February 14, 2011
In a recent edition of Lawson Condell’s Tax, Accounting and Auditing update, the federal case of U.S. v. Quinn, DC KS, 107 AFTR 2d ¶2011-412 was discussed. Rosie Quinn owed IRS trust fund taxes (i.e. payroll taxes such as income taxes and FICA that are withheld from employees’ pay) that should have been paid on various dates between 2003 and 2005. Ms. Quinn decided to pay them on December 4, 2010 – which was coincidentally, just before she was set to go to court over her back payroll taxes.
The federal court ruled Ms. Quinn could still be prosecuted even though she paid the tax debt right before her trial date. According to the law, any person “required to collect, account for and pay over” trust fund taxes and who “willfully fails to collect or truthfully account for and pay over such tax shall in addition to other penalties provided by law, be guilty of felony and upon conviction thereof, be fined up to $10,000 or imprisoned not more than 5 years, or both…”
Ms. Quinn argued that she should not face such prosecution because she had paid the trust fund taxes. The court did not see things Ms. Quinn’s way – and ruled she could still be prosecuted for willfully avoiding paying the payroll taxes. While the court was probably thankful that Ms. Quinn came into compliance and repaid her tax debt, she could not avoid prosecution by paying at the last minute.
Moral of the story: Make sure to set aside and pay all trust fund taxes on time. If you cannot – seek professional assistance immediately!
February 10, 2011
From IRS Tax Tip 2011-28
The IRS has reminded taxpayers about the steps they should take if they have not received their Form W-2, Wage and Tax Statement. Employers had until Jan. 31 to send employees a 2010 Form W-2 earnings statement.
The agency suggested four specific actions for taxpayers to take.
First, contact the employer to inquire if and when the W-2 was mailed. After making contact, allow a reasonable amount of time for the employer to resend or to issue the W-2.
Second, if the W-2 is not received by Feb. 14, contact IRS for assistance at (800) 829-1040.
Third, even if the taxpayer still has not received the Form W-2, a tax return or request for an extension to file must be filed by April 18. If the Form W-2 is not received by the due date, and the taxpayer has completed the previous steps, the taxpayer may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Form 4852 should be attached to the return, with an estimate of income and withholding taxes.
Finally, a taxpayer may have to file Form 1040X, Amended U.S. Individual Income Tax Return. If a missing W-2 is received after the return was filed using Form 4852 and the information is different from what was reported on the return, the return must be amended. Complete details can be found here.
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February 9, 2011
Recently a client from Tennessee came to us with a burden she could no longer bear. She and her former spouse had taken out a distribution from their life insurance policy to help pay their living expenses. What they didn’t realize was that one move bumped them up into a higher tax bracket. This in turn triggered a tax liability for the year that they were unable to pay.
Our client tried making arrangements with the IRS and set up an installment payment plan. She tried to repay her debt in full, but she just didn’t make enough money. Now a single mom, she didn’t have the means to repay the tax debt she had incurred. Then, she came to JK Harris.
Our tax team analyzed her financial situation and determined she was a candidate for an Offer in Compromise. We prepared the Offer package and after several months of waiting to hear back from the IRS, when we did – the news was good. Ms. Capps had her offer in compromise accepted at a fraction of what she owed.
“I am very thankful to you,” Ms. Capps said in the letter she wrote to her case specialist.
We were glad to help – and wish you all the best in the future!
February 1, 2011
by Teresa Rotell, Tax Consultant, JK Harris
This story actually happened about ten years ago, but I share it due to the uniqueness of the client’s situation.
John, 67 years old, came into my office in Ohio. He had come in with his daughter, Sherri, who was in her 40’s. He looked very heartbroken (and so did she) and I could not figure this out since he had just won the lottery the year before…for $300k. It was on a scratch-off ticket of all things. I had never seen this big of a winner…ever! At least not in person. He was upset because he had spent all of his winnings. He had given most of his money away… burying his wife of 44 years, helping his 3 daughters out of debt, and paying off some debt that he and his late wife had incurred.
After doing what most people would (paying oneself out of debt) he found himself in a bad situation with the IRS. His initial taxes were taken out when he received the proceeds from the winning ticket, but he never counted the 300k as ordinary income on his tax return for that year – leaving him with a large tax liability…I don’t recall exactly what his tax debt was, was but it was hefty. Like most, he thought all of the tax was taken out when he received his winnings.
JK Harris was able to settle the debt…for much less than I ever anticipated. I just think this is a great story because this can happen to anyone…not necessarily to win the lottery…but I think any of us can not realize that somethings must be counted as ordinary income. It was an honest mistake on John’s part. I was just glad I was able to help!
January 31, 2011
by Gina Anton, Director, Corporate Communications
Next month, JK Harris embarks on a speaking tour to promote some big ideas. JK Harris is passionate about small business and is embarking on this tour to share his ideas on growing small businesses, creating jobs on the local level. He feels that small business owners can play a big part in the regrowth of our economy.
Read more about his speaking tour on The Flashpoints blog.
You can also sign up for The Flashpoints newsletter on this site to get business tips for your small business.
January 27, 2011
There is a lot going on with tax news and financial information right now, so I decided to do a news round up – something I have not done on the Tax Resolution blog before. There were several informative links I found and wanted to share with our readers this morning. The first link was provided by one of our blog readers, Ann.
Ann covered the topic of “5 Tips for determining the amount a bank will lend you to buy a home.” Her article is an informative one that may help many of our clients who are getting out of tax debt so they can buy a home of their own. Thank you to Ann for providing this link.
MarketWatch covered some of the best tax tips in their Tax Guide 2011. This web guide offers advice on everything taxes. While it may be too late for your 2010 tax return, this helpful article can give you ideas on tax planning for 2011.
And, according to CNNMoney.com, it looks like Congress will be getting right to work on repealing the much hated IRS ruling with regard to 1099s. The rule, as it currently stands would have required small businesses to issue a 1099 IRS form not only to contracted workers, but also to any individuals or corporations from which they buy more than $600 in goods or services in a year. This rule was slated to take effect in 2012 and was much maligned by small business due to the amount of additional work it would cause. (Many small businesses would have had to hire additional staff to keep up with the paperwork alone.)
And last, but not least – the IRS’ tax tip of the day recommends taxpayers choose direct deposit to receive your tax refund faster. Visit the IRS website to read the full article.