JK Harris is the nation’s largest tax representation firm, comprised of a tax team with the knowledge and experience to help you with your tax issues. This team represents years of tax knowledge, which we present here in the form of quick tax tips for your use. On this page, we will share all types of brief tax tips to assist you in your tax planning and tax filing. We realize everyone’s situation and circumstance is unique. Therefore, for a more in depth discussion of specific tax issues, you can visit our Tax Issues and Alerts page on this blog, or our Tax PreparationTips blog, specifically dedicated to discussing taxes.
It is our hope these tips will assist you in filing your taxes and prevent future back tax issues. If you have any questions you would like our tax team to answer for you, please contact us on the Q&A page. We will make every attempt to answer all questions meeting the guidelines set forth on the blog.
*NOTE: Much of the information provided in this space does not include details necessary to make a definitive recommendation to the person asking the question, therefore, in most cases, John Harris’ response is usually provided in general terms and more information is almost always needed for John to give a complete response. We recommend you use this section of the blog as a resource page and not as an answer to your specific tax issue(s).
Eight Tips for Taxpayers Who Owe Money to the IRS
The IRS has recently been on a roll, issuing their annual summer tax tips. I wanted to discuss this particular one, since we help so many of these types of taxpayers in our business. Many people who get a tax bill from the IRS panic or avoid even opening it in the hopes if they ignore it, the IRS will go away. I can tell you from years of experience, this is just not the case. When you owe the IRS money, the sooner you contact them to deal with it, the better. Whether you get a payment plan set up, or you hire a firm such as ours to represent and advocate on you behalf, the sooner you take action, the less penalties and interest you are going to rack up.
The IRS offers the following eight tax tips for taxpayers who owe back taxes:
1. If you get a bill for late taxes, you are expected to promptly pay the tax owed, including any additional penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
2. You can pay the bill with your credit card. To pay by credit card, contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-PAY-1040 (also www.pay1040.com)
3. The interest rate on a credit card or a bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.
4. You can also pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or 800-945-8400 or online at www.eftps.gov.
5. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement, you must first file all returns that are required and be current with estimated tax payments.
6. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the web-based application called Online Payment Agreement found at www.IRS.gov.
7. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope you have received from the IRS. The IRS will usually inform you within 30 days whether your request is approved, denied or if additional information is needed. If you owe over $25,000, a Form 433F or Collection Information Statement, will be required.
8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for payments deducted straight from your bank account.
If you feel you need assistance with your case or you find you are not able to pay, there may be other options available to you. The Offer In Compromise and Currently Not Collectible Status are two options for taxpayers who meet certain criteria and can prove they are financially unable to pay their back taxes in full. If you would like more information on either of these programs, you can find it at www.jkharris.com or www.allthingstaxes.com.
IRS offers tax tips to new business owners
Summer is here and the IRS has started up its series of summertime tax tips once again. One of the more recent lists of important tax tips is for taxpayers that may be starting up a new business this summer. Although this is excellent information any time of the year for anyone starting or thinking about starting a new business, this is great information to pay attention to and could help you avoid tax problems in the future.
IRS Summertime Tax Tip 2009-02
- Decide what type of business entity you are starting (sole proprietorship, corporation, S corp., etc). The type of business you choose will determine the type of tax form you will need to file.
- The type of business you open determines what taxes you must pay and how you must pay them. There are four general types of taxes: income tax, self-employment tax, employment tax, and excise tax.
- You will need to apply for an Employer Identification Number or EIN. This number is used to identify a business entity and can be applied for online. Visit www.irs.gov to learn more about the EIN and how you can apply for one.
- Good records will help you ensure successful operation of your new business. You may choose any record keeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law doesn’t require any special kind of records but the business you are in affects the type of records you need to keep for federal tax purposes.
- Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
- Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
- Visit the Business section of www.irs.gov for resources to assist entrepreneurs with starting and operating a new business.
The best advice I can give for any new business owner would be this – be aware of your tax liabilities, stay on top of your payroll and quarterly taxes to avoid any future tax problems and keep good records of all income and expenses. Best of luck in your new business venture!
IRS offers tax tips to job seekers in Summertime Tax Tip series
Each summer, the IRS offers a series of helpful tax tips to taxpayers. I wanted to share one of the most recent ones, as it is a topic that many may find useful in the current economy. Being that the unemployment rate is higher than it has been in fifteen years, according to the Bureau of Labor Statistics, these tips might benefit current job seekers.
Here are the top six things the IRS wants you to know about deducting costs related to your job search.
- In order to deduct job search costs, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.
- You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
- You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers as long as you are looking for a new job in your present occupation.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
- You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
- You cannot deduct job search expenses if you are looking for a job for the first time.
For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).
10 Ways to Avoid Tax Problems
- Organize Tax Records – You can reduce your preparation time significantly if you organize your records and receipts. Good organization can also help you monitor the progress of your business, prepare your financial statements, identify the source of receipts, keep track of deductible expenses and support items reported on your return.
- Don’t Procrastinate – Don’t wait until the last minute to prepare your tax returns. If you wait, you may make some mistakes you wouldn’t normally make. Also if you think your return is going to be complicated, get help along the way.
- Take Advantage of IRS Online – Use www.irs.gov to download tax forms, instructions, tax law information and answers to frequently asked questions. You can also use the IRS Withholding Calculator to ensure you don’t have too much or too little income tax withheld from your pay.
- Take Advantage of Free Tax Assistance – The IRS offers recorded messages on hundreds of tax topics through its TeleTax service at 1-800-829-4477. It also offers federal tax forms and publications at 1-800-TAX-FORM (1-800-829-3676). Many post offices and libraries carry the most widely requested forms and instructions. The IRS also staffs a Tax Help Line for Individuals at 1-800-829-1040.
- Use IRS Taxpayer Assistance Centers and Volunteer Programs – The IRS has more than 400 Taxpayer Assistance Centers nationwide to assist taxpayers face-to-face with issues or questions that cannot be handled online or over the phone. Go to the IRS website to find the local IRS office nearest to you.
- Use Electronic Refund Options – You can speed up the refund process by having your refund deposited directly into your bank account by the IRS. This also reduces the chance of your refund being lost in the mail or even stolen. You can also check on the status of a refund by going to www.irs.gov and clicking on the “Where’s My Refund?” link on the home page.
- File Electronically – According to the IRS, the IRS e-file is the fastest and most accurate way to file a tax return. It is also the fastest way to receive a refund.
- Double-check Math and Data Entries – Review your return for possible math errors and make sure the names and Social Security or other identification numbers are correct and legible.
- Don’t Panic if Immediate Payment is Not an Option – If you owe the IRS and you cannot pay the amount in full, you can apply for an Installment Agreement and suggest your own monthly payment amount and due date. You also have various options for paying the IRS with a credit card.
- Request an Extension of Time to File – If you cannot file your return by the April deadline, you can request a four-month extension to August 15. An extension of time to file, however, is not an extension of time to pay. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if at least 90 percent of the total tax due has not been paid by April 15.
JK Harris & Company