The April 24th motion set forth by Attorney for Trustee, Heather A. Potts, and signed by the U.S. Bankruptcy Judge, indicates that any benefits being derived from the limited operations of Tax Masters is outweighed by the continuing costs.  Also the Trustee states that “The current status of the Debtor’s [Tax Masters] record-keeping is, to put it mildly, inadequate…”  Therefore, the U.S. Trustee is discontinuing the company’s tax services operations.

This means that cases in progress will not be completed and it will be difficult for former Tax Masters clients to ascertain the status of their case and what they should do next.  Some of these cases will have to be started over from scratch but it will take some investigation to see what can be salvaged and what the best next steps should be.  The tax professionals at ASAP Tax Relief will gladly provide you with a free consultation about you situation and putting a successful resolution into place.   Call us at 1-855-375-5400 to discuss your case and situation.

The IRS is getting ready to roll-out its Real-Time Tax System (RTTS) which promises to catch inaccurate returns and delinquent taxpayers quickly.  In the past, the IRS used a “look back” approach to determine if a return was accurate and filed on time.  Typically, problems with returns were not found and acted upon by the IRS for many months resulting in higher penalty and interest assessments.

 Now with RTTS, the IRS will conduct compliance and accuracy checks upon initial return processing against third party information (i.e., past filing status, social security number verification, and W-2 and 1099 information to include unearned income from dividends, annuities, pensions, and withdrawals from retirement plans, etc.). They will then allow taxpayers to make corrections or submit substantiation to claims of deductions and credits, if needed, before processing the return.

  What does this mean? Ultimately, the Real-Time Tax System will catch up to non-compliant tax payers and fraudulent filers more quickly, increasing the need for taxpayers to file accurate on-time returns. The IRS will charge a 20% Accuracy Related Penalty for any increase in tax they find that exceeds 10% or $5,000, and a 40% Fraud Penalty if the IRS deems willful intent to deceive.

 Also keep in mind that you are the final signature on a tax return, and other than some cases of fraud or criminal activity by a tax preparer, you will be held responsible for your return. Make sure that any preparer is able to answer questions you may have regarding the preparation of the return, and is able properly backup any item you feel needs addressing. Stay away from tax preparers touting their ability to increase your refund by finding loopholes, using OID deductions, or claiming Earned Income Credits for children and dependents that do not live in your house, you do not financially support, and who are not related to you.

As always, seek professional services and advice from a trusted source and do the right thing the first time. This will save months of headaches and costly mistakes.

Similar to calendar year 2011, April 15, 2012 falls on a weekend – Sunday to be specific. The following Monday is Emancipation Day in the District of Columbia. Since D.C. holidays have the same effect as federal holidays, the 2012 tax season is extended making the filing deadline April 17, 2012. For you early-bird filers expecting a refund, the IRS will begin accepting e-filed returns on January 17, 2012.

However, unlike last year’s protracted season that largely stemmed from regulation delays, the deadline remains October 15, 2012 for filing an extension of your return. Also, never forget that filing – no matter what date or what year – and paying taxes are two separate events. If you owe this year, the amount due or estimated amount due remains steadfast at April 17, 2012. 

Anticipating around 144 Million individual income tax returns, the IRS cites several improvements to the overall system making filing as easy as possible this year. Improvements include an easier to navigate website, direct access to software and help from www.irs.gov, and even an interactive video series to assist with your return.

Taxpayers making less than $57,000 per year have over 20 free software choices for e-filing from name brand vendors. There is no income limit or usage limit for utilizing any IRS fillable PDF forms. These can be filled in directly from your computer and printed out to sign and file. Taxpayers making less than $50,000 per year may even find free tax preparation service through a Volunteer Income Tax Assistance program (VITA).  You may find VITA centers at local libraries, community centers, or by calling  1-800-906-9887 to find the nearest VITA center for your location. 

In the past couple of years, Congress made sweeping changes or last minute extensions to existing tax laws late in the year causing uncertainty as to how best to plan for the upcoming tax season. This year, however, the song basically remains the same. Other than adjustments for inflation, tax laws and deductions for 2011 look much like 2010. Some anticipated changes may occur in 2012 prompting tax and financial planners to advise: take advantage of the certainty you have right now.

For businesses and the self-employed, stick with typical strategies like accelerating deductions into the current year and delaying recognition of income into next year.  For example, purchase staple items you know you will need next year to increase your expenses for this year. Defer sending invoices until January. Even individual taxpayers who itemize on Schedule A can pay next years’ property tax bill in December and max out contributions to your IRA.

Some energy-efficient deductions remain in 2011, but they are not the same as in prior years. This year’s deductions apply to permanent home improvements and not to purchased appliances.

As of right now, the Bush-era lower tax rates on capital gains are set to expire next year.  So if you’re considering cashing out on some good performing stocks that you’ve owned for more than a year, now would be a good time to take your gains rather than risking higher rates next year.  At the same time, sell your losers to offset you capital gains. 

December is a great time to make charitable contributions if you haven’t already.  Some financial planners are advising that this is a great year for gifting because there has been some talk about doing away with the $5 million lifetime gift exclusion. 

The motivation for the advice this year correlates almost exclusively to changes Congress may make in an effort to tackle the deficit.   That may mean higher tax rates and fewer deductions in the future.

In an effort to try and return missed refunds to taxpayers, the IRS makes an annual announcement to come get your money. Currently, nearly 100,000 taxpayers have not received refunds timely due to inaccurate mailing addresses, non-forwarding a current address after a move, theft, or other reasons associated with paper checks going through the mail system.

 The IRS stated Wednesday that $153 Million is currently owed to taxpayers from previous years refunds. The average refund is a not-to-shabby $1,547 this year which could go a long way as the holiday season approaches. The giant flat-screen TV may be back on your list after all!

The IRS states that many undeliverable refunds could be avoided if the taxpayers would e-file and direct deposit the refund into a financial institution. Many taxpayers may be unaware that the IRS can deposit refunds into multiple accounts, or they may even purchase savings bonds with a refund.

Taxpayers wishing to check on a missed refund may log onto www.irs.gov and use the “Where’s My Refund?” tool, or by calling 1-800-829-1954. The IRS does not correspond with taxpayers via email, and warns that lost refund promises though email are nothing more than a phishing scam. You may report such scams to the IRS at phishing@irs.gov , but you are advised not to open, reply, click links, or release any personal information to anyone through emails without knowing who you are dealing with. 

You’re a Mean One, Mr. Grinch IRS

You may not want to read this as the holiday season approaches, but if you owe back taxes, pay attention.  The Grinch, Mr. IRS, cometh.  He delights in the holiday season and loves to issue bank levies and wage garnishments at this time of the year.   How could he be so heartless at this time of love, joy, and thanksgiving?  You’re a hard one Mr. IRS!

Well, it’s not personal, just good business from the IRS’ viewpoint. Many taxpayers receive year-end bonuses, commissions, and cash gifts from friends and family. Money is freely flowing and Mr. IRS doesn’t want to miss his big opportunity for collecting for the U.S. Treasury.  Unfortunately for taxpayers who owe back taxes, that means coming up short at the worst possible time of the year.

If you’ve set up a formal installment IRS agreement with the IRS to settle past tax debts, don’t think you can just skip your December IRS payment.   While many consumer loans allow for this, the IRS will not. The IRS wants their money on time, every month, like clockwork, no exceptions. Once a payment is missed, the installment arrangement may default making the entire tax liability come due immediately and taking you right back to square one.

You may be able to call the IRS and talk them into allowing you a one-time, one-month deferment of your payment if you have valid reason other than “I need to buy gifts and pay someone else other than you”. But remember: this is a one-time, one-month deferment that may be allowed once in a five-year period.  So use your deferment wisely!

The last thing people want to think about during the season is fixing their past tax problems, but  this is also the season for Mr. IRS.  He shows up at inconvenient times, he is not pretty, and will not go away.

Often times it is fear of the unknown, ignorance of the options and a sense of hopelessness that keep delinquent taxpayers on the run.  But it doesn’t have to be that way.  Talk with a tax professional so you can learn about your options for keeping your bank accounts and wages safe from you know who.  And enjoy the holidays knowing that you’ve put a plan in place that will keep Mr. IRS at a safe distance.

The increase in exemptions and deductions will reduce the Adjusted Gross Income (AGI) number, the number used to calculate taxable income. The increase in tax-bracket thresholds means that more of your income will be taxed at a lower tax rate than before. These are known as “above the line” (above the AGI number) reductions of income used to calculate the AGI.

A few tax credits and deductions along with the related phase outs will increase as well. These are referred to as “below the line” credits as they reduce taxable income (calculated using the AGI number) dollar for dollar. Below is a brief list of the changes:
Exemptions and Deductions:
• Personal and Dependent Exemption will increase to $3,800. An increase of $100 from the previous year.
• Standard Deduction increases to $11,900 for Married Filing Jointly (MFJ)**, a $300 increase, for Singles (S) or Married Filing Separately (MFS) the amount will be $5,950, up $150, and for Head of Household (HOH ) the amount will be $8,700, up $200 from the previous year.
o **The IRS cites that nearly 2/3rds of Americans take the standard deduction versus itemizing deductions on Schedule A. As of now, the IRS has not released information relating to tax breaks for those who itemize.
• Tax Bracket Increases: One example for a MFJ return, the threshold between the 15% bracket and 25% bracket increases from $69,000 to $70,700, meaning that an additional $1,700 of this income would be taxed at the lower rate.
Credits and Phase Outs:
• Earned Income Tax Credit (EITC) will be $5,891, up $140 from the previous year.
• Foreign Earned Income Deduction will go to $95,100, a $2,200 increase. The IRS is also currently running an amnesty program targeting foreign earned income, so this appears to be an additional incentive to comply with foreign earned income disclosure.
• The Modified AGI phase out for the lifetime learning credit increases to $104,000 for joint filers, and $52,000 for singles and head of household.
There are a few notable other items including, increases for annual deductible amounts in Medical Saving Accounts, a slight increase for the Estate Tax Exclusion (although, annual exclusion for the Gift Tax remains at $13,000), and some small changes to qualified transportation and parking benefits as provided by an employer. For a complete understanding of any changes that may affect you, please consult a qualified tax professional or you tax preparer. More preliminary detailed information may be found here. This information is scheduled to be published in the Internal Revenue Bulletin 2011-45 on November 7th, 2011.

Below you will find ASAP Tax Relief’s checklist of commonly made tax mistakes.  With a little patience you can avoid these and save yourself time, trouble and aggravation.  When tax filing deadlines approach, most people are anxious to get their tax returns  behind them. However with a little extra patience and the checklist below, you can avoid costly tax mistakes and bigger problems in the future like bank levies, wage garnishments, and other collection efforts against you and your assets.

Checklist to Avoid Tax Mistakes

1. One of the most common tax mistakes is basic math errors. It is imperative that you double check all of your entries.  If you use software to prepare your return, make sure the results look right compared with previous year returns.  People often enter their data into the wrong spot in a tax software program and that cascades into all sorts of errors.    
2. Double check your social security number. If this is entered incorrectly; the IRS will refuse to process your tax form, which could lead to late filing penalties and such.
3. Are you sure who you can claim as a dependent?  Make sure the dependents you claim are really qualified for you to claim them.
4. Determine which is better for you:  the standard deduction or itemizing your deductions. This can make a huge impact on the results of your return. 
5. Have you entered all the information for any 1099s you received during the year?  The IRS has a copy of your 1099s on file and they will notice if you forget to include one on your return. 
6. Make sure you list any charitable donations you have made throughout the year on Schedule A.  Don’t forget to claim all the merchandise you donated to Goodwill or other charitable organizations.  Just make sure you get a receipt for the donations.
7. Make sure you are using the correct 1040 tax forms.  Don’t try to use a 1040EZ if you are claiming itemized deductions.
8. The correct filing status can also have a big impact on your tax bill.   Review the five status options and select the one that applies to your situation.
9. If you decide to use direct deposit for your refund or tax payment, make sure you enter your bank’s correct account and routing numbers- otherwise the transaction won’t be made and you will still be on the hook.
10. There are several different tax tables available for individuals based on their filing status.  It’s easy to pick the wrong one which will result in the wrong tax calculation.
11. Lastly, make sure you take advantage of any home energy efficiency tax credits as well.  Stay warm and save money on your taxes too.

Summary of Tax Mistakes

Although tax mistakes are common, they can be easily avoided with attention to detail.  One aspect of our voluminous tax code is that even seemingly simple situations sometimes have complex tax consequences.  Tax calculations have to be made for regular income taxes, alternative minimum taxes, capital gains and state taxes  just to name a few.  Consequently, hiring a tax professional to prepare your tax returns is money well spent, because they make less tax mistakes —  saving you time and money down the road.

For small businesses who erroneously classified employees as independent contractors or freelance personnel, the IRS has announced its Voluntary Classification Settlement Program (VCSP) which will offer amnesty against penalties, interest, and audit for the last three years. In return, employers are required to pay 10% of the payroll tax that should have been withheld for one year on these misclassified employees.

 However, there are some qualifications. First, the employees in the particular job class had to be classified as contractors or freelancers for the past three years and treated properly as such by being given a 1099 and submitting 1099’s to the IRS. Second, the business cannot be under audit currently by the IRS, Department of Labor, or any state authorities. If the business has been audited by these authorities in the last three years, then the business must have complied with the findings of the audits. And third, once one employee of a job class is redefined, then the entire employee pool in that job class must be redefined.

So What Do You Get for Compliance?

If a business participates in this program, the IRS will not audit payroll employee taxes for the prior three years and will only charge 10% of the tax that would have been due in the most current year.  But be aware: The IRS will examine the business’s payroll taxes for three years following the voluntary election to be in this program. If a business fails to stay in compliance with the new employee classification, the business will owe the full 10.68% payroll taxes for all years plus the full load of all applicable penalties and interest!

Here is the IRS’s example from www.irs.gov :   

Example: In 2010 you paid $1,500,000 to workers that are the subject of the VCSP. All of the workers that are the subject of the VCSP were compensated at or below the Social Security wage base (e.g., under $106,800 for 2010). You submit the VCSP application on October 1, 2011 and you want the beginning date of the quarter for which you want to treat the class or classes of workers as employees to be 1/01/2012. You look to amounts paid to the workers in 2010 for purposes of calculating the VCSP amount, since 2010 is the most recently completed tax year at the time the application is being filed. Under section 3509(a), the employment taxes applicable to $1,500,000 would be $160,200 (10.68% of $1,500,000). Under the VCSP, your payment would be 10% of $160,200, or $16,020

For more information, or for businesses who wish to comply, click here for the application Form 8952 and instructions. 

ASAP Tax Relief  introduces new website at www.asaptaxrelief.com. According to David McFarland, our site focuses on those experiencing bank levies, wage garnishments, or IRS liens with the accompanying fines and interests. With our highly trained tax specialists at ASAP Tax Relief, we are prepared to tackle and negotiate tax solutions in your particular situation. We put our collective tax experience together to formulate a tax solution that is amicable to both parties. At ASAP Tax Relief, our Tax Specialists and Enrolled Agents have many years of experience in dealing with the IRS and designing solutions for all types of taxpayers.

At ASAP Tax Relief, we realize that some of the most common tax problems that individuals and businesses experience are back taxes, unfiled tax returns, bank levies, wage and IRS garnishments or liens. If you are behind in any tax obligation, there is probably interest and penalties tacked on to your original bill which can easily double over five to seven years.  A 25% late filing penalty is commonly accrued for each year you failed to file.

ASAP Tax Relief Introduces New Website- Services

The tax professionals at ASAP Tax Relief  take a three pronged approach to assist you in quickly resolving your tax situation:

1. Analyze your situation so they understand your tax problem and your particular circumstances;
2. Recommend and openly discuss resolution options with you that overall match  your specific tax issues, and
3. Implement the particular application process for the solution you’ve chosen

As mentioned above, there are several approaches to settling back taxes with the IRS and state tax authorities. The most applicable approach will very much depend on your particular circumstances. At ASAP Tax Relief, we are strictly in the business of helping taxpayers resolve their back taxes offering superb quality, service, and fees second to none. Our tax experts are well versed in aspects of tax law and the experts at ASAP Tax Relief are confident they can find a solution that works best in your situation. Contact us for a free consultation.