Extension of Time to File has Passed…Now What?

Every year, many taxpayers file an Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.  This extension deadline is October 15 of each calendar year.  Some of those taxpayers who file an extension request will also unwisely wait until October 15th to pay the income tax owed for the previous year.  The filing extension is an extension of time to file the return, not to pay the income taxes that are owed.  Even if a taxpayer files a filing extension, he or she must pay all of the income tax owed no later than April 15th of that same year.  If the tax is not paid by April 15, the taxpayer will be subject to a Late Payment Penalty.

Also, if a taxpayer does not have money to pay the income tax owed by October 15th, he or she sometimes chooses to not file a Form 1040 – US Individual Income Tax Return at all.  It is imperative that each year’s Form 1040 – US Individual Income Tax Return be filed by its deadline, even if the taxpayer does not have all or any of the funds to pay towards the tax owed.  Not doing so risks the Internal Revenue Service assessing a Late Payment Penalty, a Late Filing Penalty, and the Internal Revenue Service filing an income tax return for the taxpayer.   This is known as a Substitute for Return.

If you filed for an extension and have not yet filed your return, or have not paid the amount due in full, you will be assessed penalties and interest that will continue to accrue. Do not let this problem linger in the background…now is the time to take action. If you have any questions, or would like a free update on your options please call us at 888-589-0955.

Trust Fund Recovery Penalty – What Does that Mean?

We work with business owners on a regular basis and almost every time they are behind on payroll deposits, there is a lot of confusion as to why they end up with two tax problems when they only owe one type of tax.  Most of them say things like, “but I own a business,” or “I thought that was why we have an incorporation – to protect us.”  In reality, that is why you would create a corporation or limited liability company, but due to the nature of payroll taxes, the IRS has come up with a policy to protect the individuals that are paying this tax through their employer.  That is called the Trust Fund Recovery Penalty (TFRP).

When the payroll is done for each tax period, there is an amount shown as withheld from the employee’s pay.  That amount is only half of the deposit as the employer still has to match that amount in order to provide the IRS with full payment for the tax deposit.  When the business is unable to make the deposit, the IRS will look to collect the amount due, plus penalties, plus interest.  The amount with growth can easily double in a two year period and it only goes up from there.  That full amount is now the businesses full responsibility as it has collected an amount of tax from the employee and has not fulfilled the payment as promised.

Generally, during the first meeting, the revenue officer (RO) will look to assess the business owner with the amount withheld – TFRP.  The simple to understand reasoning comes back to decision making.  The business, although its own entity cannot actively make a decision to withhold taxes from an individual and then not pay that money in to the IRS; a real, live, person would only be capable of doing so.  Since the owners and/or other officers of the corporation generally make this decision, the IRS will hold them personally responsible for that portion.  If the business closed without assets, the IRS would not be in a position to collect anything from that entity and the money taken from the individual taxpayers would never be recoverable either.  With the TFRP in place, the IRS now has the ability to recover the funds collected from an individual, regardless of what happens with the business.  Now, if we have a closed business without assets, the funds are due by the person(s) that made the decision not to pay the taxes.

In most cases, the RO will conduct the interview (4180), make the determination of responsibility and submit it for assessment.  Then, they will also look to collect on that amount at the same time as the business.  Essentially, a business owner can end up with two payment plans for THE SAME TAX PROBLEM.  Hardly seems fair, right?  There are some opportunities to maneuver around this complicated scenario and the experts at Larson Financial can help.  Give us a call today to see what can be done for your tax situation – complicated or not – and we can help you get back to what’s really important in your life.

What keeps you up at night…?

4what keeps you up at night graphicth Quarter is Upon Us…Have you found a tax solution yet?
As we enter the 4th  quarter of 2016 it is a good time to take a quick look at your current tax situation. Perhaps the year is not going as well as you had hoped or maybe you have past tax liabilities still hanging over your head. Millions of Americans lose precious sleep and time out of their busy days worrying about how they are going to handle their tax issues.
A tax debt does not have to be a nightmare! Larson Tax Relief has been providing great solutions to our clients for over 10 years.  If you have any questions regarding your current tax situation, or would like a free update on your options please call 888-589-0955 and ask for Brett Sukenik.

Back-to-School Time Brings Another IRS Scam

back-to-collegeThe Internal Revenue Service is warning consumers about a scam that frequently occurs during the busy back to school season. Taxpayers should be wary of IRS impersonators calling students and demanding money for an unpaid ‘Federal Student Tax” which does not exist. This is just one of many variations on IRS telephone scams that usually demand immediate payment using specific payment methods, and often threaten arrest or reporting to the police. You are encouraged to share information regarding this scam especially with young college students who may be caught off guard or unfamiliar with how the IRS operates. The IRS will never call demanding immediate payment and will not specify that payments must be made in a certain manner. Generally, the IRS will mail you a bill first if you owe taxes. If you get a suspicious phone call, hang up immediately and do not share any personal information. You can contact TIGTA to report the call by using their “IRS Impersonation Scam Reporting” web page or call 800-366-4484. If you do think you owe taxes, you can contact the IRS directly at 800-829-1040. If you do find that you owe taxes and need help that you can trust, contact Larson Financial at 888.589.0955.

Collection Statute Expiration Dates and What They Mean to Taxpayers

Some of you may be familiar with Collection Statute Expiration Date or “CSED” for short. This is the date in which your tax liability expires and the Internal Revenue Service writes off whatever is left of that period of liability. However, these dates are not always as cut and dry as the Service may lead one to believe.

Generally speaking, the Collection Statute Expiration Date expires 10 years from the date in which the tax liability was assessed for that period (not the date the return was filed). However, this not a hard and fast rule and can cause taxpayers a lot of headaches when trying to figure out when their liability should be written off by the Service.

You can contact the Internal Revenue Service today to ask what the Collection Statute Expiration Dates are for all periods with balances due. Sometimes the dates may be spot on and sometimes they’re incorrect. It is important to know that occasionally the Internal Revenue Service’s computer system doesn’t automatically update the Collection Statute Expiration Dates to include the various codes that can toll the statute.

For instance, let’s say you filed for bankruptcy- for as long as your liability is coded as being in bankruptcy, that amount of time gets added onto the back end of your Collection Statute Expiration Date. Same thing is true with a Request for a Collection Due Process or Equivalent Hearing, filing for an Offer in Compromise, or filing a Request for Taxpayer Advocate Service Assistance- all of these actions toll the collections statute and add time onto the end of the statute. Even having a “Pending Installment Agreement” code on your account adds time onto the back end of your Collection Statute Expiration Date.

Next time you hear the Internal Revenue Service give you a date in which your liability is set to expire, take a look at your account transcripts and do a little bit of research on your end to confirm if the dates are accurate or not.