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

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

What is the Tax Literacy Gap?

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

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

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

Another Insight Timalyn Learned

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

Working with Older Retirees

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

You Can Reduce Your Tax Literacy Gap

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

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

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

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

Who is she trying to help with this blog?

●      The average taxpayer

●      First-generation business owners

●      Retirees

●      Other tax professionals

Timalyn is Launching New Resources

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

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

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

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

For Tax Professionals

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

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

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

As we conclude Episode 30, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

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

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

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

 

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

Episode 26:  In this episode, Timalyn explains what happens when the IRS pursues payment from you for back taxes.  She’ll discuss some of your taxpayer rights, even when you’re behind on your tax payments.

Special Note:  This episode’s launch will mark the podcast’s 1-year anniversary.  Thank you for your continued interest and time.

As we get started, please note the abbreviation CDP refers to Collection Due Process.  Timalyn may use this abbreviation throughout this episode.

When You Can’t Pay Your Taxes

When this episode is released, the individual tax filing deadline will almost be here.  Unfortunately for many, the tax liability may be more than they have set aside to pay taxes.  People question whether they should file if they can’t pay.  What will the IRS do if they don’t pay?  Will they go to jail?  There are many reasons anxiety and stress begin to take over.  However, that’s not the time to freeze and simply do nothing.

Timalyn explains that the Taxpayer Bill of Rights ensures you have the right to due process when it comes to IRS collection enforcement. You have protections from asset seizure, such as your property or money in your bank account.

IRS Collection Due Process Hearing

Under this process, IRS collection actions that have occurred or have been proposed can be reviewed by way of an appeal. 

For instance, if you’ve received a notice of a federal tax lien filing, you have a right to appeal it.  This also applies to a final notice (IRS notice of intent to levy).

Taxpayer Appeals

If you appeal an IRS action, the appeals process is handled by a department independent of the Internal Revenue Service collection department. It’s meant to provide the taxpayer with a fair and objective review of the situation.  The objective is to ensure the IRS follows the rules.

Remember, the IRS is authorized to levy your accounts.  Social Security recipients can actually have their monthly checks levied before they are deposited into the recipients’ accounts.  The IRS can garnish wages.  Even though the IRS is a federal entity, it can grab your state tax refund, in addition to any federal tax refund you may be anticipating.

Requesting a Collection Due Process Hearing

In addition to the above situations, you also have other times during which you can request a CDP Hearing, as a taxpayer.

●      Have you received a Notice of Jeopardy Levy?  You have a right to appeal.

●      Have you received a Notice of Levy on your state tax refund?  You have the right to appeal.

●      Have you received any other form of IRS Levy?  Again, you have the right to appeal

To request a hearing, IRS Form 12153 must be submitted by the taxpayer.  This is the Request for Collection Due Process Hearing or Equivalent.  It must be submitted within 30 days of the date on the notice, not the day you received it.

How Many Times Can You Request a Hearing?

Timalyn clarifies that you are eligible to request per tax period, per action.  For instance, if you’ve received a Notice of Intent to Levy after a Notice of Intent to issue a tax lien.  In other words, you can make 2 separate requests, for the same tax period. 

Collection Statue Expiration Date

Remember the IRS can collect on any tax debt up to 10 years from the date it was assessed.  The specific date that collection right expires changes if you request a hearing (i.e. make an appeal).  The IRS is unable to proceed while the appeal is being reviewed.

However, the time the pause lasts will get added back onto the 10-year collections window, once the appeal has concluded.  For more information on this topic, refer to Episode 5 where Timalyn explains the Collection Statute Expiration Date (”CSED”).

What Happens in a CDP Hearing?

This is the opportunity for you, as a taxpayer, to tell your story.  Timalyn explains you are able to propose collection alternatives at the hearing.  It’s a good tool for you to use.

You’ll need to be prepared.  This means having receipts and paperwork in order.  You may be able to propose an installment agreement, instead of having the levy imposed.  You could propose an offer in compromise and request the time required to submit the offer.  You could possibly propose you be placed in the Currently Not Collectible status. 

What if I Don’t Agree with the Decision of My CDP Appeal?

Timalyn explains you still have another option.  You can appeal the decision in court.  Once again, this 2^nd appeal will pause the collection enforcement.  However, as Timalyn discussed above, that time will be added back onto the 10-year window the IRS has to collect a tax debt.

If you are going to submit the IRS Form 12153, be sure to send it to the address on the notice you received. 

Equivalent Hearing

If you decide to pursue your appeal, but you’ve exceeded the 30 days from the date on the notice you received, there’s still an option.  You actually have 1 year from the date on the notice to request an equivalent hearing.

The most significant difference between the Collection Due Process Hearing and the Equivalent Hearing is that you can’t take the decision of the latter to court.  In Timalyn’s experience, most people are able to reach some type of agreement during either of the hearings.   

Does It Feel Too Complicated or Overwhelming?

For some individuals, this can be a very intimidating situation.  It’s understandable.  If this is you, remember, you also have the right to representation.  There are tax professionals who can represent you.  Check out Episode 23 for the full story.  In short, an enrolled agent (such as Timalyn) is licensed to represent taxpayers in all 50 states.  Certified Public Accountants (CPAs) and tax attorneys can also represent you.

An EA (enrolled agent) or a CPA can represent you in the actual Collection Due Process hearing.  Understand that if you take your CDP appeal decision to court, you’ll need a tax attorney to represent you in that venue.   

Timalyn comments that her accounting firm, Bowens Tax Solutions, specializes in representing taxpayers at the CDP hearings.  They can actually handle this for you, so you don’t have to appear at the hearing or equivalent.

If you truly feel overwhelmed, you still have options.  Remember, back taxes shouldn’t ruin your life.

As we conclude Episode 26, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

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

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

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

 

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

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

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

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

• The Action
• The Expense, and
• The Event

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

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

Refunds

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

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

The Tax Transcript

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

Bad Debt Loss or Worthless Securities

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

Income Not Reported on the Tax Return

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

Do I Need to Keep My Tax Records Indefinitely?

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

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

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

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

Employment Taxes

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

The Importance of Filing the Return

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

How to Store Your Tax Documents

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

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

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

As we conclude Episode 20, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

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

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

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

 

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

Episode 16:  In this episode, Timalyn shares her perspective on the question, “How to Choose a Tax Professional.”  Entrusting someone to help you with taxes is an important decision you should make with careful consideration.  This is even more vital when you have back tax issues. 

Timalyn begins with 2 disclaimers.  First, she hasn’t been able to get to the podcast studio, so you may notice a slight difference in the audio quality.  Second, Timalyn is recording this particular episode specifically for you; not for her own benefit. Timalyn no longer accepts tax preparation clients. This episode aligns with her mission to fill the tax literacy gap, one taxpayer at a time.

Taxes are getting more complicated.  Your family and friends may also be able to benefit from the objective information, so please share this episode with them.  In the meantime, make sure you take notes while listening to this episode.

Choosing a Tax Professional

Begin looking for a new tax professional now.  Don’t wait until January.  Now is the perfect time to begin the search and decision process.  Remember, really good tax professionals are going to be extremely busy working with their current clients.  It may be difficult for them to schedule time to discuss your specific situation once tax season begins.

Make Sure the Tax Professional You Consider has a PTIN

Beware of scam artists and those who may be less than prepared to handle your taxes.  You want to verify that your tax professional is able to sign the returns they prepare for you.  Timalyn explains that a PTIN is a Preparer Tax Identification Number.  The IRS requires anyone preparing tax returns, for compensation, to have a PTIN.  You can verify the professional you are looking to work with has a PTIN by looking in the PTIN directory.

The PTIN gives the IRS the ability to track a lot of information about the person preparing your taxes.  If they are doing so without a PTIN, consider it a red flag.  The IRS has a page on its website to help you.  The Directory of Federal Tax Preparers with Credentials and Select Qualifications is a reliable resource.

IRS Credentials

The IRS issues various credentials for those who prepare Federal tax returns.  Here is a general overview of those credentials:

• Enrolled Agent (“EA”) – The highest license given by the IRS. Timalyn provided an in-depth overview of this credential in Episode 1.  Enrolled agents, such as Timalyn, are authorized to do tax planning, tax preparation, advising, and representation.  As an EA, she is authorized to represent taxpayers before the IRS in all 50 states.  There are only 3 credentials that are allowed to represent taxpayers before the IRS and they are EAs, tax attorneys, and CPAs.  The enrolled agent focuses exclusively on tax.  Enrolled agents are required to complete a certain amount of continuing education credits each year, including credits on ethics and other topics.
• Certified Public Accountant (“CPA”) – The CPA is licensed through the state. Interestingly a CPA may not actually do taxes.  Accounting involves a broad spectrum of specialties.  For this reason, before you hire a CPA, ask if they specialize in doing taxes.  CPAs are required to complete continuing professional education credits, annually.
• Tax Attorney – Some attorneys do actually do taxes. However, many tax attorneys typically represent clients when criminal charges with tax issues are involved.  If they specialize in tax representation, a tax attorney can represent taxpayers before the IRS.  Tax attorneys are required to complete continuing legal education credits, each year.
• Annual Filing Season Program – This credential is for tax professionals who do not have one of the above 3 credentials, but still want to prove they are qualified. They take continuing education regarding tax law updates and ethics. They have limited representation rights. 

Timalyn also discusses the importance of choosing a tax professional with experience.  She explains that it’s not always about the credentials.  Experience is a valuable teacher.  This is especially important when you consider the niche he/she has developed.  This could be a significant benefit for your specific situation.

Another resource Timalyn shares is CPAVerify.org.  This free, online resource is a quick way to confirm the credentials of a CPA. Keep in mind, just because they are a CPA does not mean they have a PTIN and are authorized to prepare tax returns.

The Ripple Effect of Not Doing Your Research

Yes, Timalyn has built a solid business focused on providing tax relief for people who owe back taxes to the IRS.  However, she doesn’t want you to become her client, because you mistakenly hired someone who wasn’t qualified to prepare your tax returns.  Tax season will be here before you know it. Start researching tax professionals to work with for the next tax season. 

Make Sure Your Preparer is E-Filing

This is another red flag.  If a tax professional is submitting a certain number of tax returns, the IRS requires them to e-file those returns.  Tax returns that are paper filed are still taking much too long to process, especially while we are still dealing with the impacts of the pandemic.  E-filing is simply a more efficient way to get your returns filed and processed.

If your tax preparer is urging you to mail in your returns, start asking questions.  You’ll want to know the specific reasons for this advice.

Timalyn comments that when a tax preparer makes you mail in your returns, it may be to enable the fraudulent preparer to disappear, before the problems are detected.  Please understand that there may be valid reasons, but in this day and age, e-filing is the preferred method. 

If you owe taxes, it may not be because your tax preparer did something wrong.  You may need to adjust your W-4 withholdings. You can find out how to do that by checking out Tax Tips with Timalyn or watching the YouTube video for couples married filing jointly.

When you e-file your returns, you’ll be notified that your return was either accepted or rejected.  You’ll know what issue or issues need to be resolved.  You’ll be able to begin addressing those issues with your tax professional.

As we conclude Episode 16, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.  

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

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

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

 

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

 

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

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

What Qualifies You as an Injured Spouse?

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

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

Can the IRS only Offset a Federal Tax Debt?

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

Seeking Injured Spouse Tax Relief

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

Innocent Spouse Tax Relief

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

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

Protecting Your Tax Refund

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

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

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

How Long Do I Have to File Form 8379?

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

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

Consult with a Tax Professional

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

Resources from Timalyn

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

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

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

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

As we conclude Episode 15, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts and many other podcast platforms.  

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

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

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

 

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

 

Episode 14:  In this episode, Timalyn explains how a spouse may do something, or neglect to do something which results in significant tax issues.  But what happens if you didn’t know what your spouse was doing?  Today, Timalyn will discuss Innocent Spouse Tax Relief.  It’s definitely worth the next few minutes to listen and learn.

Note:  Tax Relief with Timalyn Bowens is now available on Apple Podcasts!

Timalyn begins with the example of a widow with limited income, working in a fast food restaurant.  Her deceased husband ran a business and the IRS determined he had filed years of fraudulent returns.  She had to serve prison time and repay the taxes for this fraud, even though she didn’t work in his business.  They filed joint returns, which made her liable for his fraud. 

The Innocent Spouse Tax Relief Option

Back taxes shouldn’t ruin your life, but they can.  Innocent spouse tax relief enables a spouse to avoid full responsibility for the actions of the other spouse (or former spouse).  It includes the additional tax, penalties, and interest assessed due to fraud and/or negligence. 

This is different from the Injured Spouse Relief involving the seizure of a tax refund to pay federal debts, back taxes, etc.

Requirements for Innocent Spouse Tax Relief

There are several specific requirements that must be met in order to qualify:

1. Married Filing Jointly tax returns were filed for the year(s) in question.
2. The return shows understated tax due to erroneous items of your spouse/former spouse.
3. You must prove you were not involved in the fraud and/or negligence, nor would you have reasonably known about it when you signed the return(s).

Common Types of Tax Fraud

• Understating or overstating your personal income or the income of a business.
• Using “creative” deductions.
• Claiming a child who is not yours on your returns.

If you realize one or more of the above has happened, after filing, you can file for Innocent Spouse Tax Relief.  You’ll need to use IRS Form 8857.

Can the IRS Deny My Claim?

Yes.  You will be denied if the IRS determines you were cooperating in the fraud.  This could include transferring the ownership of an asset to avoid tax liability.  Avoiding paying a third-party creditor can also cause your claim to be denied.

What if I Can’t Afford to Pay the Tax Penalties and Interest?

You could still apply for an Installment Agreement, which Timalyn explained in Episode 10.  This assumes you are tax compliant in previous years and the current year. 

Timalyn closes this episode with a reminder.  Back taxes shouldn’t run your life.  She doesn’t want you to serve prison time for your spouse’s tax fraud like the women in the opening of this episode.

As we conclude Episode 14, 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.