tax debt

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

Love Letters from the IRS

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

What Is an IRS Notice?

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

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

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

IRS CP503 Notice

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

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

IRS CP504 Notice

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

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

Don’t Put Your Head in the Sand

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

How to Read the IRS Notice

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  

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

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

 

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

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

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

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

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

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

It Doesn’t Mean You Did Anything Wrong

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

Don’t Fear the Boogey Man

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

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

Correspondence Audits

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

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

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

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

Do You Already Have a Tax Power of Attorney?

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

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

Prepare Your Business for an Audit

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

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

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

You Need a Bookkeeper

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

The 3-H’s of Record Keeping

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

●      How long should you keep your records? 

●      How should your store your records?

●      How do you deliver your records?

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

Don’t Create More Problems for Yourself

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

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

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

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

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

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

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

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

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

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

  

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

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

What Does Failing to Plan Look Like with Taxes?

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

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

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

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

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

Developing an Effective Tax Plan

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

Roth IRA vs. Traditional IRA

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

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

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

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

Does Your Tax Professional Give You This Type of Advice?

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

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

Invest in Your Future

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

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

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

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

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

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

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

 

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

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

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

Tip #1:  Be Proactive

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

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

Tip #2:  Consider Hiring Financial Experts

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

The Value of a Bookkeeper / Accountant

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

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

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

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

Tip #3:  Consider Investing in a Tax Plan

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

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

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

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

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

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

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

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

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

IRS Form 1040-X

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

What Is a Continuous Use Form?

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

You Found a Mistake, So Now What?

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

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

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

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

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

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

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

Don’t Procrastinate

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

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

Injured Spouse Relief

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

Don’t Intentionally Manipulate Your Income to Get a Mortgage

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

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

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

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

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

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

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

 

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

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

To listen to Episode 38, click here.

What Is IRS Form 433-F?

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

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

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

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

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

Understanding the Detailed Information

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

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

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

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

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

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

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

Substantiating the Debt

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

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

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

Pay Careful Attention to Your Expenses

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

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

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

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

Understanding Your Cash Flow

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

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

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

Don’t Go It Alone

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

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

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

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

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

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

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

 

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

Whether you’re a brand-new listener or a long-time listener, there is nothing like hearing from a business owner – like you – who is having referral success. What are they doing differently, and how is it working for them?  Let’s find out!

Randall Brody is an income tax expert and founder of Tax Samaritan and Peace of Mind Tax Help. Randall shares his journey of building a referable business and the success he has achieved in just a few months.

He discusses the mindset shifts, tracking, and strategies he implemented to generate more referrals. If you're looking for tips on how to make referrals work for your business, this episode is a must-listen. Tune in now and take control of your referrals to build a referable business.

Resources and links mentioned in this episode can be found on the show notes page at http://www.staceybrownrandall.com/277

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 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.

Link to Blog: How To Resolve Tax Debt with the IRS: https://incitetax.com/how-to-resolve-tax-debt-with-the-irs/

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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 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.

 

Do You Owe the IRS over $100,000?!? 

A six-figure debt usually causes panic, especially for small business owners. With the IRS, the longer you wait, the more interest, penalties, and potential for collections for actions against you.

There are three things you should do.

First, get a collection hold on your account. See if there's an agent assigned to your case. Get their information.

Second, get into compliance. File any unfiled returns. Determine your current income, assets, and what needs to be protected. Look for a settlement of monthly payment you can negotiate with the IRS.

Third, identify the root cause of your back taxes. This can be improper planning. Unaddressed problems will only continue. To fix this, set an estimated tax payment schedule. Know your estimated income. Sometimes, you can do tax planning or change an LLC partnership to an S-corp. Maximize deductions and improve your bookkeeping.

These simple steps will help you resolve your situation and stop it from happening again.

JLD Tax Resolution Group can help you solve a complex tax problem with ease.

Schedule your free consultation at 201-479-2572 or visit www.201tax.com. 

 

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.

 

Episode 13:  In this episode, Timalyn discusses retirement and taxes.  Those topics were a result of some interesting conversations she recently had with her mother.  The economy is turbulent and when combined with complicated tax laws, it can generate a lot of confusion.  Timalyn is going to provide some interesting tips and perspectives for your consideration. 

Is Retirement Income Taxable?

Timalyn reminds us that we may have different types of income during our retirement years.  Most people have social security.  You may have worked for a company that offered pension benefits.  If you worked for the government, you may have a state pension.  There are traditional IRAs, 401(k)s, and Roth IRAs.

Tax planning for people approaching retirement needs to take into consideration 2 important factors:

1. What their total retirement income will be?
2. How much should be withheld in taxes from each income source?

Tax-Deferred Income

Many plans such as 401(k)s, 403(b) plans, or a traditional IRA generate taxable income in your retirement years.  The contributions to the plans were made on a tax-deferred basis.  Basically, the money that went into your plan was contributed before you paid taxes on that money.  Think of it as this was paid from your gross income, each pay period, rather than from your net income.

Social Security Income

This depends on provisional income.  Stick around until the end of the episode for more on this topic.

Roth IRA Distributions

The distributions from your Roth IRA are not taxable.  The contributions were originally made with after-tax dollars.  Roth IRA contributions are made from your net income, rather than from your gross income.  This is different from the tax-deferred contributions of the other plans.  The growth and interest accumulated in your Roth are tax-free. 

Timalyn recommends that your work with a financial advisor and a tax professional to help you make a good, long-term tax plan.

Adjusting Your Withholdings

If you work a W-2 job, you can tell the company how much you want to be withheld from each paycheck.  You do this on your W-4.  You have a Form W-4P for pension.  It takes into account the income from a variety of sources, including annuities and social securities.  If you don’t complete this form correctly, you could have a significant tax liability at the end of the year.

Watch Timalyn’s video on how to complete your W-4 correctly.  Her YouTube channel has a collection of helpful videos.  She’ll soon have a video specifically discussing the W-4P.

Is Social Security Taxable?

As stated earlier, it depends on your provisional income.  The IRS sets provisional income as the threshold at which your income becomes taxable.  Begin with your base income.  These levels are fairly low.  If you’re not retired yet, this is an important decision to consider with your financial advisor.  You may want to share this information with your retired parents.  Many people aren’t prepared for the taxes in retirement.

If you file as a single, head of household, or qualified widower, your base level is $25,000.  Any income beyond this amount is taxable.  As a result, your social security can be subjected to a very high tax rate (i.e. 50% or higher, up to 85%).  If you’re still working, you may want to delay taking social security until your income decreases.

If you’re married and filing jointly, the base income is $32,000.  If you go over that amount, 50%-85% of your social security will be considered taxable.  It depends upon your total household income. 

It’s Not Too Late

If you owe $10,000 or less, can’t pay it today and you’ve filed your taxes on time, go back and watch Timalyn’s video or use the IRS Social Security Tax Calculator to help you adjust your withholdings.  You can set up a guaranteed payment arrangement with the IRS.  Timalyn has a step-by-step e-book you can purchase by clicking this link.  Some people can get your plan set up in as little as 20 minutes.

As we conclude Episode 13, 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 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.