Tax Tips for Writers & Authors

Author: Stephen Nelson

Source: download



Sometimes, another writer, upon learning that I'm both a book author and tax accountant, asks me for the best ways that authors can minimize their income taxes.
If I can, I try to weasel my way out of the discussion, offering up such basic tidbits as, "Well, be sure to look at the home office deduction." And "do use a basic accounting program like Quicken or Microsoft Money so you capture all of your writing business expenses."
Usually, those simplistic answers work. Usually, after dolling out such drivel, the guy waunders off to get another drink and more appetizers.
Everyone once in a while, though, I encounter some writer who's really motivated to save on taxes. Usually, someone now making good money writing... When I can't deflect their questions in some other way, I tell them about the three best ways that authors have to save on taxes.
Technique #1: Smooth Your Income
Whatever you think of the US Internal Revenue Code, you need to know that it's quite progressive. That progressivity means the more you make, the more you pay. The progressivity also means that if your income fluctuates, your income taxes go up even if you make the same money on average as someone else makes whose income is steady.
To give you an example of this, suppose that you compare two writers, John and Jane. If John makes a steady $60,000 a year and has a mortgage, a spouse and couple of kids, he might pay about $1000 over four years (net of tax credits such as for children.)
In comparison, suppose that Jane averages $60,000 a year, but sees her income fluctuate between $30,000 a year and $90,000 a year. She still makes $60,000 a year on average. Yet if she also has a spouse, two kids and a mortgage, she'll probably pay $8,000 to $10,000 in taxes over those same four years.
Please note that over the same four years, then, the two writers make the same amount of money: $240,000. But what they pay in taxes differs radically. Jane pays eight to ten times what John pays! Yikes!
What can Jane do? Well, let's bring this back to the example of working writers. Jane can probably rather easily smooth her income. She can make sure that she's not stacking two big advances in the same year. She can spread out advance payments over two or more years. She can even try to stuff more of her expenses into the good years. In the good years, for example, she can buy new computers, take those graduate classes, or top off her pension.
Technique #2: Setup an LLC and Elect S Corporation Status
I've written and talked much about how S corporations save taxpayers money and how the right way to set up an S corporation is first create a limited liability company and then ask the IRS to treat the LLC as an S corporation for tax purposes.
Let me review the basics here again, however. Suppose that you're making $90,000 a year as a writer or author. If you just treat your writing business as a sole proprietorship, you might pay $12,000 in income taxes on the $90,000 and then another 15.3% self-employment tax, or roughly $13,500, on the $90,000.
If you set up an LLC and have the LLC treated as an S corporation, you'll still pay the same $12,000 in income taxes. But you'll only pay the 15.3% self-employment tax on that portion of the profit that you categorize as wages. If you categorize, say, $30,000 of the profits as wages, you'll pay $4,500 in self-employment taxes. (The other $60,000 in remaining profits, by the way, gets paid out as a dividend-like "distribution.")
Using these example numbers, then, you would save about $9,000 a year in employment taxes by using an S corporation.
Two quick points about S corporations: First, S corporations require some extra tax and accounting so you don't get to spend all of your savings. Some of the savings go to the lawyer, the accountant, and the bank. Second, you absolutely must set your salary to a reasonable level.
Technique #3: Relocate Your Residency
One final, easy planning gambit. Remember that there are states like Alaska, Florida, Nevada, Texas and Washington that don't charge residents state income taxes. Accordingly, if you relocate to one of these states, you'll automatically drop your overall tax bill because you won't have state income taxes.
One of the benefits of writing is that you do get to live wherever you want. Why not choose a place that doesn't tax your writing income?
But a caution: Do be careful that you don't get blindsided by the other taxes a state levies. For example, Washington state where I live charges a four-tenths of a percent excise tax on royalty income. This is still a lot lower tax rate than high tax states like California or New York charge writers. Which maybe explains why during the technology boom in the 1990s many computer book writers making high six figure and low seven figure incomes moved to the Seattle area.
Washington State LLC formation expert Stephen L. Nelson CPA has written more than 150 books. Formerly an adjunct tax professor at Golden Gate University, Nelson is also the author of Quicken for Dummies. Copyright 2006 by Stephen L. Nelson, CPA.

Ever Question An Arizona Attorney?

Author: Terry Detty

Source: articlerich.com



There are some Arizona tax attorneys who are always available to answer the queries of the taxpayers who are bugged with the disputes over their annual taxes. Here are among the common questions posed by the taxpayers as they get the chance to confer with the Arizona tax attorneys.

What is will happen in the event of an unfiled tax return?

Unfiled tax returns only signify one thing—and that is being in real trouble with the Internal Revenue Service. If for example you owe IRS some taxes for about ten years, then they will compute it all. They will try their level best to reach you through your old address. If in this event you have moved out of the country and once you come back, IRS will go after you demanding your dues for your taxes in the entire year of your absence.

When such case arises, you know one thing for sure. You know that you can be condemned for tax evasion. This is a crime which is punishable by the law. IRS will be very religious in sending you reminders. At one point, these reminders will become unfriendly and you will just be shocked to receive a Notice of Intent to Levy all your wages and assets.

Does it mean trouble for the unfiled tax returns that date way back?

It is in fact very much complicated if your unfiled tax returns trace to at least six years backwards. It is so because the files are kept in storage and it will need enough concerted effort to locate those records. An agent will need to browse through all of the kept files to be able to gather them all. You can just imagine how difficult it could be if your unfiled tax returns date back to some more years back in time.

What is meant by wage garnishment?

With the term wage garnishment, it means that a levy is imposed in another method. This method is concerned with the manner of collecting the back taxes which a taxpayer owes the IRS. With regards to the IRS attacks, the words levy and garnishment mean the same thing. The typical targets of the garnishment are your bank accounts and wages but the rule may also apply to the seizure of your furniture, equipment, your home, your vehicles, and you're other valued possessions.

Is any bank permitted to turn over an account to IRS without the concerned party's consent?

When IRS imposes a levy on your account in the bank, your bank is legally bound to turn over whatever amount is in your existing account. It does not regard the fact as to whether it is your own money or not or where you got your money. Keeping those monies in your own account is enough justification. Most people keep direct deposits for the Social Security, pensions, child support, and many others but then the IRS does not consume time to locate the source of the money. At the time when the money gets deposited in an account which is under your name, it automatically loses its own identity.

When will these levies on the bank account be stopped?

In comparison with the wage garnishment, a levy in your bank account will only happen once. Meaning, the next batch of money that gets deposited in your account will solely be yours again.





Terry Detty recommends this Phoenix Arizona Licensed Family Mediation and Phoenix Arizona Estate Planning Last Will and Testament . More services offered are Phoenix Arizona Bankruptcy Lawyer .

Spanish Mortgages - Frequently Asked Questions (FAQs)

Author: Mark Mountney

Source: articleage.com



At Rose Financial Services, being recognised as a specialist mortgage brokerage and independent financial adviser, we receive enquiries from people from all walks of life. And it is no surprise then that the volume of enquiries sees a repetition of requirements.
The following guide has been produced to answer many of the standard questions that clients ask of Rose FS on a day to basis with regard to raising a mortgage secured on a property in Spain. It is in 3 parts, so make sure you collect them all to provide a broad based understanding of how mortgages work in Spain.
1) Are 'Interest Only' mortgages available?
Yes, and the term for the 'Interest Only' (IO) period ranges from 1 year to a full term of 25 years. However, the schemes offering longer term IO (10 to 25 years) are far more restrictive than those for shorter terms (1 to 5 years) as the Spanish lending market has yet to adjust to the British way of thinking in this respect.
After the initial IO period the mortgage automatically switches to a Repayment or Capital and Interest type for the remainder of the mortgage term. For example, if a mortgage is arranged over say, 20 years with an IO period of 2 years, from Year 3 the mortgage will switch to a Reapyment over the remainder of 18 years. The rate of interest will still be the same i.e. annually fixed, but you will be asked to start repaying the capital as well as the interest.
At this stage, we have various choices open to us and it is a good idea for you to review matters with Rose FS;
i) Allow the mortgage to transfer to a Repayment type and start to repay the capital. However, this is not always good IHT planning (see Question 2) below).
ii) Ask the bank to extend the IO period. There is no guarantee that they will allow this but market conditions then may make them find in your favour.
iii) Consider a remortgage and switch to another lender. The downside to this, of course, will be the costs attached in doing so. It is therefore important to consider your long term requirements when planning the detail of your mortgage
2) Why would I want an 'Interest Only' mortgage as opposed to a Repayment (Capital and Interest) mortgage?
The mental approach to this is different than the normal rationale applied to borrowing in the UK. The benefits are often very different;
I) In Spain there is a 'sleeping giant' of an issue which most home owners are simply unaware of: Inheritance Tax (IHT). Go to Question 12) for a guide to this VERY IMPORTANT issue.
It is so important that any property acquisition in Spain cannot adequately be considered unless this subject is understood.
Ii) Interest rates for mortgages in Spain are low by comparison to the UK and, in most cases, the capital and income employed to either meet interest payments or repayments emanates from a ฃ income or capital base.
That being so, there is a benefit to retain as much capital as possible in ฃ and invest it for a higher return. For example, even cautious investment into a deposit account can generate an interest rate return of 5% as at the date of writing. With an average Euro mortgage rate of say, 3.5% the net return is at least 1.5% per annum. Over a standard term of 25 years, that will gross up to 37.5% of capital employed. If the mortgage is for €150,000 by way of example, that equates to a massive extra income of €56250 or approximately ฃ40,000.
Iii) Interest paid is normally allowable against income received for the purpose of calculating Income Tax. Therefore, the longer an IO period is run, the greater the interest paid and hence, the tax saving. Remember, that there is also an added income via the reduction of capital employed as mentioned above.
Iv) There is a potential exchange rate risk in holding an asset (your Spanish property) in a foreign currency (Euros) against the natural income and capital base (normally ฃ for the majority of our clients).
Therefore, by keeping the liability (your Euro mortgage) as high as possible for as long as possible, there is an offset which can mitigate against negative exchange rate movements.
3) What is the normal interest rate payable for a Spanish Euro mortgage?
Rates are normally set against the European Central Bank annual rate (Euribor) or the Spanish Cajas rate with a margin and re-fixed annually. This helps cash flow projections. It is often common to see a discount offered for the first year.
Hence, the current first year rate will range from sub 3% for low IO terms and Repayment mortgages. For longer IO periods a premium is charged by the lenders, so that the average rate will be circa 3.3% to 3.6%.
4) What documents do I need to show?
ID. Passport and either a
Residencia Card (for Residents) or an
NIE (ID number for Non Residents). Rose FS will assist in arranging any NIE needed.
Proof of Income Pay slips x 3 months
P 60
Pension Letters
Rental income contracts
Tax Assessment (Self Employed)
Trading Accounts (Self Employed)
Accountant's Statement of Affairs (Self Employed)
Bank Statements x 3 months (for all bank accounts, UK and Spain)
Existing mortgages x 3 months statements
Remortgages Existing Escritura
Original Compraventa (Purchase contract)
Recent valuations
Quotations for any works being financed or property being purchased
Latest existing mortgage or loan statements being consolidated
Purchases Compraventa (Purchase contract)
Property details
Solicitor contact details
Estate Agent details
That all sounds a lot but, in most cases, many of the documents will not apply.
Also, Rose FS need only COPY documents and not the originals. However, the original passport, NIE or Residencia will be needed at the legal completion of the process.
The application process can be actioned from a distance via post, fax and e mail. You do not physically need to meet a mortgage adviser and we will complete the process of determining your needs by phone.
5) What are the costs of arranging a mortgage?
Arranging a mortgage in Spain is slightly more expensive than in the UK and broadly you should allow 5% of the mortgage amount needed as follows;
1% Lender fee
1% Rose FS fee (minimum €1,000)
1% Notary/Registration
1.6% AJD Mortgage tax
0.15% Valuation fee Up Front
€300 Booking fee Up Front
As you can see the only monies needed by Rose FS to apply for the mortgage are the Valuation and Booking fees. All other costs are due at completion and will be deducted from the mortgages advance over the new current account with the lender.
6) What is the cost of repaying the mortgage early?
Redemption penalties, as they are formally called, are relatively inexpensive in Spain. The norm is for 0.5% for partial repayment and 1% full repayment. However, a common ploy in repaying a mortgage is never to redeem it in full but to leave a small balance outstanding.
7) Do I need to use a specialist Spanish and English speaking solicitor?
For Remortgages, where you are switching lenders, or simply releasing capital/equity from your home or debt consolidating, no! The process is relatively simple and does not warrant the extra cost of using a solicitor.
However, for a Purchase, using such a professional is STRONGLY recommended. Rose FS will happily recommend a firm.
8) Do I need to be in attendance at legal completion of the mortgage and/or purchase.
The short answer is no, although this is always recommended.
The legal completion is known as 'Notarisation' as the relevant deeds or 'escrituras' will be executed by a Notary. He or she will be a government appointed officer with the authority to witness and sign legally binding agreements.
If you cannot or do not want to be in attendance at the Notary it will be necessary for a 'Power of Attorney' agreement to be given to a trusted third party. Rose FS will happily act on your behalf although, for Purchases, we would request that your solicitor act for you. Also, for Purchases, a 'General Power of Attorney' is recommended as this gives much broader powers (for example, to open and run a bank account) rather than a standard limited power.
9) Do I need a Spanish bank account for a mortgage?
Yes. All banks insist on opening a Current Account to sit alongside the mortgage in order to receive monies in and pay the mortgage.
As part of the process heading towards Notarisation, you will need to execute the account opening forms. The sooner this is done, of course, the better.
10) Are their any mandatory or suggested insurances for a mortgage?
Yes. The only mandatory protection or insurance policy required by all banks (and this is the same in the UK) is Buildings Insurance. All banks will want to see this in place and will even insist upon arranging it themselves.
In addition, it is STRONGLY recommended that all mortgages are protected by a) Life Assurance and b) Income Protection to ensure that the mortgage and underlying asset, your home, is adequately protected.
You will not want to buy a property and only lose it from an accident , illness or disability beyond your control!
All Rose FS clients will be interviewed by our own Independent Financial Advisor in this respect.
11) What if my income is low or I cannot prove my income?
This is not an uncommon problem but there are normally aways around the issue and requirements of the lender.
Lenders look at 2 risks when determining whether a mortgage application is acceptable to them;
i) You and your ability to meet monthly mortgage payments.
This translates into a) the credit worthiness of the applicant (the lender will run checks) and b) provable, regular income.
ii) The Property.
This translates to a) the percentage they lend you against the valuation that they will carry out and b) the property state, type, etc.
For the Self Employed proof can sometimes be difficult because a good Accountant, in preparing the books of accounts, will try to keep net profits and hence, tax as low as possible. However, the combination of the latest books, Tax Assessment and a Letter of Comfort or Statement of Affairs from the Accountant, with sight of recent banks statements, will normally do the job.
If your income is low still, or because of a low wage, pension, rental or investment income, we can look to use a third party (normally a working child, sibling or parent) to add the weight of their own income acting either as a co-applicant on the mortgage or as a 'Guarantor'. Again, they do not need to come to Spain to execute any legal documents; this can achieved via a Power of Attorney from a distance. Rose FS will arrange this.
It is important to mention two things here;
i) The co-applicant(s) is at risk, as are you, if you do not keep up the repayments of the mortgage. That needs careful explaining to them.
However, often, the addition of a Guarantor actually diminishes such a risk as mortgage payments can be normally extended over a longer period, especially where the majn applicants are elderly.
ii) The Guarantor does NOT need to be added to the property deed. In other words, the ownership of your property need not be undermined by you using a third party to financially support your appllcation.
12) Am I too old for a mortgage and what is the maximum term to repay?
Many elderly clients think they are too old to apply for a mortgage, despite the fact that maximum age for repayment is 75. This is not so.
By using a third party to either come onto the application or to act as a Guarantor (as above) the emphasis of the lending assessment of risk is taken away from the more elderly applicants to rely on the added third party (normally a child).
This is often good Inheritance Tax planning as any debt outstanding on a death reduces the tax payable.
So, if you are in the position of 'wanting' or 'needing' access to some of the capital locked into your home, or wish to buy and are worried about either age or income, this option has to be considered.
13) Do I need to be worried about Spanish Inheritance Tax?
Worried, no! Concerned, yes! Understanding the issue and how to overcome it is more than half of the battle!
The vast majority of people that buy in Spain, especially the British, make an assumption that the IHT regime in Spain is the same as in the UK. This is simply not so. It is massively different and to understand a) the issues and it's potential impact on you and your family and b) how it is so easy to address, is a danger to say the least!
The primary differences between Spanish and UK IHT regimes are threefold;
i) There is no spouse exemption on the family home
ii) The IHT allowances lie with the beneficiary(ies) and not the deceased
iii) The standard personal allowance in Spain is just €15,958 versus ฃ275,000 in the UK. A huge difference.
The effect of IHT means that, as most people buying in Spain are non- resident for tax, the risk of having to pay IHT is high.
However, IHT is levied on the 'net worth' of the recipient and the benefit being received, so by keeping the mortgage at a high a level as possible, the taxable exposure is reduced. A Repayment mortgage decreases over time which has the directly opposite effect of increasing IHT exposure.
Even if the preference is for a Repayment it is wise to consider IO as an alternative for the IHT mitigation as above, and indeed to consider as long a term as possible, perhaps by bringing would-be beneficiaries onto the mortgage so that they, in turn, can benefit when the property passes to them on death of the current owners.
There are various routes to resolving the problem or IHT mitigation that can and should be considered;
i) Maximise the Interest Only mortgage (as above)
ii) Effect Life Assurance (normally Whole of Life). This is normally written in Trust in favour of the end beneficiaries not to not avoid tax but rather to make sure that funds are available to meet the tax bill.
iii) Add beneficiaries to the property deed. Because tax is calculated according to the distribution of the deceased's share of the property (or other assets) and the classification of the beneficiaries, it can make sense to add the beneficiaries early so that each person has a smaller share and, hence the tax exposure reduced.
The issues arising by doing this though are several;
i) By changing the owners of a property there may be a Capital Gains Tax payable. So timing is important.
ii) You may not be comfortable in gifting part of your home away, even to your children! Having said that the concern could be overcome, at least to a degree, by taking a 'General Power of Attorney from them so that control lies with you. But these powers can be cancelled at any time so you need to be comfortable with whom the arrangement is made.
Finally, it is critical that your effect a Will here in Spain. This is because there is a default mechanism that will decide the fate of your estate if you die without one. That could mean that people may benefit in a way that you had not intended! Rose FS will recommend a solicitor to assist.
I hope that this FAQ series has been useful. However, if you have an enquiry of a different nature please do not hesitate to contact us.
Mark Mountney is a partner in Rose Financial Services, a specialist mortgage brokerage and Independent Financial Advisor based in the Parque Comercial, Mojacar. He is a fully qualified mortgage and financial adviser in the UK with some 10 years experience in managing his own firm. Mark was also a founder of The Association of Mortgage Advisors, the trade association for mortgage intermediaries with 13,000 members.

IRS Gets Tough on Collection of Large Tax Debts

Author: James Coleman

Source: articleage.com



The Federal budget deficit is big and getting bigger. As you may be aware, our political leadership in both parties is not fond of cutting spending despite what they may say to voters from time to time. Since raising taxes is not popular, a decision has been made to get tough on the taxes that are owed to Uncle Sam. The IRS is now getting very tough on collecting tax debts. Enforcement Action is up and Offer-in-Compromise settlements are way down over the last few years.
If you or a client of yours owes delinquent Federal taxes, be prepared for a financial proctology if you want to set up a payment plan or settle with IRS for less than what is owed. An IRS Form 433A or 433F may be required for individuals and a 433B for business taxpayers. Many expenses claimed are subject to limits known as the "IRS National Standards." Get the current IRS standards from their website.
If more than $25K is due, the following documented proof may be required by IRS to set up a payment plan:
1. Three months of all bank account statements the taxpayer has in their name;
2. 401k Statements;
3. Three months of pay stubs or proof of year-to-date earnings and deductions;
4. Proof of monthly bills (rent, mortgage, utilities, childcare, etc.);
5. Paid medical bills and prescription drugs; and
6. Car note, car valuation, mortgage balance, insurance costs.
If you own property, IRS may require that you apply for a loan before they will grant you an Installment Agreement or Temporary Hardship. A loan denial letter might be required to be submitted to the Revenue Officer (RO) or to the Automated Collection System (ACS) representative working the case.
The best thing that you can do if you want to avoid being put through the ringer on providing financial data is to pay your balance in full or get it below $25,000 before it gets to an IRS collector. If you can get it below $25K, chances are you can get a "streamlined" installment agreement and only have to meet requirements to pay off the debt in less than 60 months.
Don't ignore any letters you get from IRS! Wishing the IRS will go away won't make it so. The good news is that IRS is still allowing folks a 120 day grace period to full pay. You must ask for it and all delinquent tax returns must be filed. In addition, no enforcement action can be in place at the time you make the request.
Ignoring the IRS or missing an IRS deadline will likely result in enforcement action. If the IRS garnishes your wages, the levy will likely not be released until a full financial statement is given, all delinquent returns are filed, and a resolution is agreed to by the RO or ACS. If your bank account is seized: barring an extreme hardship that can be proven…kiss the money good bye.
If you owe a large tax debt, get professional help. Hire a Certified Public Accountant (CPA), Enrolled Agent (EA), or a Tax Attorney who is familiar with collection cases. Don't hire some company that promises you that they can "wipe out" all your taxes, penalty, and interest just by signing their Power-of-Attorney. Make sure whomever you hire takes a complete financial statement from you. Without it, promises of what kind of IRS deal they can get you are probably bogus.
The IRS has a program to settle tax debts for less than what is owed, but only for those people who qualify. It is called the Offer-in-Compromise. Very few will ever qualify for an OIC. IRS is currently rejecting over 80% of the OICs it is getting. Even getting a payment plan is difficult if you have a large tax debt.
If you are dealing with a serious IRS problem, stay focused and don't get depressed. If you let a tax problem overwhelm you, then you are doing a disservice to yourself and your family. After all, it is only money. Before you call IRS: get your documentation together; prepare an IRS Form 433A, 433B or 433F and double check your figures. When dealing with IRS employees, stay calm and polite no matter how cold they might be to you. They have a tough job to do and have to follow the procedures they are given by IRS management. They are not bad people and neither are you. Good luck!
You can find help at the following websites:
www.irs.gov (Internal Revenue service)
www.naea.org (National Association of Enrolled Agents)
www.ascpa.com (American Society of CPAs)
www.nsacct.org (National Society of Accountants)
James Robert Coleman, E.A., A.T.A.
Enrolled Agent, Accredited Tax Advisor, former IRS Revenue Officer.
Member-National Association of Enrolled Agents & National Society of Accountants.
http://www.exirsman.com

Can the IRS Take My Pension?

Author: Darrin Mish

Source: articlerich.com



IRS Problems can cause you and your family a lot of stress. You have worked hard all your life to be able to have a nice home and car. Now the IRS is threatening to take this all away. You have received a notice from the IRS stating that they are going to seize your assets to pay off the back taxes you owe. Can they do this? Can they take your car, your home, even your pension?

The IRS can seize your assets to pay your tax bill but there are certain assets that are safe from the IRS.

1. Clothing and school books
2. Fuel, food, furniture and personal effects up to $2,500
3. Tools and books that are job related up to $1,250
4. Unemployment, worker's compensation, public assistance and job training benefits
5. Undelivered mail
6. Certain annuity and pension benefits which includes the Railroad Retirement Act, Railroad Unemployment Insurance Act, Special Pensions for Medal of Honor winners, and Retired Serviceman's Family Protection Plan and Survivor Benefit Plan
7. Certain service-oriented disability payments
8. Deposits to the special Treasury fund made by members of the armed forces and Public Health Service employees who are on permanent duty assigned outside the US
9. A minimum amount exempt from a levy on wages, salary, and other income

You will notice that on the above list it says "certain annuity and pension benefits." These benefits are not completely exempt from the IRS. Your pension may be at risk if you owe a large sum to the IRS.

The IRS will typically seize your assets in this order:

1. Bank and checking accounts
2. Cars, boats, airplanes, and other recreational vehicles
3. Cash value life insurance
4. Accounts receivable
5. Stocks and bonds
6. Wages
7. Collectibles
8. Investment and vacation real estate
9. Pensions, IRAs and Keoghs
10. Home

As you can see, pensions are low on the list.

When the IRS seizes assets, they only need enough to pay off your tax bill. Do not forget, however, that your bill has been accruing penalties and interest so it has been increasing daily. If there are no other assets available to satisfy your bill than the IRS can seize your pension.



Darrin T. Mish (http://www.getirshelp.com) is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. He can be reached at his website at http://www.getIRShelp.com

Bailiffs & Council Tax - Knowing What To Do

Author: Michael Sherriff

Source: articleage.com



This article is about bailiffs who may call trying to collect Council Tax or Community Charge (Poll Tax) arrears. If a bailiff has contacted you to collect another sort of debt the law might be different.
Council Tax and Poll Tax are usually collected by private firms of bailiffs on behalf of your local council. They try to take your goods away and sell them, usually at auction, to raise money to pay the debt. The process they have to follow to say they want your goods is called 'distraining' or 'levying'.
From October 1998 bailiffs who call must be "certificated". This means they must have a certificate from the County Court allowing them to act as bailiffs. You can complain to the County Court about a certificated bailiff.
From April 1998 you should get a letter from the Council telling you how much you owe and warning you that a bailiff will call if you do not pay the debt within 14 days. It will also tell you who to contact at the council if you have a query. Contact the council and try to make an arrangement to pay what you can afford immediately. If the council agrees then they can stop bailiffs calling out and save you extra fees.
DO I HAVE TO LET THE BAILIFFS IN?
IF THE BAILIFFS HAVE NOT BEEN INTO YOUR HOME BEFORE TO COLLECT THIS DEBT, THEY HAVE NO RIGHT TO COME IN. THEY CANNOT BREAK IN. YOU CAN CHOOSE NOT TO LET THEM IN.
* DON'T open the door to them as they may try to push past you. If they get inside, they have a right to enter again and may break in to take your goods.
* DON'T leave windows open or doors unlocked - bailiffs can legally get in through these. Bailiffs CANNOT get the police to help them break in.
* BEWARE! Some bailiffs may leave you a phone number, and arrange to come round to 'have a chat'. Don't let them in, even if they say it's only to use the toilet or make a phone call.
* Bailiffs MAY try to break into sheds, garages, greenhouses etc., even though this is illegal. KEEP VALUABLES SAFE! They may be able to take cars, motor-bikes and other vehicles parked near your home.
* Politely but firmly refuse to let the bailiffs in. Offer what you can afford to pay. If the bailiffs accept your offer, ask them to return to their car, and go out and pay them. Make sure you get a receipt.
DON'T SIGN ANYTHING! If the bailiff leaves papers for you to sign and return, you do not have to do this. You don't have to sign agreements posted through your door either.
THE BAILIFFS HAVE ALREADY BEEN INSIDE MY HOME
THIS IS MORE SERIOUS. If you have let them in before, then bailiffs have the right to return to you home and if you don't let them in, they are allowed to break in.
* Contact the bailiffs straight away and make an offer to pay the debt in instalments. Show them a copy of your personal budget so they can see you are offering as much as you can afford. You will need to treat this as a priority debt as bailiffs could come back and take any goods they have listed if you don't pay. Get a receipt for any payments you make.
* Contact you council and ask them to take the debt back. Ask your local Councillor for help.
WHAT THINGS ARE THE BAILIFFS ALLOWED TO TAKE?
There are some things that the bailiffs are not allowed to take at all; such as goods that are rented or hired. The regulations also say that the following items are exempt and can't be taken:
* "Such tools, books, vehicles and other items of equipment as are necessary for use personally in employment, business or vocation"
* "Such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying basic domestic needs of the person and family".
* This list is not very specific so you may find that bailiffs have a different idea of what items are necessary for you to keep and what can be taken. You can complain about what the bailiffs take if you feel the items should have been exempt.
CAN THE BAILIFFS TAKE THINGS WHICH ARE NOT MINE?
The bailiffs can only take things which belong to you and/or goods which are jointly owned by you and your partner. If they want to take goods that belong to someone else (your children, partner, lodgers etc.) explain that the goods do not belong to you. If you can, show a receipt or note as proof. The owner of the goods may have to provide a sworn statement in the form of a "statutory declaration" to say this is the case. They cannot take goods which are rented or hired. This includes goods on hire purchase agreements. Show them a copy of your credit agreement if you can.
WHAT IF I HIDE THINGS OR GIVE THEM AWAY?
If the bailiffs haven't yet been in, you can hide things or take them somewhere else. If the bailiffs have already been in, you are committing an offence if you remove goods that they have said they will take. You can hide them on your premises but the bailiffs can search for them.
BAILIFFS PROCEDURES
If the bailiffs are distraining for Poll Tax or Council Tax, there are certain procedures that they have to follow. They must have with them:-
* written authorisation from the council for them to call. They should show you this if you ask.
They must leave you a copy of:-
* the law setting out their powers and what they can and cannot do. These are the "Enforcement Regulations".
* the charges the bailiffs are allowed to make for each visit. You should check they have not added too much on to your debt. See the schedule at the end of this fact sheet.
* any agreement you have actually signed. This will be called a "Walking Possession" agreement and includes a list of goods the bailiffs have warned you they may take.
HOW DO I STOP THE BAILIFFS?
* You can try to make an arrangement to pay the debt back at a rate that you can afford. You can offer the money directly to the bailiffs, although it is easier to get them to accept your offer if they have never been into your home. Always get a receipt for any money you pay.
* Bailiffs cannot send you to prison. If the bailiffs have never been into your home and they will not accept your offer, all they can do is to pass your debt back to the council. It is important to make an arrangement to pay the council, or they may try other ways of recovering the money, such as taking money out of your wages or your benefit.
* If the bailiffs refuse your offer it is important to put the money you have offered aside so you can pay it to the council as soon as the debt is passed back to them. Write to the bailiffs and the council telling them you are saving the money up as the bailiffs have refused to take your payments.
* If you are on Income Support, Pension Credit or Job Seekers Allowance, some councils' have a policy for not using bailiffs and will accept an offer from you or agree to accept direct payments from your benefits. Ask your council if they are willing to take the debt back from the bailiffs so you can pay them directly.
* If the council won't help then contact your local councillor and ask them to take it up with the council for you. Explain what hardship you will be in if the bailiffs come to your home and take your belongings.
HOW DO I COMPLAIN?
The Lord Chancellors Department has issued National Standards for Enforcement Agents. These good practice guidelines set out general rules for how bailiffs should behave and what procedures they should follow. You can mention these standards in your complaint but the standards are not enforceable by law. We can give you details of the standards or they may be found at the Department for Constitutional Affairs website www.dca. gov.uk/enforcement/agents02.htm
GET ADVICE FIRST. Bailiffs law is very complex, and even if you think that what they have done is unfair, they may still be acting within the law.
* From October 1998 bailiffs have to have a certificate granted by a court to collect Council Tax. A complaint from you can help get the certificate withdrawn. Ask your local County court if they have a form for making a complaint. If not, write in to the Court Manager with details. The Court will hold a hearing and can cancel the bailiff's certificate, order compensation and order return of the goods. A bailiff can be fined for collecting without a certificate.
* You can complain to the Magistrates Court, and there have been cases recently where the debt has, in effect, been written off when it has been proved that bailiffs have acted illegally. This is done by making a complaint and asking for a hearing. The court can order return of the goods or compensation.
* You should complain to the council as the bailiffs are acting as their agent. They can ask the bailiffs to look at your complaint and change their procedures. If the council won't help you could talk to your local councillor who may be prepared to take your complaint up with the council.
* You can ask the local Government Ombudsman to look at your complaint if the Council refuse to help you.
BAILIFFS CHARGES
You may be able to complain about bailiffs charges. The amounts they are allowed to charge for council tax and poll tax are set out in the schedule on page 5. The amounts they are allowed to charge for council tax are set out on the next page in the schedule. There are lower fees for poll tax collection. These are shown in italics. If you feel you have been charged too much you can complain in writing to the Council and the bailiffs. You may be able to ask the County Court to look at the charges for you see below. Phone us for advice.
You can find out what is 'reasonable' by making enquiries on a local basis. For example, if you have been charged ฃ80 for attendance with a van, and local enquires indicate you could hire a van for a morning for ฃ40 this is clearly unreasonable, especially as it is likely that bailiffs will be visiting several properties at once, and many companies own their own vans.
In the first instance, complain to the bailiffs themselves. You can tell them you know their charges are excessive and that you will be taking further action if the charges are not reduced to the levels shown in the schedule.
* You can then complain to the council as the bailiffs are acting as agents of the Council. There have been recent cases that have been taken back in front of the Magistrates Court over these issues, with the result that the councils have been forbidden to take any further recovery action, or in other words, the debt has been written off. So it IS worth complaining.
* You can apply to the County Court for the costs to be checked. This is called "Taxation". The court can look at a complaint within 12 months. They will decide if the charges are excessive or not. There is a fee to pay to the court for this application. If the court decides not reduce the bill at least 20% you can be liable for the bailiffs firm's court costs. You need legal advice first.
USEFUL LINKS
The Secretary
Association of Civil Enforcement Agencies
Kensington House
33 Imperial Square
Cheltenam
Glos
Tel: 01242 241456
Website: www.acea.org.uk
The Secretary
Enforcement Services Association (ENSAS)
(formally The Certificated Bailiffs Association) Ridgefield House
14 John Dalton Street Manchester M2 6JR Tel: 0161 839 7225
Website: www.bailiffs.org.uk
Local Government Ombudsman (England)
Millbank Tower
Milbank
London SW1P 4QP
Advice Line: 0845 602 1983
Monday to Friday 9.00 am - 4.30 pm. Website: www.lgo.org.uk
There are 3 Local Government Ombudsman offices for England. Please contact the advice line to check where to send any complaint.
Local Government Ombudsman (Wales)
Derwen House Court Road Bridgend
CF31 1BN
Tel: 01656 661 325
Website: www.ombudsman-wales.org
Author: Michael Sherriff
After writing 100's of articles relating to UK Credit and finance Michael has also written a book that blows away the myths surrounding UK credit repair. A number one seller in the UK called "UK Credit Secrets 2005 Edition". This book can be found at UK Credit Secrets

How To Legally Save Thousands of Dollars a Year in Taxes

Author: Roberto Neuberger

Source: free-articles



How To Legally Save Thousands of Dollars a Year in Taxes


By Alex Goumakos


Someone once remarked, โ€œNext to being shot at and missed, nothing is quite so satisfying as an income tax refund.โ€ There's no question that saving money in taxes is high on everybody's list of financial priorities, especially self-employed business owners.


However, unlike individuals who work as employees for an employer, business owners actually have the โ€œluxuryโ€ of choosing how much in taxes they pay each year by picking one form of business entity (sole proprietorship, partnership, corporation, etc.) over another. Unfortunately, the majority of business owners choose a business entity once (usually when starting out) then keep the same entity for the life of the business. This isn't necessarily the smart thing to do.


While some companies can get away with sticking with the same form of business throughout the life of the business, countless others are just simply throwing money out the window by overpaying their taxes. For some small business owners, this โ€œfinancial nonchalanceโ€ can actually cost an extra several thousand dollars in unnecessary and avoidable taxes each year.


If you are a business owner concerned about reducing your tax liability, here's a way you can dodge the tax bullet by utilizing what's known as a Subchapter S corporation:


First some background: When starting a new business most business owners focus on simplicity: that is, the less paperwork and regulations to contend with the better. What this means is that most new businesses start out as โ€œunincorporatedโ€ entities such as sole proprietorships (73%) and partnerships (6%). While management and administrative costs of running the business might be easier and less expensive initially, the tax burden, especially the self-employment tax, can be anything but.


For many business owners who wait till year-end to do their tax planning (or no tax planning at all), the self-employment tax is an unwelcome surpriseโ€ฆand a very large expense. Newly self-employed individuals are shocked even more once they realize that they are responsible for the self-employment tax all on their own. That's because when they worked as an employee their employer was responsible for paying one half of the self-employment tax.


The self-employment tax is simply a version of the same Social Security and Medicare taxes you pay as an employee. However, instead of paying 7.65% as you do when you're an employee, as a self-employed business owner you have to pay double: 15.3%.


In 2002, the Social Security portion (12.4%) is levied on the first $84,900 of net profits. There is no limit to the Medicare portion (2.9%). Self-employed individuals are also entitled to a one half-credit of the tax. As an example, a self-employed individual with $100,000 in net profits in 2002 would be required to pay $12,400 in self-employment tax. This tax is in addition to federal, state and local taxes!


Here's what you can do to save money on the self-employment tax:

Incorporate and elect Subchapter S status. You can elect Subchapter S status even if you have a pre-existing C corporation too. Operating your business as an S corporation is one of the very few four leaf clovers still left in the tax code. The reason for this is simple: The net income from an S corporation is NOT subject to the self-employment tax.


If structured and implemented properly, an S corporation could save you thousands of tax dollars per year. As an employee-shareholder of your S corporation, you pay yourself wages just like you would any other employee. But instead of taking profits out through payroll, you take cash distributions called โ€œnontaxable dividendsโ€.


Nontaxable dividends are called nontaxable, because they aren't double taxed like the dividends paid to shareholders in a regular C corporation. You're still paying taxes on the net income of your S corporation when you file your personal tax return, but the tax is federal tax and not the self-employment tax.


For the sake of simplicity, if an S corporation with $100,000 of net profits pays its owner a reasonable salary of say $50,000 and non-taxable dividends of $25,000, the tax would be $7,650. This is a whopping $4,750 savings in tax! Even if you factor in additional costs such as workman's comp insurance, incorporation costs, professional fees and incidentals, the savings is still more than adequate.


The key to the whole scenario is that your salary must be reasonable under the circumstances surrounding your business. It's also much better for salary justification purposes if your business is not limited to the delivery of personal services by you. Nevertheless, incorporating and electing Subchapter S status is an excellent way to reduce your overall tax burden.


Here's more good news: If you happen to already own a regular C corporation and you live in a state that has a high corporate income tax rate, you'll come out ahead even more if you elect S status. Additionally, if you have children aged 14 or older, you can save even more taxes by giving them shares in your S corporation and having them pay the tax at their lower tax rates. By giving away shares you also reduce your estate tax obligation.


So you see, there are plenty of good reasons to incorporate and elect S status. I've only touched on a few minor points. There are many, many other valid reasons to incorporate. Just keep in mind that you should always consult with your tax advisor for your particular needs and circumstances before making any important business or financial decisions. Besides taxes, there are many legal and financial issues to contend with as well. Always look before you leap.


When it comes to your business, you should make it a point to assess the validity of your type of business structure on a yearly basis. Incorporating is definitely not just for startups. There are plenty of unincorporated businesses that are missing the boat when it comes to saving money. Don't be one of them. It pays to find out more.


Alex Goumakos is a CPA, business advisor and guest consultant of Active Filings LLC, a company that provides incorporation services in all US. (http://www.activefilings.com). Alex can be reached by email at mailto:alex@activefilings.com


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Unreported Offshore Income? Take Action Now With the IRS

Author: Ron Cohen

Source: ezinearticles.com



The world is changing. A tax evader should seriously consider what may be the only way to stop an illegal bad situation from becoming a life-destroying criminal prosecution. Consider a Voluntary Disclosure to clean-up the past.

Based on tax law precedent going back to the 1940s, the I.R.S. and many state tax authorities have a standing polciy that, generally, they will NOT pursue criminal prosecution of tax evasion in cases where the tax evading taxpayer comes forward BEFORE they are contacted by the tax authority.

As an I.R.S. District Counsel (prosecuting attorney) once told me after a 13 week course on I.R.S. internal procedures as part of my Masters Degree program in Taxation: "If you learn nothing else in this class, remember this: If your client is in tax trouble, you need to find me before I find you."

He went on to explain that the I.R.S. wants people to be able to come back from the non-filing and non-paying underworld and get clean without fear of criminal prosecution...otherwise, tax evaders have no way to re-enter the tax system without the threat of losing not only large sums of money but also lose their liberty and living standard if they suffer criminal prosecution, versus civil (money) penalties.

Alternatively, if the I.R.S. finds or contacts a taxpayer via an audit, non-filing notices, the Form 1099 Matching Program, referrals from other non-tax prosecutions or otherwise becomes aware of significant criminal tax violations, then, their frame of mind changes. They often try to make a public example of the taxpayer and pursue criminal prosecution and jail sentences to the extent allowed by law.

It is my experience that taxpayers have to almost force the I.R.S. (by repeated bad behavior) to prosecute, as the I.R.S. has a lack of resources. They would much rather use civil penalties, liens, levies and wage garnishments which can quickly be triggered by the I.R.S. computer system to collect unpaid tax and force the taxpayer back into filing returns. But when the taxpayer ignores I.R.S. letters, disappears or is non-responsive, is under other criminal prosecution (like an arrested drug dealer) or argues the tax system is illegal or unconstitutional, the case gets elevated to where I.R.S. lawyers and criminal investigators are assigned.

At that point, the I.R.S. people involved, like all of us, want to be successful in their work; and success for them is often a criminal prosecution and a conviction. A taxpayer in that situation needs the immediate help of qualified legal counsel specializing in tax cases.

Specifically, regarding unreported offshore Income, in my opinion, you are running out of time.

Technology, the Federal and State deficits and the political winds are now all working against tax evasion with regards to unreported offshore income.

The technology is improving to catch tax evaders who often establish an offshore bank account in a country that does not share account information with the I.R.S. An A.T.M. card is often used allowing access to the funds at any A.T.M. machine in the U.S. that is in the offshore bank's A.T.M. network. The U.S. bank through which the A.T.M. withdrawal is processed becomes a legal party to the transaction. The I.R.S. has a significant project underway to drill-through the U.S. bank and find the offshore account and the U.S. taxpayer/evader.

Banks are being required to increase internal audit controls to stop inadvertently assisting tax evaders.

Recently in the news, the I.R.S. is pressuring Liechtenstein and Swiss banks to provide information on U.S. taxpayers suspected of tax evasion. Banks in the Cayman Islands and Bermuda continue to come under pressure from U.S. and European tax authorities.

Now, with the economic crisis of the last 6 months, the U.S. President and Congress and the tax authority of many countries and states see unreported income of tax evaders as "low-hanging fruit." As voters have no sympathy for offshore tax evaders, it is clear more laws and resources will be applied to pursue this unreported income.

As a result, the world is changing. A tax evader should seriously consider what may be the only way to stop an illegal bad situation from becoming a life-destroying criminal prosecution. Consider a Voluntary Disclosure to clean-up the past.

How Does A Taxpayer make a "Voluntary Disclosure?"

With regards to the I.R.S., a specific process exists for taxpayers who approach the I.R.S. with the intent to clean-up old returns. I provide five comments:

It will take many months to resolve unfiled, unreported income. Be patient!
Use complete honesty and complete disclosure in every contact with the I.R.S. or any tax authority. Remember, you are trying to avoid CRIMINAL PROSECUTION. This is not a game. Don't try playing games with partial disclosures. The worst thing you can do is hold back information at this point and be accused of lying. They have seen it all before, and they know what you are thinking, often before you do. You are coming to them for help, so provide complete cooperation. They are usually very cooperative with people who take this approach.
Keep a copy of everything you give the I.R.S. and keep a written record of every telephone conversation.
Consider getting assistance from a C.P.A., Enrolled Agent or Tax Attorney.
Don't forget the state taxes that might be involved. The I.R.S. WILL communicate the information you provide to the state tax authorities.

The starting point for a Voluntary Disclosure is no surprise. Put together your tax information for each taxable year just as if you would to originally file your tax return. Again, consider consulting with a C.P.A., and Enrolled Agent and/or a bookkeeper if you need help to get your information together.

If you can't find records, then call banks, or businesses, etc. to collect as much documentation as you can. YOU DON'T NEED TO BE PERFECT OR HAVE EVERYTHING IF IT DOES NOT EXIST. The I.R.S. understands that records from years ago may be unavailable. Reasonable estimates are fine if there is no alternative. Don't get caught in the mental trap of not filing, or waiting longer just because you can't find every record, Form 1099, receipt, bank statement or invoice.

If your return was originally filed, however, offshore (or any other type of income) was not reported, an amended tax return needs to be prepared. That is I.R.S. Form 1040X for individual taxpayers.

When you are as ready as you can be (and sooner is always better than later) to contact the I.R.S., mail everything to the I.R.S. Service Center, just as if you were filing a normal tax return, but with a cover letter. Absolutely mail it certified mail, return receipt requested and keep copies of everything and all postmarked documents (seriously) for the rest of your life. I'll skip explaining why, here.

Under Internal Revenue Manual Sec. 9.5.3.3.1.2.1, a voluntary disclosure occurs when:

The communication (tax return and/or related letter) is truthful, timely and complete. This includes:

the taxpayer shows a willingness to cooperate (and does in fact cooperate) with the IRS in determining his or her correct tax liability; and the taxpayer makes good faith arrangements with the IRS to pay in full, the tax, interest, and any penalties determined by the IRS to be applicable.

At this point, the I.R.S.sends the tax return[s] to a special unit that deals with amended or late returns. Over two months may pass before the taxpayer receives any reply. Pay in as much of the estimated tax, interest and penalties as possible with the returns. Make sure to indicate what year each payment should be applied to. Otherwise, it will be applied to the current tax year - which is a hassle to correct.

The I.R.S. has additional triggers they consider when evaluating the situation.

How many tax years are involved?
What is the amount involved? Clearly, a $1 million unreported amount may get a different response than a $10,000 unreported amount.
What prior filing history does the taxpayer have? Is this the first issue, or part of a long history of problems?

Often, if no special issues come up, the taxpayer will receive a straightforward letter simply saying the return was received and the following tax, interest and penalties is owed. In all my experiences, if the taxpayer pays any amount due within the 30 days allowed after receiving that letter, it is very normal to never again hear from the I.R.S. with regards to that tax return for that particular year. However, nothing in this article guarantees this result.

The moral to this story is that I.R.S. policy and case law clearly MOVES TO THE SIDE OF THE TAXPAYER toward avoiding criminal prosecution the moment the taxpayer mails the unfiled or amended tax returns and pay as much of the unpaid balance due as possible.

NOTE: The Voluntary Disclosure policy does NOT apply to illegal source income. For example, unreported drug trafficking income will not qualify for the Voluntary Disclosure procedure, as that type of income is illegal under other (non-tax) laws. In contrast, there is nothing illegal about earning interest income from a Swiss bank account, so it is not illegal "source" income. However, the failure to report such income on your tax return can be a tax crime. Therefore, the Voluntary Disclosure policy can apply to the Swiss interest income.

WHEN IS THE VOLUNTARY DISCLOSURE POLICY NOT AVAILABLE?

It is important to note when a taxpayer is considered "contacted" by the I.R.S.: Again from Internal Revenue Manual Sec. 9.5.3.3.1.2.1

A disclosure is timely if it is received before:

the IRS has initiated a civil examination or criminal investigation of the taxpayer, or has notified the taxpayer that it intends to commence such an examination or investigation; the IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer's noncompliance; the IRS has initiated a civil examination or criminal investigation which is directly related to the specific liability of the taxpayer; or the IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action (e.g., search warrant, grand jury subpoena).

If the above has occurred, please consult a tax attorney. You may actually do more harm than good by sending in a tax return (or amended return) to the IRS Service Center at this point, as the I.R.S. may consider that an attempt to work around the tax examiner who contacted you, to gain a legal advantage.

A tax evader never knows when a, b, c, or d above may occur or when an I.R.S. letter will show up in their mail box. At that moment, the opportunity to avoid criminal prosecution may be lost forever. It is an "on/off" switch for which there is precedent in I.R.S. policy and case law.

So please, if you are in this situation, get to them before they get to you, and please consider seeking competent tax advice before doing so.

The policy of most state, local and European tax authorities is similar, although you should seek advice competent in the policy of each tax authority before taking any action.

Also, assuming you have legally avoided criminal prosecution, many people try to negotiate unpaid taxes, interest and penalties. Please be very skeptical of companies that promise to negotiate your tax liability. In reality, only the bankrupt or near bankrupt qualify for these programs, and many, many people have given me feedback on how some firms take an upfront fee and then do nothing, or even make matters worse. Please be careful.

With regard to penalties to be assessed, a complete review is beyond the scope of this article except to say, they will be very significant.

Please see the attached from Doug Shulman, Commissioner of the IRS, from 3/26/09: http://www.irs.treas.gov/newsroom/article/0,,id=206014,00.html.

I am always available for questions and comments at 510 797 8661 x237.

Ron Cohen is a Partner at a top Bay Area CPA Firm, Greenstein, Rogoff, Olsen & Co. He has more than 25 years experience in public accounting and related industry work. He earned an undergraduate accounting degree from the University of Illinois, Chicago, and then a Masters in Taxation from Golden Gate University. Ron has extensive knowledge in International Tax and has traveled extensively throughout Europe and Asia handling tax issues.

Why You Must Handle IRS Issues Immediately

Author: Boris Tomson

Source: articlesbase.com



Why You Must Handle IRS Issues Immediately People who have been through an IRS problem circulated undesirable tales regarding their experience.Visit Here http://gov-debt-grantbenefit.blogspot.com ÂUnfortunately, no matter how outrageous some stories are, most of them are true in one way or another. When it comes to collecting money owed from them, the IRS is a bit aggressive at this undertaking. The IRS still wants their money whether the money is truly owed or the debt is simply a result of an IRS mistake. Hence, in situations where the taxpayers did nothing wrong, it is their responsibility to protect themselves from IRS problems. Many taxpayers who file their taxes properly and on schedule are not totally safe from IRS errors and penalties that result from these mistakes. Getting a Federal Tax lien is one of the most unfortunate IRS-related problems that you will have. With a tax lien enforced on you, your credit records will be severely affected that it's almost impossible for you to get any kind of loan. Aside from not entertaining your loan applications, the banks won't even permit you to open a new bank account. With this, it will be extremely hard for you to settle utility bills such as phone and electricity bills. For those who think that tax issues and IRS problems will merely work themselves out, they are completely wrong. The only way for an IRS problem to go away is if you pay the money that is owed, or you decide to assert your rights to the IRS. These courses of action, however, will require your money and time. It is always in your best interest to immediately take action as soon as you get a notification from the IRS. Otherwise, they IRS may enforce rigid collection techniques and charge you with interest rates as high as 25%. You'll continue being subjected to these consequences until the debt is completely paid, or until the charges are dismissed. You might also want to ascertain that you have all the necessary documents and supporting evidence in order. Not only will this help you effectively deal with the IRS, but this will also project an impression that you're ready for anything that the government will throw at you. In very serious situations, it's best that you contact a tax professional like a tax attorney or a CPA. Their education and background on the field will certainly liberate you from whatever IRS trouble you maybe into. Aside from the usual penalties that the IRS imposes on delinquent taxpayers, they can also utilize more intrusive collection procedures like wage garnishment. This is referred to as a Wage Levy. You do not want the IRS to take this action because this allows them to get as much as 75% on your paycheck. Can you live with only 25% of your net pay? The sooner you deal with your IRS problems, the sooner you will be able to negotiate with the IRS and the more difficult it is for them to impose such aggressive and intrusive actions on your finances.Visit Here http://gov-debt-grantbenefit.blogspot.com

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Deciding When To File A Tax Return?

Author: K Hoyng

Source: articledashboard.com



April 15th - "The Day of Reckoning"! Every year, millions of Americans get ready to pay taxes to Uncle Sam, or get ready to collect a tax refund from Uncle Sam; when did this become the great day that it is for taxpayers, and when are we actually required to file a income tax return? Let's take a look at the beginnings of the income tax date of April 15 and why it was chosen?

The first known income tax that Americans were legally required to pay was enacted during the early 1860s, and the Presidency of Abraham Lincoln. The Civil War was proving very costly to finance, and the President and Congress created the Commissioner of Internal Revenue and enacted a law requiring citizens to pay federal income tax. This could be considered the start of our modern day income tax. This income tax was based on principles of graduated or progressive taxation and of withholding income at the source. The commissioner was given authority to assess, levy and collect federal income taxes. The authority to enforce tax laws by seizure of property and income and by prosecution.

Originally, the deadline for completing and filing your individual income tax was not April 15th. In the beginning, it was first set for March 1st. Then, during 1918, Congress pushed the date out to March 15th. Then, in the great overhaul of 1954, the date was once again moved forward to April 15th, and this is where it remains today. Why April 15th? The main thought from most scholars say the reasoning is that the date gives the IRS more time to handle the work load and more time to hang on to your money before offering a tax refund. This date has only been set this way for a little over 50 years. That's not very long, in historical terms, and it could possibly be changed again.

If you are an individual taxpayer, you are required to file either a return or an extension of time to file (Form 4868) by April 15th. Corporate and other legal entities are required to file their federal income tax return by March 15th, and if not, they also must file an extension of time to file. What this extension does not do, is to extend the amount of time you have to pay any taxes due the government. So, if you are unable to ready your personal or business financial information in a timely manner, and have no reasonable estimate as to the amount of tax you may owe, you can expect to pay some form of penalty.

In the years following WWII, the burden of tax responsibility was shared fairly equally by the corporate world and the individual taxpayer. Today, however, the shift has been toward more responsibility on the part of the individual, and less on the business backs. To demonstrate how special interests have begun to overtake American politics, during 1867, public opinion was so strong, and the outcry of the general public so loud, that the President and Congress abolished the income tax law in 1872, and from 1872 until 1913 almost all of the revenue for government operation came from the sale of liquor, beer, wine, and tobacco. Although the income tax did make a small come back in 1894, it was found unconstitutional in 1895 by the U.S. Supreme Court because it was not apportioned among the states in conformity with the Constitution.

An interesting time during the formation and eventual taxation of America occurred during 1918. Until that point in time, the vast majority of tax revenue for government funding came from alcoholic beverage sales and high tariffs. In 1919, Congress passed an amendment to the Constitution that made it illegal to manufacture or sell alcohol; what would replace the revenue? American federal income tax was the proposed solution, and we've been paying since. Although during the great years known as Prohibition, many "revenue agents" spent their days tracking down "moon shiners" not tax evaders, the American citizen, the individual taxpayer took on the heavy burden of supporting government revenue, and it has become heavier with each passing year. On a side note, although "moon shining" was illegal, the "moon shiners" still had to pay taxes on the moon shine so they were incarcerated for tax evasion and not "moon shining". Taxes seem to always come into play when looking for a way to prosecute someone.

Then, during 1942, the Revenue Act of 1942 was passed and the "New Deal" era was begun. Since that point in time, government control, power, and expenditures has continued to increase at a phenomenal rate, and today the American taxpayer supports a trillion dollar giant known as the United States government. This ravenous beast consumes more than 10% of our earned income each year, and if the Social Security Administration has their way, will continue to consume even more of our weekly earnings. We can foresee no other relief in sight.

Currently, all the tax regulations for this country are the responsibility of the Internal Revenue Service, and there are four major divisions of this government office: the Wage and Investment, Small/Business Self-Employed, the Large and Midsize Business and the Tax Exempt and Government Entities. Each division has responsibilities as they pertain to their individual specialty.

There continues to be talk on the hill to change the way taxes are calculated and collected. The most common themes are the flat tax and the national sales tax. Until Congress actually has the courage to step up to the plate and change it, taxes will remain as cumbersome as always.

Tax Tips for IT Consultants and Contractors

Author: Stephen Nelson

Source: articleage.com



I live and work, quite literally, down the road from the main Microsoft campus. No surprise, then, that I'm commonly asked by freelance consultants for the best ways that these self-employed independent contractors can minimize their income taxes.
If I can, I try to weasel my way out of the discussion, offering up such basic tidbits as, "Well, be sure to look at the home office deduction." And "make sure you're taking advantage of deductions for health insurance and pension funds."
Usually, those simplistic answers work. Everyone once in a while, though, I encounter some guy who's really motivated to save on taxes. Usually, someone now making good money consulting or contracting… When I can't deflect their questions in some other way, I tell them about the three best ways that independent contractors have to save on taxes.
Technique #1: Smooth Your Income
Whatever you think of the US Internal Revenue Code, you need to know that it's quite progressive. That progressivity means the more you make, the more you pay. The progressivity also means that if your income fluctuates, your income taxes go up even if you make the same money on average as someone else makes.
To give you an example of this, suppose that you compare two consultants, John and Jane. If John makes a steady $60,000 a year and has a mortgage, a spouse and couple of kids, he might pay about $1000 over four years (net of tax credits for these like his children.)
In comparison, suppose that Jane averages $60,000 a year, but sees her income fluctuate between $30,000 a year and $90,000 a year. If she also has a spouse, two kids and a mortgage, she'll probably pay $8,000 to $10,000 over those same four years.
Please note that over the same four years, the two consultants make the same amount of money: $240,000. But what they pay in taxes differs radically. Jane pays eight to ten times what John pays. Bummer.
What can Jane do? Well, let's bring this back to the example of working consultants. Jane can probably smooth her income. She can make sure that she's not stacking two big retainers or performance bonuses in the same year. She can spread out year-end payments over the ending and beginning year in ways that smooth her income out. She can even try to stuff more of her expenses into the good years. In the good years, for example, she can buy new computers, take those graduate classes, or top off her pension.
Technique #2: Setup an LLC and Elect S Corporation Status
I've written and talked much about how S corporations save taxpayers money and how the right way to set up an S corporation is first create a limited liability company and then ask the IRS to treat the LLC as an S corporation for tax purposes.
Let me review the basics here again, however. Suppose that you're making $90,000 a year as a consultant or contractor. If you just treat your business as a sole proprietorship, you might pay $12,000 in income taxes on the $90,000 and then another 15.3% self-employment tax, or roughly $13,500 on the $90,000.
If you set up an LLC and have the LLC treated as an S corporation, you'll still pay the same $12,000 in income taxes. But you'll only pay the 15.3% self-employment tax on that portion of the profit that you categorize as wages. If you categorize, say, $50,000 of the profits as wages, you'll pay $7,500 in self-employment taxes. (The other $40,000 in remaining profits, by the way, gets paid out as a dividend-like "distribution.")
Note, then, that the S corporation saves you roughly $6,000 every year. Sweet, right?
Two quick points about S corporations: First, S corporations require some extra tax and accounting so you don't get to spend all of your savings. Some of the savings go to the lawyer, the accountant, and the bank. Second, you absolutely must set your salary to a reasonable level.
Technique #3: Relocate Your Residency
One final, easy planning gambit if you telecommute. Remember that there are states like Alaska, Florida, Nevada, Texas and Washington that don't charge residents state income taxes. Accordingly, if you relocate to one of these states, you'll automatically drop your overall tax bill because you won't have state income taxes.
Sometimes, one of the benefits of independent contracting and freelance consulting is that is that you do get to live wherever you want. Why not choose a place that doesn't tax your income?
But a caution: Do be careful that you don't get blindsided by the other taxes a state levies. For example, Washington state where I live charges a one and half percent excise tax on service revenue. This is probably still less than the income taxes that many other states charge. But it highlights an important caveat: Before you move to some other state, you definitely want to run the numbers and compare your current state to the possible new state.
Florida LLC formation expert Stephen L. Nelson CPA has written more than 150 books. Formerly an adjunct tax professor at Golden Gate University, Nelson is also the author of Quicken for Dummies. Copyright ฉ by 2006 by Stephen L. Nelson.

Don't Delay In Managing Irs Tax Debt

Author: Brad Stroh -

Source: articledashboard.com



Debt Resolution, IRS Settlements Offer Help for Serious Tax Problems

San Mateo, Calif., - With tax day behind us, consumers and business owners who owe the IRS are not out of the woods. But while death and taxes are the big two inevitabilities, those with serious tax problems should know that it is possible to negotiate with the IRS to reduce past-due tax penalties and payments, according to Bradford G. Stroh, co-founder and CEO of Freedom Financial Network, LLC.

Americans, carrying more debt than ever, are also more likely to have tax problems than in the past. In 2004, the total of uncollected IRS taxes reached upwards of $250 billion. The number of levies (a key enforcement tool in which the IRS takes possession of assets to collect on unpaid taxes) topped 2 million during fiscal year 2004 - a 21 percent increase from 2003 and triple the 2001 number.

According to Stroh, taxpayers with tax debts under $10,000 usually can manage the payment on their own or via an installment plan arranged with the IRS. "Tax problems merit professional help when individuals cannot pay tax liabilities of $10,000 or more," Stroh says. "At that point, specialists can negotiate directly with the IRS on behalf of these consumers, helping them obtain settlements."

Tax relief specialists usually are attorneys or certified public accountants with special training and experience. Stroh explains that these experts can navigate the intricacies of IRS forms and calculations, help consumers understand the criteria the IRS imposes, and then help them get back into good standing with the IRS.

Depending on the severity of an individual's situation, two types of IRS settlement are available:

An offer in compromise reduces the principal amount owed to the IRS.

An installment agreement is a payment plan for the amount due and often includes reduced penalties.

"Remember that you cannot let overdue taxes languish," Stroh warns. "The IRS is serious -- and increasingly aggressive -- about tax collection and evasion. Tax debt can result in a lien on a house or garnished wages."

Advisors can help consumers with the following steps:

Evaluate the situation and determine the amount of taxes owed to the IRS.

Ascertain whether the situation meets IRS standards for "doubt as to collectability" (i.e., unable to pay the full tax burden), "doubt as to liability" (i.e., consumer might not owe the tax), or "economic hardship."

Establish the full amount owed, including taxes, penalties and accumulated interest, and understand whether collection limitations or penalty cancellations are possible.

Determine the best method for managing and eliminating the tax debt.

Negotiate with the IRS to settle on an agreed course of action and resolve the debt.

While facing and handling tax debt can be painful, last year's bankruptcy reform legislation made it even more crucial for consumers to act. Historically, consumers in severe IRS debt might file for Chapter 7 bankruptcy protection or wait for the 10-year statute of limitations on tax liability to expire. Now, people are much more limited in the ability to obtain Chapter 7 filings. The bill's new "means test" leads many consumers instead to file Chapter 13 bankruptcy, which establishes a repayment plan, rather than wiping out all debt. Consumers with tax debt may find it much less costly and simpler to work with a debt resolution firm's tax relief service, which allows individuals to set up tax payment plans while avoiding court fees, attorney fees and bankruptcy judgments on their records.

"Whatever means you choose, tax season means it's time to face the inevitable and manage your tax burdens," Stroh says. "Fortunately, experts are available to help you along the way."

Freedom Tax Relief, LLC (http://www.freedomtaxrelief.com) provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that can often result in savings of up to half the amount owed. Based in San Mateo, Calif., Freedom Financial Network serves more than 5,000 clients nationwide and manages more than $200 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation.

To Legally Save Thousands of Dollars a Year in Taxes

Author: Roberto Neuberger

Source: free-articles



How To Legally Save Thousands of Dollars a Year in Taxes


By Alex Goumakos


Someone once remarked, "Next to being shot at and missed, nothing is quite so satisfying as an income tax refund." There's no question that saving money in taxes is high on everybody's list of financial priorities, especially self-employed business

owners.


However, unlike individuals who work as employees for an employer, business owners actually have the "luxury" of choosing how much in taxes they pay each year by picking one form of business entity (sole proprietorship, partnership, corporation, etc.) over another.


Unfortunately, the majority of business owners choose a business entity once (usually when starting out) then keep the same entity for the life of the business. This isn't necessarily the smart thing to do.


While some companies can get away with sticking with the same form of business throughout the life of the business, countless others are just simply throwing money out the window by overpaying their taxes. For some small business owners, this "financial nonchalance" can actually cost an extra several thousand dollars in unnecessary and avoidable taxes each year.


If you are a business owner concerned about reducing your tax liability, here's a way you can dodge the tax bullet by utilizing what's known as a Subchapter S corporation:


First some background: When starting a new business most business owners focus on simplicity: that is, the less paperwork and regulations to contend with the better.


What this means is that most new businesses start out as "unincorporated" entities such as sole proprietorships (73%) and partnerships (6%). While management and administrative costs of running the business might be easier and less expensive initially, the tax burden, especially the self-employment tax, can be anything but.


For many business owners who wait till year-end to do their tax planning (or no tax planning at all), the self-employment tax is an unwelcome surprise...and a very large expense. Newly self-employed individuals are shocked even more once they realize that they are responsible for the self-employment tax all on their own. That's because when they worked as an employee their employer was responsible for paying one half of the self-employment tax.


The self-employment tax is simply a version of the same Social Security and Medicare taxes you pay as an employee. However, instead of paying 7.65% as you do when you're an employee, as a self-employed business owner you have to pay double: 15.3%.


In 2002, the Social Security portion (12.4%) is levied on the first $84,900 of net profits. There is no limit to the edicare portion (2.9%). Self-employed individuals are also entitled to a one half-credit of the tax. As an example, a self-employed individual with $100,000 in net profits in 2002 would be required to pay $12,400 in self-employment tax. This tax is in addition to federal, state and local taxes!


Here's what you can do to save money on the self-employment tax


Incorporate and elect Subchapter S status. You can elect Subchapter S status even if you have a pre-existing C corporation too. Operating your business as an S corporation is one of the very few four leaf clovers still left in the tax code.


The reason for this is simple: The net income from an S corporation is NOT subject to the self-employment tax.


If structured and implemented properly, an S corporation could save you thousands of tax dollars per year. As an employee- shareholder of your S corporation, you pay yourself wages just like you would any other employee. But instead of taking profits out through payroll, you take cash distributions called "nontaxable dividends".


Nontaxable dividends are called nontaxable, because they aren't double taxed like the dividends paid to shareholders in a regular C corporation. You're still paying taxes on the net income of your S corporation when you file your personal tax return, but the tax is federal tax and not the self-employment tax.


For the sake of simplicity, if an S corporation with $100,000 of net profits pays its owner a reasonable salary of say $50,000 and non-taxable dividends of $25,000, the tax would be $7,650. This is a whopping $4,750 savings in tax! Even if you factor in additional costs such as workman's comp insurance, incorporation costs, professional fees and incidentals, the savings is still more than adequate.


The key to the whole scenario is that your salary must be reasonable under the circumstances surrounding your business. It's also much better for salary justification purposes if your business is not limited to the delivery of personal services by you. Nevertheless, incorporating and electing Subchapter S status is an excellent way to reduce your overall tax burden.


Here's more good news: If you happen to already own a regular C corporation and you live in a state that has a high corporate income tax rate, you'll come out ahead even more if you elect S status. Additionally, if you have children aged 14 or older, you can save even more taxes by giving them shares in your S corporation and having them pay the tax at their lower tax rates. By giving away shares you also reduce your estate tax obligation.


So you see, there are plenty of good reasons to incorporate and elect S status. I've only touched on a few minor points. There are many, many other valid reasons to incorporate. Just keep in mind that you should always consult with your tax advisor for your particular needs and circumstances before making any important business or financial decisions. Besides taxes, there are many legal and financial issues to contend with as well. Always look before you leap.


When it comes to your business, you should make it a point to assess the validity of your type of business structure on a yearly basis. Incorporating is definitely not just for startups. There are plenty of unincorporated businesses that are missing the boat when it comes to saving money. Don't be one of them. It pays to find out more.


Alex Goumakos is a CPA, business advisor and guest consultant of Active Filings LLC, a company that provides incorporation services in all US. (http://www.activefilings.com). Alex can be reached by email at mailto:alex@activefilings.com

Overview of Common Types of Tax Problems

Author: Boris Tomson

Source: articlesbase.com



Overview of Common Types of Tax Problems There are many types of tax problems that a person can encounter.Visit Here http://gov-debt-grantbenefit.blogspot.com Having to deal with tax issues can be stressful and intimidating, so understanding what types of tax problems you may encounter can better help you to prevent them from occurring. There are many different kinds of problems you can run into, some which are well known, and others which many people aren't even aware of. It can be difficult to have to deal with tax problems, because many people have an innate fear of dealing with the IRS. So when problems occur, they aren't quite sure what to do because they are hesitant to contact the IRS with questions and concerns that they may have. However, it is possible for you to research the information for yourself so that you do not have to make that dreaded phone call to the IRS for questions about your tax issues. Once you have researched the issues yourself, it is best for you to contact a professional to help you deal with the issues, before you actually contact the IRS. The first type of tax problem that people can encounter is problems with their payroll taxes. Payroll tax problems can vary and there are many different issues that can come up. The IRS is extremely relentless in making sure that they are able to collect on any past due payroll taxes that you may owe. It is very important for you to make sure that your payroll documents are up to date and that all of the tax information is correct. There are many cases with employers making typo errors on your tax documents that you may never be aware of. For this reason, it is important that you periodically ask your employer to review your payroll tax documents to ensure the information is correct. You also need to make sure that you often review your payroll stubs and keep track of the payroll taxes are being taken out, so that you can ascertain whether they are taking the right amount of taxes out or not. Another one of the types of tax problems you may encounter are IRS tax liens. A tax lien shows that you already owe the IRS back taxes. Tax liens can be placed upon your personal property such as your home or other types of real estate you may have such as a business location. If a tax lien is placed against your property, you will be unable to transfer or sell ownership of that property without first paying off your back taxes and having the lien removed. Trying to prevent a tax lien is in your best interest. Most people don't have the extra funds laying around to pay off a tax lien. They then realize they are in a real predicament because with a tax lien on their property, they are unable to get a loan to pay off the back taxes. The best way to prevent this of course, is to pay your taxes on time and not have a lien placed against you. An IRS levy is another of the types of tax problems that can occur. A levy is an actual attempt by the IRS to receive payment from you to pay off your back taxes. This can cause a great deal of financial burden to you, as a levy can drastically cut into the money that you have coming in. With an IRS levy, the IRS has the ability to take the money owed to them from your checking or savings account, if you have money is these accounts. However, the levy can only be placed against the account for one particular day. The bank must then withdraw any money in the accounts and send it to the IRS. The IRS cannot take any additional deposits that you may make into these accounts unless they place another levy against the account. The IRS levy can also garish your wages, so that the money they are owed is taken from your paycheck. This can result in you loosing your entire paycheck to the IRS, which will certainly put you in a real bind. Other types of tax problems that can occur are IRS seizures, wage garnishments, IRS audits and unfiled tax returns. All of these issues can cause severe issues with your taxes and greatly affect your life and your finances. It is extremely important that you retain all the necessary tax documentation that you have so that if you are audited, you can provide the information to the IRS to help prevent any action from being taken against you. Of course, preventing this negative action is only going to work if you have been truthful on your tax forms and have provided all the necessary information that is requires to ensure that you are paying the right amount of taxes. If an audit shows that you have missing tax income and unpaid taxes, this can lead to the IRS placing wage garnishments against you and seizing assets to cover the cost of your unpaid tax debt. These are just some of the types of tax problems that a person can encounter. There are of course other types of tax problems that can arise, which is why it is so important to ensure that you are properly paying your taxes every year. To prevent these types of tax problems from happening, you need to make sure that your payroll taxes are being taken out and paid properly and that you are filing your taxes each year to ensure that you do not owe any money to the government. When you file your taxes, make sure that you claim all of your income, so that if the IRS decides to do an audit, you do not end up in trouble for unpaid taxes that they may find. This is one of the number one causes of tax problems that are encountered. Properly taking care of your taxes is one of the best things you can do in life, and will prevent these types of tax problems from occurring.Visit Here http://gov-debt-grantbenefit.blogspot.com

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