcript.  Individuals should consult a bankruptcy attorney about the specific facts of their situations.  

There is a partial-pay installment agreement.  This is one of Timalyn’s favorite options. It allows a taxpayer to make monthly payments to the IRS, but pay less than they owe because the tax bill expires before the end of the payment agreement.   

Some taxpayers may be able to qualify for a step-up payment arrangement.  Timalyn will file the paperwork for this arrangement.  It may enable the taxpayer to make smaller installments until additional cash flow can be identified, such as for the payoff of another debt.  At that point, the payment amount would increase.

Timalyn strongly encourages you to get your returns filed, even if they are filed after the tax deadline.  Back taxes don’t have to ruin your life.

As we conclude Episode 2, we’d like to encourage you to visit Timalyn’s social media properties.  You’ll be able to subscribe to this podcast on Apple Podcasts, Google Podcasts, Spotify, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA.  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.americasfavoriteea.com/.

 

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.

 

Did you know as of 2019, 20.1 million people owe the IRS and can't pay.  Taxes may be ruining your life.  Timalyn Bowens is here to help.  As an Enrolled Agent ("EA") she's authorized to represent taxpayers before the the IRS and all 50 states.

Listen to Episode 1, which launches on 4/08/22 to learn how she can help you.