IRS woes

Avoid These 5 Common Tax Filing Mistakes That Can Get You In Tax Trouble

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Whether you file the simple 1040EZ or a complex 1040 with multiple schedules, making a mistake on your tax returns could lead to big tax trouble. Something as simple as a math error or unsigned form could invite extra attention from the IRS.

The tax agency sees those mistakes every year, and IRS representatives warn taxpayers to be careful when filling out their forms. Even if you think you have everything filled out perfectly, it never hurts to double-check and look for these common errors.

#1 — Assuming your tax pro prepared your taxes properly
Blindly trusting your accountant or tax preparer to file your taxes correctly can be costly. Most tax professionals do a thorough job, but letting them file without your careful review is a mistake.

We resolve back tax problems for people, and often what gets people in trouble is a simple mistake, like forgetting to report income, missing deductions or taking too many deductions. These are sometimes honest mistakes that if not caught early can trigger red flags and have the IRS sending you balance due notices.

No one knows your financial situation better than you, do so it’s important you double-check your return so you’re not blindsided with an unwanted surprise.

#2 — Waiting until the last minute
Filing taxes is stressful enough. Don’t make things worse by waiting until midnight on deadline day to get your return in the mail. Give yourself plenty of time to gather all the necessary documents and complete your return.

Keep in mind that unexpected problems could interfere with your last-minute tax filing plans. Getting your taxes completed early is the only way to protect yourself from unforeseen circumstances that can delay your tax filing.

#3 — Failing to file on time
If you cannot file your return on time, you can ask for an extension by filling out a single form. Even if your documents are in disarray, there is no excuse for not filing on time. An extension gives you six more months to get everything in order and complete your return.

Keep in mind that even when filing an extension, you will still need to estimate the tax you owe and make your payment. Filing an extension extends the amount of time you have to get your return to the IRS, but it does not provide a reprieve from your tax debt. If you wait to make your tax payment, you will get hit with penalties and interest.

#4 — Not making a backup or keeping good records
Making backup copies of your tax returns, income documents and schedules is an essential part of tax planning and preparation. Set up a folder or file box and use it to store your tax documents as they come in, and then scan each one before you put it away.

Once you have completed your return, be sure to make copies of every document, including your W-2 form and tax schedules, before sending the return to the IRS. If you file electronically, save a PDF copy of your return before completing the final step. Save all of those electronic tax documents on your computer or cloud storage device. Ordering a lost copy of a past year’s return from the IRS is time-consuming and expensive; you can save time and money by making your own backup copies. If the IRS audits you or requests more information, having your own records organized will be extremely helpful in the process.

#5 — Ignoring letters from the IRS after you file your taxes.
Sometimes the IRS will send follow-up correspondence, especially if you owe them money. It can be easy to ignore the first few letters. Even if you have the intention of paying your taxes soon, you should still take action and either get on an installment agreement or reach out to a reputable tax relief firm if your financial situation requires it.

That’s not all. Here are some suggestions to keep in mind if you’re preparing your own return.

Owe back taxes?
Our firm specializes in tax problem resolution. And you certainly don’t want to talk to them yourself. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to schedule a virtual or in-person no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Need immediate assistance? Call 973-846-8265 today.

What is a Levy? IRS and Other Asset Levies Explained

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Falling behind on your debts is never a fun position to be in. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.

What is an IRS levy?
Simply put, if you owe back taxes and you ignore the IRS, they can seize your property, take money from your bank accounts, or sell your assets in order to satisfy the balance due.

The IRS will give you plenty of notices via mail before they take this step. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account.

Other types of levies
Private creditors may issue a levy against your bank account with a court order. Court orders are not required for levies by government agencies. The creditor must notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period.

Funds earned from child support, social security, unemployment, workers’ compensation settlements and certain other types of government agency payments are exempt from levy. You must request the exemption and offer proof of the source of the funds.

Wage garnishments
Government agencies may also garnish an employee’s wages for back taxes, child support and other delinquent payments required by law.

The IRS has the authority to levy up to 85 percent of your paycheck. The levy notice will be sent to your company’s payroll or human resources department, which will then withhold the appropriate amount of money from each paycheck and send it to the IRS or state tax board. You must provide a wage garnishment release if you’re able to work out a payment arrangement.

If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments and federal retirement annuities, among others.

Seizing your assets
The IRS may also seize your real estate and personal property such as a car or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. This authority also extends to property and money you own that’s being held by another party, such as the cash value accrued from a life insurance policy. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.

What to do if you have an IRS levy
Back taxes don’t just disappear if you ignore them long enough. Putting your head in the sand will cause the problem to get worse. The IRS knows if you’ve paid or not. They might even be willing to compromise.

If you have back tax debt, we highly recommend you reach out to our firm first, particularly if you owe more than $10k in federal or state taxes and can’t pay in full. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out today for a consultation.

3 tax resolution strategies from the IRS

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Whew, tax time has passed! Or has it? While taxes are a fact of life, tax problems shouldn’t be. If you find yourself in hot water with the IRS, they’ll come to collect what you owe by any means possible — from garnishing your wages to putting a lien on your property. Luckily, there are valuable tax relief options out there to help resolve your tax debt and get you back in good standing with Uncle Sam.

#1 First time Penalty Abatement policy
The IRS doesn’t like being ignored, and if you don’t respond to their initial notices, pricey penalties will keep accruing. But under its First-time Penalty Abatement policy, the IRS may provide administrative relief from a penalty that would otherwise be applicable.

#2 Offer in Compromise (OIC)
You’ve probably seen or heard advertisements from tax relief firms that claim they can settle your tax debt for less than the full amount. An Offer in Compromise can help get your debt down to a manageable payment. To even be considered, you must ensure you’re in compliance and file any unfiled tax returns.

#3 Structured payment plan
Can’t pay the lump sum you owe in full? Your specific tax situation will determine which payment options are available to you, including a short-term payment plan (120 days or less) or a long-term payment plan (an installment agreement that’s longer than 120 days).

Ready for a fresh start?
Effective since 2011, the IRS’s Fresh Start Initiative aims to help more individuals and small businesses take advantage of the flexible programs available to settle tax debt. For details, contact Magone & Company at (973) 301-2300 to schedule a no-obligation consultation and learn more about your options.

The latest guidance on economic impact payments for taxpayers

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You’ve probably heard that IRS will be making millions of economic impact payments (also called recovery rebates) in coming months to help people stay afloat during the economic uncertainty related to the COVID-19 crisis. Here’s what you need to know about this program:

How much will I receive?
IRS will soon begin making payments of up to $1,200 to eligible taxpayers or up to $2,400 to married couples filing joint returns. Parents will get an additional $500 for each dependent child under age 17. Thus, the payment for a married couple with two children under 17 would be $3,400.

Who is eligible?
U.S. citizens and residents are eligible for a full payment if their adjusted gross income (AGI) is under $75,000 (singles or marrieds filing separately), $122,500 (heads of household), and $150,000 (joint filers). The individual must not be the dependent of another taxpayer and must have a social security number that authorizes employment in the U.S.

Not everyone is eligible
For individuals whose AGI exceeds the above thresholds, the payment amount is phased out at the rate of $5 for each $100 of income. Thus, the payment is completely phased out for single filers with AGI over $99,000 and for joint filers with no children with AGI over $198,000. For a married couple with two children, the payment will be completely phased out if their AGI exceeds $218,000.

How will the IRS get me my payment?
The vast majority of people won’t have to do anything in order to get an economic impact payment. IRS will calculate and send the payment automatically to those who are eligible.

If you’ve already filed your 2019 tax return, IRS will use the AGI and dependents from that return to calculate the payment amount. If you haven’t filed for 2019 yet, information from your 2018 return will be used.

IRS will deposit the payment directly into the bank account reflected on the return. It plans to develop a web-based portal for individuals to provide their banking information, so payments can be received via direct deposit rather than by postal check.

People who are not otherwise required to file a tax return will need to file a simple return to receive an economic impact payment. IRS will soon provide instructions on how to do this.

Payments are nontaxable
Economic impact payments will not be included in the recipient’s income for tax purposes.

Have questions about the the relief available to individuals and families? Give the NJ CPAs at Magone & Company a call at (973) 301-2300, we’re here to help.

Guess what? The IRS knows about your un-filed tax returns

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No one likes filing their taxes, but not filing them isn’t just a bad idea. It’s illegal. The IRS keeps detailed records, and chances are they’ve already noticed your lack of compliance. If you’re guilty of an unfiled return, it’s only a matter of time before they catch up with you and demand payment. So, do yourself and your finances a favor, and bring your return filing status up to date as soon as possible.

Here’s how to get started…

Consult with a professional. While the desire for a clean slate is commendable, now is not the time to go it alone. Before filing missing returns, you may want to consult with a qualified tax professional who can offer advice and support, from gathering the proper documents to ensuring that the necessary paperwork is completed correctly.

Gather documentation. Sort through your records and compile all the tax-related information you have on hand. If you’re missing W2 or 1099 forms from past years, your tax pro has the ability to help retrieve them. A professional can also help you construct your income and expenses when records have been lost or destroyed.

Run the numbers. A tax professional can file on your behalf, so you can learn the exact figures you may owe. According to the IRS, a surprising number of unfiled returns may actually be due for a refund. In fact, unfiled 2015 federal income tax returns left 1.4 billion in unclaimed refunds on the table.

If you’re dealing with the potential repercussions of unfiled tax returns, contact the tax resolution specialists at NJ CPA firm Magone & Company at (973) 301-2300 to schedule a no-obligation consultation, and get back on good terms with the IRS.

The latest guidance on tax payment relief

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We have received guidance regarding the special payment relief proposed by the Treasury Department on March 17. This payment relief includes:

Individuals: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of the 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C corporations, such as trusts or estates. The IRS will automatically provide this relief to taxpayers. You do not need to file any additional forms or call the IRS to qualify for this relief.

Corporations: For C corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of the 2019 tax due.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If you file your tax return or request an extension of time to file by April 15, 2020, you will automatically avoid interest and penalties on the taxes paid by July 15.

We remind our clients and friends that for the vast majority, your tax return is due on April 15, 2020 without extension. This relief does not extend the filing date, only the payment of the tax liability.

We also remind you this relief applies only to federal income tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax.

Here is the latest on the payment deferral and filing due dates for the states that have published information:

  • California — Filing and payments extended until June 15, 2020. Includes quarterly estimated tax payments.
  • Connecticut — Business returns extended until June 15, 2020, individuals until July 15th.
  • Michigan, Colorado, Georgia, Maryland, Massachusetts, Ohio, Oregon — State treasury departments have said they will mirror IRS guidance; however, there have been no official pronouncements issued yet.
  • South Carolina – Filing and payments extended until June 1, 2020 for individuals and corporate taxpayers. Quarterly estimates were not addressed.

Many state treasury departments are closed, but monitoring the IRS guidance. We continue to monitor various state payment deferral plans and due dates, and will communicate them if and when they are adopted.

Our team of tax professionals is here for you during this uncertain time. Please call the office at 973-301-2300 with any questions.