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Yearly Archives: 2022

Know Your Choices to Pay Your Tax Bill! – Part 2

April 27, 2022

On April 25, 2022 we posted Know Your Choices to Pay Your Tax Bill! - Part 1 where we discussed Paying in full within 120 days (short-term payment plan) and Installment agreements (long-term payment plan). In this Part 2we will discuss two other alternative for taxpayers who do not have the money to pay their current tax liability.

Offer in compromise (OIC). An OIC is an agreement between a taxpayer and IRS that settles the taxpayer's tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, won't qualify for an OIC in most cases. IRS says that to qualify for an OIC, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees. (IRS website)

IRS may compromise a tax liability on any of the following grounds:
  1. Doubt as to liability. There must be a genuine dispute as to the existence of amount of the correct tax debt.
  2. Doubt as to collectibility. Such doubt exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability.
  3. To promote effective tax administration. An offer may be accepted on this ground if: (a) collection in full of the tax owed could be achieved, but (b) requiring payment in full would either create an economic hardship, or would be unfair and inequitable because of exceptional circumstances. (Reg. § 301.7122-1(b))

To request an OIC, the taxpayer must apply using Form 656, Offer in Compromise. The taxpayer also must submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B (OIC), Collection Information Statement for Businesses.

A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).

The OIC application generally must be accompanied by a $186 application fee. However, the fee is waived for certain low income taxpayers or if the OIC is based on doubt as to liability. (Form 656-B, Notice 2006-68, 2006-31 IRB 105, Sec. 4.03)

Except with regard to offers filed by low-income taxpayers, or based only on doubt as to liability, an OIC must be accompanied by a nonrefundable payment that depends on how the taxpayer is offering to pay.
A taxpayer may propose to pay in a lump sum, i.e., an offer payable in five or fewer installments within five or fewer months after the offer is accepted. If such an offer is made, the taxpayer must include with the Form 656 a payment equal to 20% of the offer amount. This payment is required in addition to the $186 application fee.
A taxpayer may propose to make periodic payments, i.e., six or more monthly installments made within 24 months after the offer is accepted. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656. This payment also is required in addition to the $186 application fee. (Code Sec. 7122(c)(1)
Currently Not Collectible - delay the collection process. Where a payment would create financial hardship, is to ask IRS to delay collection until the taxpayer is able to pay. If IRS determines that the taxpayer cannot pay any of his or her tax debt, it may report the taxpayer's account as currently not collectible and temporarily delay collection until the taxpayer's financial condition improves. Interest and penalties continue to accrue until the tax debt is paid in full. (https://www.irs.gov/businesses/small-businesses-self-employed/temporarily-delay-the-collection-process)

The taxpayer may be asked to complete a Collection Information Statement (Form 433-F, Form 433-A or Form 433-B) and provide proof of financial status (this may include information about assets and monthly income and expenses).
During a temporary delay, IRS will again review the taxpayer's ability to pay, and may also file a Notice of Federal Tax Lien to protect the government's interest in his assets.
Taxpayers requesting a temporary delay of the collection process or to discuss other payment options should contact IRS at 1-800-829-1040 or call the phone number on their bill or notice.
Remember to FILE YOUR RETURN,
Even if You CANNOT Pay Your Tax!
I know this is counterintuitive, since no one wants to bring attention to the fact that they cannot pay their taxes by filing a tax return showing a tax due and not paying the tax. However by filing your return,
  1. You begin the running of the Statute of Limitations for assessment & collection,
  2. You begin the running the two-year period for discharging this debt in bankruptcy and
  3. You reduce your associative tax return penalties from 5% a month for late filing to .05% for late payment penalty. 
    • The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.
    • If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.
Need Time To Pay Your IRS Taxes?  
   
Contact the Tax Lawyers at 
Marini & Associates, P.A. 
 
 
for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243

 


 

Read more at: Tax Times blog

Should I Stay or Should I Go? – Expatriations Are Up In 1st Quarter of 2022

April 26, 2022

The number of people who expatriated from the U.S. rose during the first quarter of 2022 compared with the previous quarter, the Internal Revenue Service said in a notice released Monday.

The number of people losing or renouncing their U.S. citizenship rose to 571 in January through March, from 488 in the final quarter of 2021, the IRS said in a list of those choosing to expatriate. 


Expatriation Is The Term The IRS Employs For Loss Or Renunciation Of U.S. Citizenship Under Internal Revenue Code Section 877(A) And Section 877A, The Notice Said.
Expatriation has increased significantly in 2020. 

Should I Stay or Should I Go?


Need Advise on Expatriation?

 


Contact the Tax Lawyers at 
Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243


Read more at: Tax Times blog

Joe Biden's Proposals in His FY 2023 Budget

April 26, 2022

President Joe Biden’s 2023 federal budget, released Monday April 25, 2022, proposes tax hikes on the ultra-wealthy and corporations while providing billions of dollars in new spending for the Defense Department and the Justice Department.

The proposal sent to Congress touts a reduction in the federal budget deficit of more than $1 trillion over the next 10 years. 

This is paid for, in part, by raising the corporate tax rate from 21% up to 28%, a rate favored by progressive Democrats but opposed by key moderates. Biden also proposes a new 20% minimum tax on the top 0.01% of earners and households worth more than $100 million.

Key revenue raisers:  (Total -$2,545 billion)

  1. Raise the corporate tax rate from its current rate of 21% to 28%. 
  2. Raise the top individual tax bracket to 39.6%.
  3. Impose a 20% minimum tax on the top 0.01% of earners and households worth more than $100 million, the so-called the Billionaire Minimum Tax.
  4. Repeal several tax breaks for oil and gas producers and processors.
  5. Tax carried interest as regular income, closing the so-called carried interest loophole. and
  6. End tax deferrals on the gains from like-kind exchanges.

Increase Taxes on Corporations (-$1,555 billion). The President's budget would raise the corporate income tax rate from 21 percent to 28 percent. This proposal is inclusive of a 20 percent minimum tax (up from 10.5 percent today) on foreign-earned Global Intangible Low-Based Tax Income. The budget would also reform the taxation of foreign business income by incorporating global efforts to combat corporate tax avoidance. 

Increase Taxes on High-Income Households (-$780 billion). The President's budget would increase the top individual income tax rate from 37 percent to 39.6 percent - the top income tax rate prior to the enactment of the Tax Cuts and Jobs Act. It would also establish a 20 percent minimum tax on households with assets worth $100 million or more, tax capital gains as ordinary income for high-income earners, and tax gains at death. Moreover, the budget would close several Estate Tax loopholes by changing rules for certain trusts, improving estate tax administration, improving the valuation of assets, and tightening other exemptions. 

Other Revenue Increases (-$215 billion). The President's budget would close several tax loopholes, including taxing carried interest as ordinary income and repealing "like-kind exchange" rules that allow real estate investors to avoid paying capital gains taxes, among other tax changes. It also proposes reforms to improve tax administration and compliance and would eliminate several fossil fuel tax preferences, such as the expensing of intangible drilling costs. 

 Have an IRS Tax Problem? 
 
   
Contact the Tax Lawyers at 
Marini & Associates, P.A. 
 
 
for a FREE Tax HELP contact us at:
www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

 



Source

Committee for a Responsible Federal Budget

Read more at: Tax Times blog

Comm'r Rettig Blames Congress' Underfunding of IRS For Delays

April 25, 2022

A "start-stop" approach to congressional funding of the IRS has starved the agency of sustained, long-term investment needed to upgrade its technology systems, and this has contributed to ongoing delays in tax return processing, IRS Commissioner Chuck Rettig told lawmakers.

Having information technology dating back to the 1960s and '70s has meant that his agency must rely on paper-based processes, Rettig testified at an April 21 hearing of the House of Representatives Oversight and Reform subcommittee on government operations. The use of paper processes has exacerbated delays in the IRS's efforts to surmount a backlog of current- and prior-year returns as well as correspondence with taxpayers, millions of whom have been unable to learn the status of their refunds and other matters.

The IRS, along with other parts of the U.S. government, has endured more than 100 continuing resolutions, Congress' method of short-term government funding since 2001, Rettig pointed out to the subcommittee.

"It Is Virtually Impossible For Any Agency, Any Organization, Any Private Sector Organization, To Build Out A Robust, Meaningful Technology Infrastructure With The Start-Stop Going On Like That," He Said.

He further explained that the IRS received its omnibus budget on March 15, leaving just six months in the current federal fiscal year for the agency to use those IT funds.

Also testifying at the subcommittee hearing was National Taxpayer Advocate Erin Collins, who said taxpayers in 2022 are experiencing many of the same challenges the faced last year: delays in processing returns and correspondence with the IRS and difficulty reaching the IRS by phone. Collins added that new digital tools implemented by the IRS for tracking refunds and amended returns have been unable to give taxpayers the information they seek.

Repeating An Observation From Her 2021 Annual Report To Congress, Collins Said The IRS's Continued Reliance On Paper Remains "Kryptonite" To The Agency.

It received almost 170 million individual income tax returns last year, about 10% of which were filed on paper forms, she pointed out.

"Last year, the IRS received about 17 million original paper individual returns, and those processing delays are now running up to 12 months," the taxpayer advocate testified. 

Collins Said About 3 Million Individual And Business Returns And About 3.6 Million Amended Returns Await Processing


From The 2020 Tax Year And Another 9 Million
Paper Returns Filed For 2021.

Over the past two years, the IRS's backlog of unprocessed returns and pending correspondence "has snowballed," she said. "The IRS needs to get current on the inventory and get out of the hole it finds itself in."

In 2021, Collins said, only 32 million of 282 million calls from taxpayers were answered by an IRS employee or contractor.

Members of subcommittee took to partisan bickering at the hearing over whether ensuring multiyear funding for the IRS, a request repeatedly made by Rettig and his predecessors would solve the agency's problems with outdated technology and difficulty meeting taxpayer needs. Democrats on the subcommittee, led by its chairman, Rep. Gerry Connolly (D-VA), agreed that the agency requires more funding and blamed its woes on chronic cuts by past Republican majorities in the House and Senate.

Rep. Jody Hice of Georgia, the ranking Republican on the subcommittee, questioned why earlier efforts to modernize the IRS hadn't yielded better results. He pressed Rettig to explain how additional funding from Congress would improve the agency's systems.

 Have an IRS Tax Problem? 
 
   
Contact the Tax Lawyers at 
Marini & Associates, P.A. 
 
 
for a FREE Tax HELP contact us at:
www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

 



Read more at: Tax Times blog

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