Monthly Archives: April 2014

Taxpayer Advocate Service at the IRS Nationwide Tax Forums

Westchester NY accountant Paul Herman has all the answers to your personal finance questions!

 Each year, the Taxpayer Advocate Service (TAS) participates in the IRS Nationwide Tax Forums, a three-day series of tax education and networking conferences for tax professionals.

2014 Tax Forums
Previous Tax Forums

2014 IRS Nationwide Tax Forums – Dates and Locations
The 2014 IRS Nationwide Tax Forums will take place on the following dates:

  • July 1 – 3, Chicago, IL
  • July 15 –17, San Diego, CA
  • July 22 – 24, New Orleans, LA
  • August 19 – 21, National Harbor, MC (Washington, D.C. area)
  • August 26 – 28, Orlando, FL
For more information about the 2014 IRS Nationwide Tax Forums, visit www.irstaxforum.com.Back to top

TAS Seminars
Our seminars allow tax professionals to get the latest information on key federal tax issues. This year, the TAS sessions will focus on:

Advocating for Levy Release and Return of Levy Proceeds
This session will provide information to tax professionals with clients whose wages, bank accounts, or Social Security Administration payments are levied. The discussion will focus on helping the tax professional determine if the taxpayer is experiencing economic hardship and is entitled to levy release. Tax professionals may also assist their clients by advocating for the return of levied amounts.

Advocating for Your Clients during the EITC Process by Using Alternative Documentation 
The Earned Income Tax Credit (EITC) is one of the nation’s largest means-tested anti-poverty programs. However, low income taxpayers often experience unique challenges that prevent them from successfully navigating the IRS system. Two main problems are inconsistency as to what documentation the IRS will accept, and inflexibility in accepting proof. The denial of an otherwise eligible EITC claim can deprive a low income family of a much-needed resource. It can also impair the ability to claim the EITC in future years. Tax professionals can help by advocating for the use of alternative documentation, such as third-party affidavits, when representing low income taxpayers with EITC controversies.

Helping Your Clients with Offers in Compromise 
This presentation will cover the types of offers in compromise (OIC), when each type is most appropriate, the costs and terms of an OIC, and the process of applying for an offer. The presentation will also highlight strategies for effective tax administration OICs and OICs when your client has a tax liability due to reliance on a payroll service provider.

There is no advance preparation or prerequisite required to attend these seminars. Access a complete list of IRS tax forum seminars.

Back to top

Seminars Available for CPE Credit
Seminars from prior Tax Forums are available at the IRS Nationwide Tax Forums Online (NTFO). Tax professionals can earn continuing professional education (CPE) credits through 15 self-study seminars that use interactive videos synchronized with slides. Topics include TAS seminars, 2013 income tax law changes, education credits, EITC due diligence requirements and more.

Downloadable PowerPoint slides and a transcript are also available for each seminar.

In addition to the recently-added seminars, NTFO offers more than 30 other seminars from prior IRS Nationwide Tax Forums from 2008 through 2011 (some seminars are only available for audit).
For more information, visit www.irstaxforumsonline.com.

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Tax Collection and Payment Alternatives

Westchester NY accountant Paul Herman has all the answers to your personal finance questions!

 

Tax Collection and Payment Alternatives

The IRS may take action to collect money if you do not pay the taxes you owe in full, if you do not pay the taxes you owe on time or if you do not make arrangements with the IRS to develop a tax payment plan.

It is in your best interest to pay any taxes you owe as soon as possible because the IRS will continue to charge you penalty and interest. If you cannot pay the full amount of taxes you owe by the deadline, you should still file your return and pay as much as you can to reduce penalties and interest.

How can I pay my taxes?

  1. Check or money order made out to the Department of Treasury – Write your Social Security number or Individual Taxpayer Identificaton Number (ITIN), the tax form number and tax period on the check.
  2. Electronic Federal Tax Payment System (EFTPS) – EFTPS is a free tax payment system. You can transfer money from your bank account to pay your taxes by phone or online. For details, visit www.eftps.gov or call 1-800-316-6541.
  3. Credit Card – While you can pay your taxes with a credit card, these companies charge finance fees. To pay by credit card, contact one of the following service providers:

 

What if I cannot pay in full?

Depending on your specific circumstances, you may qualify for an extension or an installment agreement. Your options include:

  • You can request an extension.
  • You may apply for an installment payment plan or a partial pay installment agreement.
    • Note: For most taxpayers, the IRS generally charges a fee for setting up an installment agreement and interest and penalties continue to accrue during this time.

 

What if I cannot pay at all?

The worst thing you can do is do nothing at all. Call the IRS at the phone number on your bill if you cannot pay your taxes. Because you will need to give the IRS complete financial information make a list of your monthly expenses and monthly income before you call, and be prepared to discuss those with the IRS. Be sure to consider:

  • Medical costs
  • Transportation costs (e.g., gas, repairs, insurance, bus fares)
  • Housing costs
  • Other costs not recurring on a monthly basis, such as auto repairs (for these costs, consider your total yearly costs and divide that amount by 12 to come up with an average monthly amount)

If the IRS agrees that you do not have the ability to pay, it may temporarily suspend collection action. However, the amount you owe will continue to increase through additional penalty and interest charges.

 

What if I do not pay voluntarily?

If you do not pay your tax bill or contact the IRS to make arrangements to pay, the IRS will take action to collect, such as:

  1. Filing a Notice of Federal Tax Lien (NFTL) – A lien is a claim against your property that will appear on your credit report and it may harm your credit rating. The IRS will release the lien once the taxes, penalty, interest and recording fees are paid in full.
  2. Serving a Notice of Levy or seizing assets – The IRS can collect the amount you owe from your wages, bank accounts, Social Security benefits, retirement or other sources of income. If the tax isn’t paid and you haven’t made arrangements, the IRS may seize your car, home or other property. Prior to taking such action, you have the opportunity to request a hearing to resolve your tax payment issues.
  3. Applying other tax refunds – The IRS will apply any future federal and/or state tax refunds to pay down the debt you owe.

 

What if I disagree with the IRS tax collection actions?

Depending on where you are in the collection process, you may be able to appeal the IRS collection actions through the Collection Due Process (CDP) or Collection Appeals Programs (CAP). For more information, see Publication 1660Collection Appeal Rights, call 1-800-829-3676 or visit www.irs.gov.

 

Will the IRS settle for less than full payment (Offer in Compromise)?

An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS where the IRS agrees to accept less than the full tax amount owed. Once the taxpayer pays the reduced amount agreed to, the taxpayer’s tax liability (the amount of taxes owed) is resolved. For most taxpayers, there is a fee for submitting a request for an OIC and if a taxpayer can pay in full, the IRS will generally not accept an OIC.


Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Double Benefit From a Tax Deduction

Westchester NY accountant Paul Herman has all the answers to your personal finance questions!

Double Benefit From a Tax Deduction

For most taxpayers, the amount of federal income tax they pay depends on where they fall in the federal income tax brackets and the breakdown of their taxable income between ordinary (e.g., wages) and capital gains from the sale of assets (e.g., common stock). Taxpayers eligible for the lower federal income tax brackets (those under 25%) on their ordinary income can generally expect to be taxed at 0% on their long-term capital gains. Taxpayers in the 25% or higher federal income tax brackets can generally expect to be taxed at either 15% or 20% (again, exceptions apply) on at least a portion of their long-term capital gains.

It seems inevitable that, as federal taxable income increases, the rate we pay on at least a portion of that income also increases. The converse should and does apply. That is, as federal taxable income decreases, the rate of tax we pay on at least a portion of that income also decreases. In addition, if a taxpayer has a long-term capital gain that, after considering ordinary income, is partially taxed at the 0% rate, any additional deduction that decreases ordinary income will simultaneously decrease the tax rate on a comparable amount of long-term capital gain from 15% to 0%. This has the effect of producing a double benefit for that deduction, as shown in the following example.

Example: Jack and Julie, filing jointly for 2014, have net ordinary income of $60,000 and a long-term capital gain from the sale of stock of $40,000, for total income of $100,000. For 2014, the joint rates applicable to ordinary taxable income change from 15% to 25% at $73,800. Accordingly, $13,800 ($73,800 – $60,000) of their long-term capital gain will be taxed at 0% and the balance of $26,200 ($40,000 – $13,800) is taxable at 15%. All income, both capital and ordinary, is taxed at a rate of 15% or less.

If Jack and Julie contribute $11,000 to their deductible IRAs ($5,500 each for 2014, assuming they are both under age 50), they receive a 30% tax rate savings, even though their highest tax bracket is 15%. The $11,000 IRA deduction reduces ordinary income at the 15% rate, but also shifts $11,000 of capital gain taxation from the 15% to the 0% bracket, for another 15% savings. This produces a total tax benefit of 30% on the $11,000 reduction.

A similar impact would occur for any expenditure or deduction that reduced ordinary income (i.e., Section 179 expense, additional interest expense, etc.). Conversely, adding ordinary income at the 15% bracket would cause a 30% impact, as additional ordinary income would push a portion of the capital gains formerly at 0% upward into the 15% bracket.

 

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.