Thursday

Never to Early to Start Preparing for Next Year's Taxes



You may be tempted to forget all about your taxes once you’ve filed your tax return. Do not give in to that temptation. If you start your tax planning now, you may avoid a tax surprise when you file next year. Now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are some IRS tips to give you a leg up on next year’s taxes:
  • Take action when life changes occur.  Some life events can change the amount of tax you pay. Some examples that can do that include a change in marital status or the birth of a child. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee's Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
  • Report changes in circumstances to the Health Insurance Marketplace.  If you enroll in insurance coverage through the Health Insurance Marketplace in 2015, you should report changes in circumstances to the Marketplace when they happen. Report events such as changes in your income or family size. Doing so will help you avoid getting too much or too little financial assistance in advance.
  • Keep records safe.  Put your 2014 tax return and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid. You should use your tax return as a guide when you do your taxes next year.
  • Stay organized.  Make tax time easier. Have your family put tax records in the same place during the year. That way you won’t have to search for misplaced records when you file next year.
  • Shop for a tax preparer.  If you want to hire a tax preparer to help you with tax planning, start your search now. Choose your tax preparer wisely. Use theDirectory of Tax Return Preparers tool on IRS.gov to find tax preparers in your area with the credentials and qualifications that you prefer.
  • Think about itemizing.  If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.

Tuesday

Top 10 Tips to Know if You Get a Letter from the IRS

Top 10 Tips to Know if You Get a Letter from the IRS

The IRS mails millions of notices and letters to taxpayers each year. There are a variety of reasons why we might send you a notice. Here are the top 10 tips to know in case you get one.

1.    Don’t panic. You often can take care of a notice simply by responding to it.

2.    An IRS notice typically will be about your federal tax return or tax account. It will be about a specific issue, such as changes to your account. It may ask you for more information. It could also explain that you owe tax and that you need to pay the amount that is due.

3.    Each notice has specific instructions, so read it carefully. It will tell you what you need to do.

4.    You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return.

5.    If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

6.    If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice. Send it to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7.    You won’t need to call the IRS or visit an IRS office for most notices. If you do have questions, call the phone number in the upper right-hand corner of the notice. Have a copy of your tax return and the notice with you when you call. This will help the IRS answer your questions.

8.    Always keep copies of any notices you receive with your other tax records.

9.    Be alert for tax scams. The IRS sends letters and notices by mail. The IRS does not contact people by email or social media to ask for personal or financial information.

10.    For more on this topic visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom left of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov/forms at any time.

Monday

Tips for Filing an Amended Return

Tips for Filing an Amended Return

Have you found that you made an error on your federal tax return? If so, you may need to file an amended return. Here are ten tips that can help you file.

1.    Tax form to amend your return.  Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct your tax return. You must file a paper Form 1040X; it can’t be e-filed. You can get the form on IRS.gov/forms at any time. See the Form 1040X instructions for the address where you should mail your form.

2.    Amend to correct errors.  You should file an amended tax return to correct errors or make changes to your original tax return. For example, you should amend to change your filing status, or to correct your income, deductions or credits.

3.    Don’t amend for math errors, missing forms.  You normally don’t need to file an amended return to correct math errors. The IRS will automatically correct those for you. Also, do not file an amended return if you forgot to attach tax forms, such as a Form W-2 or a schedule. The IRS will mail you a request for them in most cases.

4.    Most taxpayers don’t need to amend to correct Form 1095-A, Health Insurance Marketplace Statement, errors.  Eligible taxpayers who filed a 2014 tax return and claimed a premium tax credit using incorrect information from either the federally-facilitated or a state-based Health Insurance Marketplace, generally do not have to file an amended return regardless of the nature of the error, even if additional taxes would be owed. The IRS may contact you to ask for a copy of your corrected Form 1095-A to verify the information.

5.    Time limit to claim a refund.  You usually have three years from the date you filed your original tax return to file Form 1040X to claim a refund. You can file it within two years from the date you paid the tax, if that date is later. That means the last day for most people to file a 2011 claim for a refund is April 15, 2015. See the Form 1040X instructions for special rules that apply to some claims.

6.    Separate forms for each year.  If you are amending more than one tax return, prepare a 1040X for each year. You should mail each year in separate envelopes. Note the tax year of the return you are amending at the top of Form 1040X. Check the form’s instructions for where to mail your return.

7.    Attach other forms with changes.  If you use other IRS forms or schedules to make changes, make sure to attach them to your Form 1040X.

8.    When to file for second refund.  If you are due a refund from your original return, wait to get that refund before filing Form 1040X to claim an additional refund. Amended returns take up to 16 weeks to process. You may spend your original refund while you wait for any additional refund.

9.    Pay added tax as soon as you can.  If you owe more tax, file your Form 1040X and pay the tax as soon as you can. This will stop added interest and penalties. Use IRS Direct Pay to pay your tax directly from your checking or savings account.

10.    Track your amended return.  You can track the status of your amended tax return three weeks after you file with ‘Where’s My Amended Return?’ This tool is on IRS.gov or by phone at 866-464-2050 FREE. It is available in English and in Spanish. The tool can track the status of an amended return for the current year and up to three years back. To use ‘Where’s My Amended Return?’ enter your taxpayer identification number, which is usually your Social Security number. You will also enter your date of birth and zip code. If you have filed amended returns for multiple years, you can check each year one at a time.

Still need help?  Contact Nicholas Hartney, EA at nick@patriotresolution.com or nick@irstaxhelp.tax 

Sunday

Obamacare Overview and How it Affects Your Taxes For Those of You Who Filed Extensions

Health Care Law and Taxes – More Time to File
Obamacare-at-a-glance
Most taxpayers will simply check a box on their return to indicate that everyone listed on the front of the return has qualifying health care coverage for the entire year and may not need more time to file. 

However, people who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through theFree File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension onForm 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

If you received your coverage through a Marketplace, you may have received an incorrect Form 1095-A, Health Insurance Marketplace Statement, or your form may have been delayed. If you have not yet filed your income tax return, you should file by April 15 using either the Form 1095-A that you have received or the corrected form, if available. Alternatively, you may file for an extension of time to file by April 15 using Form 4868.  For more information including information about what to do if you already filed your tax return, see our Incorrect Forms 1095-A and the Premium Tax Credit questions and answers.

An extension to file will give you until Oct. 15 to file your taxes. It does not give you more time to pay your taxes. You still must estimate and pay what you owe by April 15 to avoid a late filing penalty. You will be charged interest on any tax that you do not pay on time. You may also owe a penalty if you pay your tax late. In light of some tax filers not receiving their correct Forms 1095-A, in time, the Treasury Department and IRS released guidance providing penalty relief for individuals who are unable to file an accurate return by April 15. Generally, in order to qualify for this relief, taxpayers must file either Form 1040 series or Form 4868 by April 15. A return must be filed by Oct. 15.  More specifics on the relief is  included in Notice 2015-30, Penalty Relief Related To Incorrect Or Delayed Forms 1095-A. 

For more information about the Affordable Care Act, visit IRS.gov/aca.
If you need help with any tax issue please contact me at either nick@patriotresolution.com or nick@irstaxhelp.tax 

Friday

What to Know about Late Filing and Late Paying Penalties

What to Know about Late Filing and Late Paying Penalties

April 15 was the tax day deadline for most people. If you are due a refund there is no penalty if you file a late tax return. But if you owe tax, and you failed to file and pay on time, you will usually owe interest and penalties on the tax you pay late. You should file your tax return and pay the tax as soon as possible to stop them. Here are eight facts that you should know about these penalties.  

1.    Two penalties may apply.  If you file your federal tax return late and owe tax with the return, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

2.    Penalty for late filing.  The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

3.    Minimum late filing penalty.  If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

4.    Penalty for late payment.  The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

5.    Combined penalty per month.  If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent. 

6.    File even if you can’t pay.  In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can. Use IRS Direct Pay to pay your tax directly from your checking or savings account. You should try other options to pay, such as getting a loan or paying by debit or credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up an installment agreement with the IRS using the Online Payment Agreement tool on IRS.gov. 

7.    Late payment penalty may not apply.  If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

8.    No penalty if reasonable cause.  You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014.

Why Gamble With Your Tax Debt? Contact Nicholas Hartney, EA Today to Fix Your Tax Problems | 7 Things to Consider Before Placing Your Bet

Hiring a Tax Resolution Firm is a Gamble | 7 Things to Consider Before Placing Your Bet on a Tax Firm 


1.  Did the tax resolution firm contact you without being solicited to do so (i.e. Ambulance Chaser)? I have wrote extensively about these firms .   If after reading these posts you are still unsure....

..2. Can you speak to the person who will be working your case? If no, then you probably want to avoid this tax resolution firm.  If you can then you want to ask them...

..3. Will they be handling your case or should you expect to be working more with their paralegals (who 99.99% of the time are not true paralegals, really just anyone they can find willing to work for $10-$12 an hour).  This should be an interesting conversation.  

4. Ask them about their billing.  How will they bill you?  Can you see an example of a retainer billing statement? Will they charge you $50 per fax?  Hundreds of dollars for a template letter?  Again, this should be an interesting conversation.

5. How long have they been with the firm?  Most of the Tax Resolution firms are high-pressure boiler rooms and as such have the tendency to have an extremely high turnover rate.  

6. Is the majority of their salary based on asking on their clients for more money?  Most of these firms treat their attorneys, CPA's and enrolled agents as a sales force, not a professional tasked with resolving the case.  

7. After questioning the tax resolution firm, ask yourself if it feels like a bait-and-switch.  Is the sales person saying one thing and the representative telling you something different, is their gaps in their stories? 

If you have questions please feel free to email me at either nick@patriotresolution.com or nick@irstaxhelp.tax.  My phone number is 303.731.3193 or toll free at 866-932-2833.  

Nicholas Hartney, EA | If You Missed the IRS Tax Deadline these 5 Steps Can Help

If You Missed the Tax Deadline These Tips Can Help

April 15 has come and gone. If you didn’t file a tax return or an extension but should have, you need to take action now. Here are some tips for taxpayers who missed the tax filing deadline:
  1. File as soon as you can.  If you owe taxes, you should file and pay as soon as you can. This will stop the interest and penalties that you will owe. IRS Direct Pay offers you a free, secure and easy way to pay your tax directly from your checking or savings account. There is no penalty for filing a late return if you are due a refund. The sooner you file, the sooner you’ll get it.
  2. IRS Free File is your best choice.  Nearly everyone can use IRS Free File to e-file their federal taxes for free. If your income was $60,000 or less, you can use free brand-name tax software. If you made more than $60,000, use Free File Fillable Forms to e-file. This program uses electronic versions of IRS paper forms. It does some of the math and it works best for those who are used to doing their own taxes. Either way, you have a free option that you can only access on IRS.gov. It’s available at least through the Oct. 15 extension period.  
  3. Use IRS e-file to do your taxes.  No matter who prepares your tax return, you can use IRS e-file through Oct. 15. E-file is the easiest, safest and most accurate way to file your taxes. The IRS will confirm that it received your tax return. The IRS issues more than nine out of 10 refunds in less than 21 days.
  4. Pay as much as you can.  If you owe tax but can’t pay it in full, you should pay as much as you can when you file your tax return. IRS electronic payment options are the quickest and easiest way to pay your taxes. Pay the rest of the tax you still owe as soon as possible. Doing so will reduce future penalties and interest.
  5. Use the IRS.gov tool to pay over time.  If you need more time to pay your tax, you can apply for an installment agreement with the IRS. The best way to apply is to use the IRS Online Payment Agreement tool. You can use the IRS.gov tool to set up a direct debit agreement. You don’t need to write and mail a check each month with a direct debit plan. If you don’t use the tool, you can use Form 9465, Installment Agreement Request to apply. You can get the form on IRS.gov/forms at any time.
  6. A refund may be waiting.  If you are due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may still get a refund. This could apply if you had taxes withheld from your wages or you qualify for certain tax credits. If you do not file your return within three years, you could lose your right to the refund.

If you need assistance please email me at either nick@patriotresolution.com or nick@irstaxhelp.tax. 

Monday

Five Things to Know if You Need More Time to File Your Taxes


Nicholas Hartney, EA | 5 Items You Need To Know If You Need More Time To File

The April 15 tax deadline is coming up. If you need more time to file your taxes, you can get an automatic six month extension from the IRS. Here are five things to know about filing an extension:

1.    Use IRS Free File to file an extension. You can use IRS Free File to e-file your extension request for free. Free File is only available through IRS.gov. You must e-file the request by midnight on April 15. Don’t forget to come back to Free File to e-file your taxes for free. You can access the program at any time through Oct. 15.

2.    Use Form 4868. You can also request an extension by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must mail this form to the IRS by April 15. Form 4868 is available on IRS.gov/forms at any time.

3.    More time to file is not more time to pay. An extension to file will give you until Oct. 15 to file your taxes. It does not give you more time to pay your taxes. You still must estimate and pay what you owe by April 15 to avoid a late filing penalty. You will be charged interest on any tax that you do not pay on time. You may also owe a penalty if you pay your tax late.

4.    Use IRS Direct Pay.  The safe, fast and easy way to pay your tax is with IRS Direct Pay. Visit IRS.gov/directpay to use this free and secure way to pay from your checking or savings account. You also have other electronic payment options. The IRS will automatically process your extension when you pay electronically. You can pay online or by phone.

5.    IRS helps if you can’t pay all you owe.  If you can’t pay all the tax you owe, the IRS offers you have options.  Contact Nick today at nick@irstaxhelp.tax. 

If you found this Tax Tip helpful, please share it! 

Wednesday

Monday

Tax Resolution Scams Still Going Strong

It amazes me that the old school boiler tax resolution firms are still out there.


A taxpayer who is called or calls the tax resolution firm is connected with a high-pressure salesperson, and maybe with two or three of them (often times a "manager" comes on for good measure). The taxpayer is assured that the firm will settle and resolve the taxpayer’s tax obligations. The salespeople earn commissions and large bonuses. Tax resolution firms take large retainers, anywhere from $2,500-$10,000+.


The taxpayer somehow is able to come up with the retainer money and that money is burned through with over and double billing in a month or two with very little progress. To bill down the clients retainers employees of the tax resolution firm send the taxpayer boilerplate letters requesting information by artificial deadlines. When there is no response to the letters, the associate heading the case will write what is called "a money letter" followed by several "money calls" to harass the taxpayer for additional retainer funds.


If the taxpayer is unable to pay the tax resolution firm they will deem the case closed and revoke their contacts with the IRS and state taxing authorities, with the taxpayer realizing no resolution or relief. If the taxpayer requests a refund of fees paid to the tax resolution firm, the firm will run through the retainer billing statement and make adjustments to ensure all the retainer is used up.


The tax resolution firm is able to get away with this due to the fine print in the retainer agreement which the tax resolution firm required the taxpayer to sign prior to beginning representation.
The majority of the time taxpayers cases are worked by people called "paras", i.e. a 'paralegal' with no formal schooling. These 'paras' at tax resolution firms are not subject to any professional regulation, evidenced from their low salaries of $12 an hour-but will bill taxpayers up to $300 per hour for clerical work.


Eventually the taxpayer figures out she has been had and throws in the towel. By the end of the taxpayer's relationship with the firm they end up owing more to the IRS than they did when they started with the tax resolution firm due to additional accrued penalties and daily compounded interest. I offer an alternative to these run of the mill tax resolution companies by helping taxpayers either resolve their own debt or by representing them before the IRS for a small monthly fee.


You can contact me at nick@irstaxhelp.tax

Friday

Nicholas Hartney, EA | History of the IRS and What a 1040 Looked Like in 1913

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Brief History of IRS

Origin
The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.
16th AmendmentIn 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.
In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments.

1913 Form 1040 (PDF 126KB, 4 pages, including instructions)

A New NameIn the 50s, the agency was reorganized to replace a patronage system with career, professional employees. The Bureau of Internal Revenue name was changed to the Internal Revenue Service. Only the IRS commissioner and chief counsel are selected by the president and confirmed by the Senate.
Today’s IRS OrganizationThe IRS Restructuring and Reform Act of 1998 prompted the most comprehensive reorganization and modernization of IRS in nearly half a century. The IRS reorganized itself to closely resemble the private sector model of organizing around customers with similar needs.

Thursday

Nicholas Hartney, EA | Instructions for Filing an Extention of Time to File Income Tax Returns with the IRS

Form 4868 for those of us who need some extra time to file their   Automatic 6-month extension by filing.



Purpose of Form Use Form 4868 to apply for 6 more months (4 if “out of the country” (defined on page 2) and a U.S. citizen or resident) to file Form 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS


Qualifying for the Extension


To get the extra time you must:


1. Properly estimate your 2014 tax liability using the information available to you,


2. Enter your total tax liability on line 4 of Form 4868, and


3. File Form 4868 by the regular due date of your return.


If you do not pay the amount due by the regular due date, you will owe interest. You may also be charged penalties. For more details, see Interest and Late Payment Penalty on page 2. Any remittance you make with your application for extension will be treated as a payment of tax. You do not have to explain why you are asking for the extension. We will contact you only if your request is denied. Do not file Form 4868 if you want the IRS to figure your tax or you are under a court order to file your return by the regular due date.


There are three ways to request an automatic extension of time to file a U.S. individual income tax return.


1. You can file Form 4868 and pay all or part of your estimated income tax due. See How To Make a Payment, on page 3.


2. You can file Form 4868 electronically by accessing IRS e-file using your home computer or by using a tax professional who uses e-file.


3. You can file a paper Form 4868. It’s Convenient, Safe, and Secure IRS e-file is the IRS’s electronic filing program. You can get an automatic extension of time to file your tax return by filing Form 4868 electronically. You will receive an electronic acknowledgment once you complete the transaction. Keep it with your records. Do not mail in Form 4868 if you file electronically, unless you are making a payment with a check or money order (see page 3). Complete Form 4868 to use as a worksheet. If you think you may owe tax when you file your return, you will need to estimate your total tax liability and subtract how much you have already paid (lines 4, 5, and 6 below). Several companies offer free e-filing of Form 4868 through the Free File program. For more details, go to IRS.gov and click on freefile. Pay Electronically You do not need to submit a paper Form 4868 if you file it with a payment using our electronic payment options. Your extension will be automatically processed when you pay part or all of your estimated income tax electronically. You can pay online or by phone (see page 3). E-file Using Your Personal Computer or Through a Tax Professional Refer to your tax software package or tax preparer for ways to file electronically. Be sure to have a copy of your 2013 tax return—you will be asked to provide information from the return for taxpayer verification. If you wish to make a payment, you can pay by electronic funds withdrawal or send your check or money order to the address shown in the middle column under Where To File a Paper Form 4868 (see page 4). File a Paper Form 4868 If you wish to file on paper instead of electronically, fill in the Form 4868 below and mail it to the address shown on page 4. For information on using a private delivery service, see page 4. Note. If you are a fiscal year taxpayer, you must file a paper Form


When To File Form 4868 File Form 4868 by April 15, 2015. Fiscal year taxpayers, file Form 4868 by the original due date of the fiscal year return. Taxpayers who are out of the country. If, on the regular due date of your return, you are out of the country and a U.S. citizen or resident, you are allowed 2 extra months to file your return and pay any amount due without requesting an extension. Interest will still be charged, however, on payments made after the regular due date, without regard to the extension. For a calendar year return, this is June 15, 2015. File this form and be sure to check the box on line 8 if you need an additional 4 months to file your return. If you are out of the country and a U.S. citizen or resident, you may qualify for special tax treatment if you meet the bona fide residence or physical presence tests. If you do not expect to meet either of those tests by the due date of your return, request an extension to a date after you expect to meet the tests by filing Form 2350, Application for Extension of Time To File U.S. Income Tax Return. You are out of the country if: • You live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, or • You are in military or naval service on duty outside the United States and Puerto Rico. If you qualify as being out of the country, you will still be eligible for the extension even if you are physically present in the United States or Puerto Rico on the regular due date of the return. For more information on extensions for taxpayers out of the country, see Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. Form 1040NR or 1040NR-EZ filers. If you cannot file your return by the due date, you should file Form 4868. You must file Form 4868 by the regular due date of the return. If you did not receive wages as an employee subject to U.S. income tax withholding, and your return is due June 15, 2015, check the box on line 9. Total Time Allowed Generally, we cannot extend the due date of your return for more than 6 months (October 15, 2015, for most calendar year taxpayers). However, there may be an exception if you are living out of the country. See Pub. 54 for more information. Filing Your Tax Return You can file your tax return any time before the extension expires. Do not attach a copy of Form 4868 to your return. Interest You will owe interest on any tax not paid by the regular due date of your return, even if you qualify for the 2-month extension because you were out of the country. The interest runs until you pay the tax. Even if you had a good reason for not paying on time, you will still owe interest. Late Payment Penalty The late payment penalty is usually ½ of 1% of any tax (other than estimated tax) not paid by April 15, 2015. It is charged for each month or part of a month the tax is unpaid. The maximum penalty is 25%. The late payment penalty will not be charged if you can show reasonable cause for not paying on time. Attach a statement to your return fully explaining the reason. Do not attach the statement to Form 4868. You are considered to have reasonable cause for the period covered by this automatic extension if at least 90% of your actual 2014 tax liability is paid before the regular due date of your return through withholding, estimated tax payments, or payments made with Form 4868. Late Filing Penalty A late filing penalty is usually charged if your return is filed after the due date (including extensions). The penalty is usually 5% of the amount due for each month or part of a month your return is late. The maximum penalty is 25%. If your return is more than 60 days late, the minimum penalty is $135 or the balance of the tax due on your return, whichever is smaller. You might not owe the penalty if you have a reasonable explanation for filing late. Attach a statement to your return fully explaining your reason for filing late. Do not attach the statement to Form 4868. How To Claim Credit for Payment Made With This Form When you file your 2014 return, include the amount of any payment you made with Form 4868 on the appropriate line of your tax return. The instructions for the following line of your tax return will tell you how to report the payment. • Form 1040, line 70. • Form 1040A, line 46. • Form 1040EZ, line 9. • Form 1040NR, line 66. • Form 1040NR-EZ, line 21. • Form 1040-PR, line 11. • Form 1040-SS, line 11. If you and your spouse each filed a separate Form 4868 but later file a joint return for 2014, enter the total paid with both Forms 4868 on the appropriate line of your joint return. If you and your spouse jointly file Form 4868 but later file separate returns for 2014, you can enter the total amount paid with Form 4868 on either of your separate returns. Or you and your spouse can divide the payment in any agreed amounts.



Wednesday

Nicholas Hartney, EA | IRS Attempting to Block Passports For People Who Owe Back Taxes

You can send your thank you cards to Harry for this one.
The IRS and Justice Department are working together to catch ex-pats behind on their income taxes. Even though there are no longer debt prisons they can still arrest people behind on their taxes when they land on U.S. soil. Sen. Harry Reid (D-Nev.) and a handful of others in Congress think the government could do more to apprehend people on the move and even prevent them from obtaining or leaving the States in the first place. In 2012, the Government Accountability Office reported on the potential for using the issuance of passports to collect taxes.
The thought is to restrict passports and travel until you pay the IRS what they say you owe (including penalties and interest). Several successive proposals have been defeated for now. Some say the right to travel is fundamental, practically constitutional.
According to an introduced Senate Bill 1813, an idea to punish tax debtors, the State Department would be allowed to revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in an amount in excess of $50,000.
As an enrolled agent and someone who has represented taxpayers for over 10 years I can foresee major problems with this from the taxpayer's perspective, starting with lack of due process.


The IRS is notorious for assessing people an arbitrary tax bill by having the IRS computer process and prepare what are called Substitute-For-Returns (S.F.R Sec. 6020(b)) if you fail to file an income tax return.
IRC 6020(b) states, "If any person fails to make any return required by any Internal Revenue Law or regulation made there under at the time prescribed therefore, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise."
When the IRS prepares an SFR they will give you the lowest possible deductions and if you have a 1099-MISC issued to you they will tax it at 100%, i.e. they will not consider any expenses you had to offset the total taxable income. The return will be processed "in the best interests of the Service". On top of that they will assess failure to file and failure to pay penalties (which max out at 50% of the tax due), then apply compounded daily interest! Before you know it, a few years of unfiled tax returns or perhaps even if a new 1099 is issued that you either forget about or one is issued under your taxpayer ID in error, $50,000 can add up very fast, and when dealing with the IRS you are guilty before being proven innocent. If passed this law will hurt a lot of innocent people.
Now with Harry Reid announcing retirement a mere few months after his workout injuries perhaps this no-travel, no-passport idea will lose steam and die...
And before I forget, Happy Retirement Harry!