irs problems

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

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

Tip #1:  Be Proactive

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

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

Tip #2:  Consider Hiring Financial Experts

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

The Value of a Bookkeeper / Accountant

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

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

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

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

Tip #3:  Consider Investing in a Tax Plan

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

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

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

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

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

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

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

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

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

IRS Form 1040-X

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

What Is a Continuous Use Form?

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

You Found a Mistake, So Now What?

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

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

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

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

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

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

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

Don’t Procrastinate

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

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

Injured Spouse Relief

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

Don’t Intentionally Manipulate Your Income to Get a Mortgage

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

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

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

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

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

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

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

 

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

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

To listen to Episode 38, click here.

What Is IRS Form 433-F?

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

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

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

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

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

Understanding the Detailed Information

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

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

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

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

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

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

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

Substantiating the Debt

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

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

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

Pay Careful Attention to Your Expenses

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

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

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

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

Understanding Your Cash Flow

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

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

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

Don’t Go It Alone

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

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

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

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

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

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

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

 

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

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

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

The Onboarding Process

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

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

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

4 Things Timalyn Needs, before She Begins 

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

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

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

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

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

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

The Investigation Phase

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

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

The Compliance Phase

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

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

The Negotiation Phase

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

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

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

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

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

1)    Offer in Compromise:  Do You Qualify?

2)    What is an Offer in Compromise?

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

IF YOU ARE A TAX PROFESSIONAL

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

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

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

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

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

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

 

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

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

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

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

What Is the Trust Fund Recovery Penalty?

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

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

How Long Does the IRS Have to Assess the Penalty?

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

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

Why Is the Trust Fund Recovery Penalty so Harsh?

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

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

Additional Penalties Can Be Assessed

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

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

Who Can Be Held Responsible?

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

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

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

Can I Get the IRS Trust Fund Recovery Penalty Removed?

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

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

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

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

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

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

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

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

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

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

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

The IRS Test to Determine Classification

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

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

What Are Payroll Taxes?

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

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

●      FICA Taxes – social security and Medicare taxes.

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

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

Annual Payments, Quarterly Payments and Tax Deposits

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

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

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

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

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

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

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

If You Fail to Meet Your Obligations

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

●      Failure to File

●      Failure to Deposit

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

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

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

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

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

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

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

Additional Resources

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

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

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

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

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

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

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

  

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

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

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

Tax Avoidance

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

●      Claiming your home office deduction as a business owner

●      Itemizing your mortgage interest as a home owner

●      Itemizing charitable contributions 

Common but Illegal Tactics that Are Considered Tax Evasion

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

●      Receiving cash payment and not reporting the taxable income

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

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

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

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

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

The Underground Economy

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

●      Selling or buying something at a garage sale

●      Paying cash or accepting cash for tutoring

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

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

Tax Evasion

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

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

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

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

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

You May Not Be Required to File Federal a Tax Return

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You Have Rights as a Taxpayer

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

Defining Tax Representation

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

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

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

What Is an Enrolled Agent?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  

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

Episode 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 23:  In this episode, Timalyn addresses a question she gets fairly often.  Do I need a Tax Attorney, an Enrolled Agent, or a CPA?  Timalyn’s mission is to fill the tax literacy gap, one taxpayer at a time, so she’s going to answer this important question for all of us.

 

She begins by explaining the answer may depend on your situation.  Each of the 3 types of tax professionals has different qualifications.  She discussed this issue in Episode 16 (“How to Choose a Tax Professional”). 

Timalyn also strongly recommends that you research the individual before hiring them because even if they have the proper credentials, it doesn’t mean they have a reputation for doing what they are supposed to do.  The IRS has a database of all tax professionals who have a Preparer Tax Identification Number (PTIN).  This is a good place to start. 

There are only 3 licensed professionals authorized to represent you before the IRS.  Tax representation is when the professional acts on your behalf (i.e. “they step into your shoes”) in dealing with the IRS. 

You’ll need to complete a Tax Power of Attorney form to enable the professional to represent you.  This is IRS Form 2848.  Timalyn also has a YouTube video explaining how to complete form 2848.  Remember, the only people who can represent you are:

●      Tax Attorney

●      Enrolled Agent (“EA”)

●      Certified Public Accountant (‘’CPA”)

Tax Attorneys

These professionals focus on tax law, in a specific state or states.  They can represent you in fraud and criminal cases, in addition to tax matters.  Not all tax attorneys prepare tax returns. Also, they may or may not focus on tax representation.  If you are going to hire a tax attorney, inquire whether he/she performs these services.   

The tax attorney can also represent you in court, even when it’s not under the jurisdiction of the IRS.  An Enrolled Agent and a CPA cannot represent you in court. 

Certified Public Accountants

Most taxpayers are familiar with the term CPA but don’t actually know what they do.  Did you know many CPAs don’t prepare tax returns?  A CPA may not handle tax representation either, even though they are authorized by the IRS to do so. 

The CPA license is a state-specific license to perform accounting work and services.  There are many other areas of accounting that don’t focus on taxes. 

A certified public accountant may handle internal audits and audit representation.  They’ll help prepare financial statements for a business or entity.  Still, this often doesn’t involve work related to back taxes or tax negotiations with the IRS.

Enrolled Agents

These tax professionals are licensed directly by the IRS.  Unlike a tax attorney or a CPA, Enrolled agents are authorized to represent clients in all 50 states.  Timalyn clarifies that when it specifically relates to tax representation, both the tax attorney and the CPA can participate in all 50 states, but their other services are limited to the specific states in which he/she is licensed.

The Enrolled Agent license is the highest credential awarded by the IRS to a tax professional.  Timalyn has a passion for taxes.  This is why she chose this path, specifically.  Enrolled agents are required to pass the Special Enrollment exam.  It’s a 3-part exam focused completely on tax law.  It includes sections on individuals, businesses, and tax representation. 

Evaluate Your Specific Situation

Before you select a tax professional, you should strongly evaluate your situation to understand the type of professional that is best suited to handle your tax issues. 

Remember, for more information on selecting the right tax professional, check out Episode 16.   

FREE WEBINAR

Timalyn is providing a free, live webinar on Tuesday, March 2^nd, 2023 at 3:00EST.  The topic is, “How to Negotiate with the IRS, Even If You Own $100k and Can’t Pay Today.”  Remember, back taxes shouldn’t ruin your life. 

As we conclude Episode 23, 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 22:  In this episode, Timalyn focuses on her passion.  It’s helping you to face your biggest fear, the IRS.  Timalyn explains that the majority of her clients are first-generation entrepreneurs.  Today, she’ll provide advice many of them have needed and others will need.

The Biggest Reason People Run into IRS Issues

Timalyn comments the biggest reason people, especially entrepreneurs run into problems with the IRS is that they fail to pay their quarterly, estimated tax payments. Episode 21 focused on estimated tax payments.

For W-2 employees, the employer automatically makes the tax withholdings.  However, if they have gains from other transactions (i.e. sale of property, stock sales, etc.), they may also be required to make quarterly, estimated tax payments.  If they don’t, they could end up in the same situation as a business owner who failed to make those payments.

Remember to Breathe

This is actually important advice.  The ostrich approach is not the solution.  Timalyn can help you develop a plan to resolve the issues. 

The first step is to file your taxes on time.  Not filing, when you know you owe taxes, is the worst thing you can do.  You’ll be assessed a failure to file penalty (up to 25% for the taxes you owe as a single-member LLC or corporation).  Partnerships and/or S-corporations can be hit with a penalty for each partner or shareholder, for each month the tax filing is late.

Check out Episode 2, for more information about failure to file penalties.  Episode 11 covers the first-time penalty abatement, which could be used to get the penalties removed.  Episode 12 deals with getting IRS penalties removed for reasonable cause if you don’t qualify for first-time penalty abatement.

The Investigation

Timalyn explains that after the returns are filed, it’s important to figure out why you actually owe the IRS.  Often this comes down to, again, quarterly estimated payments not being made or a W-2 employee who didn’t properly complete the W-4 form.  Timalyn has a series of YouTube videos explaining how to properly fill out the W-4 Form, depending on your status.  Click this link to go to her YouTube channel.

Next, Timalyn will help you to determine if there was a valid reason preventing you from making timely IRS tax payments or filing on time.  Episode 12 has a list of reasonable causes the IRS may accept.  It may qualify you to have your penalties and interest removed. 

Now, you need to focus on staying tax compliant.  It’s something taxpayers often mess up.  You have to file your return on time.  If you don’t you could lose any deal you previously negotiated with the IRS.  This could also happen if you fail to make your estimated quarterly tax payments or don’t have the funds to pay your tax liability. 

Remember, tax compliance requires filing on time and that you avoid owing taxes you can’t pay.   Timalyn recently did a live video on tax compliance that you can check out here: Tax Compliance .

What Does the IRS Say You Can Afford to Pay?

This last step is confusing, because often a taxpayer may have his/her own definition of what they can afford to pay, but the IRS may have a different amount in mind.  So, how did they get there? 

The IRS Standards provide the amounts, according to the area of the country in which you live, the IRS uses to determine what you should be able to pay.  The Standards also take into account the size of your family.  This link will show you the IRS Standards, effective April 25, 2022.

Before you attempt to negotiate with the IRS, you should take time to download Timalyn’s “Back Tax Negotiation Checklist.”  This list is a cheat sheet of the different forms you should download and complete before getting on the phone with the IRS.

What if I Still Can’t Pay My Taxes on Time?

After completing the above steps, it’s time to negotiate.  Timalyn advises you to remember to “play nice” when you’re on the phone.  These are people who are there to help and may be able to help, but how you approach them is important. 

Free Live Webinar

On February 23^rd, Timalyn is going to offer a free, live webinar: How to Negotiate with the IRS Even if You Owe $100k (and can’t pay today).  To register for this free, upcoming event go to https://www.americasfavoriteea.com/workshops . There will be no replays available.

Finally, remember, communication is key to working through your IRS issues.  Don’t ignore letters from the IRS.  Get the help you need to resolve these issues.  As Timalyn always says, “Back Taxes Shouldn’t Ruin Your Life.”

As we conclude Episode 22, 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 21:  In this episode, Timalyn discusses the confusion she encounters with some business owners.  This involves the question of why they owe taxes.  Often, the issue involves estimated tax payments.  This episode isn’t only for business owners.  Individuals may also need to make estimated tax payments.  In today’s episode, Timalyn will explain what these payments are, who should make them, how to make them and when they need to be paid.

Our Pay as You Go Tax System

In the US, we are on a pay-as-you-go tax system.  The IRS prefers taxpayers don’t wait until the end of the year to pay a large tax bill.  The system is set up to get you to pay as you earn your income.

For W-2 wage earners, you have a portion of your earnings withheld for taxes on each paycheck.  The amount is typically determined by how you completed your IRS W-4 Form.

Business owners have the responsibility to submit your individual portion and the portion your employer would normally be responsible for (if you were still a W-2 employee). 

How Often Are Estimated Tax Payments Made?

These payments are set up to be made on a quarterly basis. 

Who Should Make Estimated Tax Payments?

Timalyn explains these are for sole proprietors and partners in a general or limited partnership.  This includes people who do jobs like door dash or other service-related jobs such as insurance agents, Uber drivers, and others who receive a 1099. 

Partners and shareholders are also required to make a quarterly tax payment, assuming you have a tax liability of $1,000 or more from your activities.  The threshold is $500 for corporations.  It has nothing to do with whether you typically receive a tax refund.  Your tax liability and your tax refund are 2 different topics.  To learn more about this, check out Timalyn’s blog post, “15 Tax Terms Every Tax Payer Should Know.”

Note:  Timalyn is speaking about federal taxes, but states may also require estimated quarterly tax payments to be made.  She recommends checking with your state’s Department of Revenue.

How Do I Calculate Estimated Quarterly Tax Payment Amounts?

Timalyn recommends hiring a tax professional to calculate these amounts.  This service would typically not be included in a standard tax preparation fee. 

For an individual, you can calculate them using IRS Form 1040-ES.  You’ll also want to use IRS Form 1040-SE (“Schedule SE”), to estimate your self-employment tax.  This will also provide you with your 4-Quarterly Cash Payment Vouchers, enabling you to pay your estimated quarterly tax payments via check. 

For a corporation, use IRS Form 1120-W.  This is the same process for calculating your projected income and estimating your quarterly payments. 

Remember, you don’t need to submit the forms you used to calculate your payments.  For federal payments, you only need to submit the form (and voucher) not the background information. 

Timalyn has a video series on her YouTube channel, providing information about the W-4 and how to properly complete it, based on your situation.  This information will also help you learn how to adjust your withholdings.

When Are Quarterly Estimated Tax Payments Due?

The first payment is due on April 15^th, yes, the same due date as your previous year’s tax payments.  The second payment is due on June 15^th.  The third payment is due on September 15^th.  The fourth payment is due on January 15^th.

If the above dates fall on a holiday or weekend, the due dates roll to the following Monday. 

How Do I Make Quarterly Tax Payments?

Timalyn explains you have several options for your federal payments.  There is an online option via the EFTPS system.  This is the Electronic Federal Tax Payment System. 

You can sign up for an account at IRS.gov enabling you to make payments. In this YouTube video, Timalyn explains how to make a tax payment using your credit card or debit card.  You can also read her blog post on how to make an online payment using your bank account.

Remember, you still have the option of mailing in your tax payment with a payment voucher.  The mailing information is provided on the actual voucher. 

You might consider using the IRS2Go app to make your tax payment. 

The IRS also provides a pay-by-phone option, but there may be fees associated with this method.

What if I Don’t Make Estimated Quarterly Tax Payments?

You may decide to skip making these payments.  The bottom line is that you will owe the IRS.  It’s possible some life event may happen which might require you to use the money you set aside for your payment at the end of the year.  Life happens.  Making quarterly payments helps to avoid not being able to pay the IRS when the tax bill comes due.  It’s always best to be proactive.  If you fall far enough behind, you may eventually find yourself in a situation where the IRS issues a tax levy on your bank account. 

Avoiding the Underpayment Penalty

In addition, because you didn’t make your quarterly estimated tax payments, you’ll also be required to pay an underpayment penalty.  To avoid it, you need to make sure you’ve paid 100% of last year’s tax liability when you file.  You may also be able to avoid it if you have 90% of the current year’s tax liability paid.  The IRS can be lenient.  If you’re in a pinch, pay whichever of the two amounts is smaller.

Did you know 1 in 50 taxpayers has an IRS tax issue? 

There are many reasons this occurs.  It could be confusion, maybe someone’s ignoring the problem, or any of a myriad of other root causes.  You can help people by sharing this episode with your family and friends.  Back taxes shouldn’t ruin your life or theirs either.

As we conclude Episode 21, 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 12:  In this episode, Timalyn wraps up a 2-part series on getting rid of IRS penalties.  This episode focuses on how to remove IRS penalties for a reasonable cause. It might surprise you, but there’s a process available, if you qualify.  So, do you?  Listen to this episode to find out.

Note:  To listen to Part 1, check out Episode 11 for the discussion of IRS Penalties:  First Time Penalty Abatement.

What is Reasonable Cause?

Timalyn explains it’s when the IRS considers the situation and decides to waive the penalty.  This process is different than the First Time Penalty Abatement (which gets rid of the penalties and interest).  Both are good options to understand and to pursue.

Requirements for Reasonable Cause Abatement

There’s more work involved in pursuing this option.  However, it may be the only option for which you qualify. 

#1:  The request must be in writing, not communicated over the phone.

#2:  Timing is very important.  The cause you’re using must apply to the specific tax year.

#3:  You must have documentation to back up your request for reasonable cause.

9 Reasons the IRS may Approve Your Reasonable Cause

#1:  Death, serious illness or unavoidable absence was involved in your inability to file or pay.

#2:  Fire, casualty or natural disaster (as declared by the federal government). 

#3:  Unable to obtain records. Listen to Timalyn’s examples.

#4:  A mistake was made.  You’ll need documentation to prove this claim.

#5:  Erroneous advice.  A paid professional gave you bad advice, resulting in penalties.

#6:  Written or verbal advice from the IRS.  Document the individual’s name, date and time you spoke with that representative.  There may be a recording of the conversation.  Always take notes when you interact with the IRS.

#7:  Ignorance of the laws.  It’s going to depend upon whether the IRS thinks you performed your due diligence.  Common knowledge issues typically don’t work.  This may have to be combined with #5:  Erroneous advice to be considered a reasonable cause.

#8:  Reasonable cause after “ordinary care” was completed.  You’ll need to convince the IRS that you were trying your best, but a mistake occurred. 

#9:  Undue financial hardship.  The IRS may be willing to negotiate the penalty and interest, but not completely abate it, in this case. 

How Do You Submit the Request for Reasonable Cause Penalty Abatement?

You’ll need to use IRS Form 843 for Penalty Abatement.  This process is more difficult, but it’s possible.  You’ll have to substantiate the reasons you feel you qualify in writing.  You’ll also need to provide the required documentation.  Once you’ve submitted it, it’s a waiting game.  But remember, back taxes don’t have to ruin your life.

Remember to come back for Episode 11 for the discussion of IRS Penalties:  First Time Penalty Abatement.

As we conclude Episode 12, 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.

 

Timalyn Bowens is launching a new podcast on April 8, 2022.  Get ready for the Tax Relief with Timalyn Bowens Podcast!  Are you behind on taxes?  Is the IRS threatening you or your business?  Are you overwhelmed or confused about how to resolve your tax issues?  Let's join Timalyn as she explains your options and how she may be able to help.  Timalyn Bowens is America's Favorite EA.