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Internal Revenue Service sign with a traffic signal in the foreground indicating a red light.
There are advertisements all over media which make claims about the settlement of tax debts that taxpayers need to pay to the IRS. The particular settlement program is known as Offer In Compromise. However, the fact that a vast majority of Offer in Compromise applications are rejected is something you should be aware of. 

In a report made by the Government Accountability Office, there were 16 million people with tax debts as of 2010. During that time, only 31,000 Offer in Compromise applications were approved, while approved Installment Agreements numbered to 4 million.

The acceptance rate for Offer in Compromise is low because of two main reasons.

  1. There are a lot of taxpayers who apply, but do not fulfill the base qualifications for Offer In Compromise.
  2. The taxpayers who do qualify are unable to pay the amount they offer.

Do you Qualify for Offer in Compromise?

The basic criteria that is used by the IRS to determine the acceptance of an application for Offer in Compromise is the ability of the taxpayer to pay their tax debt. There is a tool on the IRS website known as the OIC Pre-Qualifier that can help you get a basic idea of your acceptance eligibility.

The basic idea to qualify for an OIC is for a client to prove their inability to pay the total tax debt before the expiration of the collection statute. This is done by viewing the net equity of assets along with any kind of future income. Monthly disposable income is basically what the IRS uses to calculate future income to determine whether a tax debt can be paid before the expiration of the collection statute.

If the final calculation determines the inability to pay your tax debt, you are considered eligible for Offer in Compromise.

You should know that eligibility does not equal acceptance. You must be able to pay the offer amount computed by the IRS in order for your application of Offer in Compromise to be accepted and the debt to be settled.

Can you Pay the Offer in Compromise Amount?

There is a formula used to objectively determine whether you can pay the amount proposed in the Offer In Compromise. The formula requires an estimate of your future income for 1-2 years.

Due diligence is necessary for calculations of the offer amount. Sometimes, people who have a tax debt overestimate or underestimate this amount in their calculations. They need to properly calculate their disposable income for each month and the net equity in the assets they own. Due diligence is also important in order to avoid what may become a lengthy and costly investigation process.

2011 Fresh Start Initiative by the IRS

The number of qualifications and acceptance of Offer In Compromise has been rising since 2011. The reason being the Fresh Start Initiative which has made it easier to qualify for Offer in Compromise. The 2011 initiative also enabled the people who owe taxes to pay a lesser offer amount.

Before the introduction of the initiative, offer amounts for tax debt settlement were considerably higher than they are today. Before the initiative, future income would be summed up for 4 years instead of the 1-2 years that is now calculated since the Fresh Start Initiative.

There was a 30% increase in applications for Offer in Compromise after the introduction of Fresh Start, while the IRS’ acceptance rate has increased from 25% to 42%.

Conclusion

The Offer in Compromise should only be considered when your financial situation is poor enough to hinder your ability to pay the complete tax debt until the expiration of collection statute. The criteria for qualification and acceptance of an Offer in Compromise application is quite clear in order to decide between pursuing an Offer in Compromise or not.

The difficult task is the calculations and estimations involved in computing the ability to pay and the net equity in assets. You should look closely into the feasibility of the Offer in Compromise in regards to your financial situation. Sometimes, there are suitable alternatives to Offer in Compromise such as a Partial Pay Installment Agreement or a Currently Non Collectible Status.

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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

Tax Return - Complete Controller

The average American taxpayer has quite a few options when it comes to preparing their tax return. Those with a modest income, employees, tenants, and low investment owners are better off filing their taxes online through tax preparation websites. The online services are quick, inexpensive, and offer a convenient solution for your basic tax needs. Certain brick and mortar tax preparing services have now launched their websites for such clients.

However, not all tax situations are similar. If you own rental properties, run a business, or have other investments, preparing a tax return is a lot different and, in many cases, will require the services of an expert. A professional tax preparer will ensure that your deductions are maximized and that you end up with a significantly lesser tax burden. However, even an expert requires tidy bookkeeping and specific items to help you file a return to the best of their ability. Check out America's Best Bookkeepers

Identification

You are required to have a photo identification that would appear on top of the 1040 form. Any type of identification document is sufficient to go through this step. A social security card is the most crucial identification document when preparing a tax return. If you have a spouse or family planning to file jointly, everyone’s social security cards are required. Married individuals need their spouse’s signature on their tax returns before they are submitted to the IRS.

For US citizens, a social security number works just fine. However, in some cases, other nationality holders are required to file income tax returns. They need to acquire an ITIN (individual taxpayer identification number) and bring it to the tax preparer’s office to proceed.

Proof of Income

The purpose of income tax is not only to inquire about what you earn at your place of employment but also from other sources, such as investments, businesses, the sale of the property, etc. Not all of your income gets taxed at the same rate, and some won’t be taxed. However, you have to disclose everything. Earned income will be taxed separately from unearned income.

You must have an official income statement from each of your income sources. Your employer reports your earned income as a W-2, while self-employed individuals report it as a 1099-MISC. You must bring all of these income documents to the expert’s office to prepare your tax return. Below are some types of incomes that you should report to the IRS. Check out America's Best Bookkeepers

  • Earned income
  • Income from business
  • Rental income
  • Social security benefits
  • Royalties
  • Gambling earnings
  • Rental income
  • Income earned as dividends on stock
  • Alimony

Once you have acquired everything that is needed, you can proceed with the deductions and exemptions.

Proof of Expenses

The most important reason for hiring a tax expert is increasing your deductions in compliance with the IRS rules and regulations. All taxpayers are permitted for a standardized deduction. However, if you want to reduce the tax burden, a lot can be achieved by providing substantial documentation of your expenses when preparing your return. Check out America's Best Bookkeepers

This is why it is essential for you always to keep receipts as they are the sole proof of your expenses. Businesses are often liable to the most amount of deductions in the form of business expenses. Though, there are deductions like medical bills, childcare expenses, mortgage interest, and charitable contributions that can be included in personal expenses.

Proof of Disaster, Theft, and Other Unexpected Losses

If someone has encountered an unexpected situation and suffered heavy losses, you must not think that the IRS is going to get you. Several provisions in the tax code are designed to help individuals and businesses who have incurred substantial damages.

To claim a loss or theft, you will have to provide proof of ownership and how it was taken away from you. If you have requested a part of the damages with your insurance, that must be clearly stated. In most cases, victims of natural disasters are exempt from taxes by providing proof of lost property and rebuilding expenses.

Conclusion

Individuals who can produce all of the items mentioned above do not need to worry about preparing a tax return. You need to find a good tax preparer and get this taken care of before the due date with substantial deductions.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
2018 Tax deadlines - Complete Controller

The IRS issued regulations, both temporary and final, on July 18th, 2017, updating the due dates and rules that define extensions (such as the time to file tax returns). The regulations apply to returns filed on and beyond July 20th, 2017. Much of the statutory changes were in effect from December 31st, 2017. Such changes supersede the final regulations. Check out America's Best Bookkeepers

In 2015, Congress passed many bills that incurred statutory changes, and those changes get summarized within these final regulations. The statements did contain provisions affecting certain things that aren’t related to or affected by the main bill. The two bills that did so were “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” and “Protecting the Americans from Tax Hikes Act of 2015”.

If there is a case when a filing due date (for regular taxes) falls on a non-business day (such as a Sunday, Saturday, or a Public Holiday), the due date is postponed to the next business day. 2016 saw an adjustment in many of the due dates for filing because of this rule. These dates include:

  1. Individual and FBAR Due Date
  2. Form 1041 Due Date
  3. Partnership Extended Due Date
  4. Form 1041 Extended Due Date
  5. C Corporation Due Date Check out America's Best Bookkeepers

Tax Returns for 2017 that are to be Reported in 2018

W-2 Forms, submitted either electronically or by mail, are due by January 31st.

Partnership businesses are supposed to fill out Form 1065, and S Corporations are supposed to submit Form 1120S. Both of these are due on March 15th. The deadlines for these can be extended up until September 17th.

Trusts and estates must submit Form 1041. Form 1120, which has to be provided by C Corporations, must be submitted by April 17th. These can be extended up until October 1st and October 15th, respectively.

Tax-exempt organizations are due to submit the Form 990 Series by May 15th. The extended due date for this form is November 15th.

The Form 5500 Series, which is supposed to be submitted for the Employee Benefit Plan, is due on July 31st, with the extended due date being November 15th.

For the corporations and businesses that file according to Fiscal Years, the following is accurate.

 Filer Type

Due Date (Counted after End of Fiscal or Plan Year)

S Corporations and Partnerships

The Fifteenth Day of the Third Month

C Corporations

The Fifteenth Day of the Fourth Month

Employee Benefit Plan

Last Day of The Seven Month

It is essential to check the due dates for tax returns in the states relevant to you because, sometimes, the due date set by individual states may differ from the federal due dates for filing. Check out America's Best Bookkeepers

Changes That You Should Be Aware Of

  1. Form 1065 Filers (Partnerships) are getting a more extended extension period, which can be up to 6 months. Previously, they were able to have a five-month extension.
  2. Form 1041 Filers (Trusts and Estates) have a maximum extension of 5 ½ months, granting them a two week longer a limit of extensions than the threshold for previous rules.
  3. The Report regarding Employee Benefit Plans will be getting an automatic extension to a maximum of 3 ½ months.
  4. Reporting of Data on Financial and Foreign Bank Accounts will have the same due date as Individual Form 1040, with an extension of up to 6 months. The convenience provided by this change is the alignment of the Individual and FBAR filing. The penalty for failure to file a request for an extension in time can get waived by the IRS.
  5. The automatic extension for those filing the 990 Series (i.e., Tax Exempt Organizations) will be getting a longer extension, which will be six months rather than the former three-month automatic extension.
Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
tax return time - Complete Controller

 Filing a tax return is a yearly activity undertaken as a moral and social obligation by every citizen of the country. Whether it’s a business or an individual, everyone is liable to file returns because these are the means for the government to define the amount and plan the expenditures of its citizens. It also offers a stage for the filer to claim refunds and other forms of relief from taxation as they become eligible for it. A specific amount or percentage of your income is taxed, and failing to do so can result in penalties and other severe repercussions. Check out America's Best Bookkeepers

Legal and Social Implications of Filing a Tax Return

There is generally a fixed date at the end of each financial year to file tax returns. Although, for cases that need auditing before filing, the time may be a little later. When you submit the returns, you define a legal sanction for your income to be used, however, and wherever. Similarly, the inability to pay taxes on time can result in legal action against you, depending on the due amount. However, generally, the repercussions of late payments are related to higher interest rates and penalties.

Also, it is your social duty as a citizen to file a tax return. Because you use facilities provided by the government every day, such as roads, public transportation, parks, and others, which require regular maintenance, it is in your interest to pay tax bills on time. Complying with your social duties makes you a responsible citizen of the country, and, with time, your social status improves. Check out America's Best Bookkeepers

Loans and Registrations

When you apply for a home, education, or any other type of loan, it is mandatory to show your returns to the lending institution. We all require loans from time to time, whether for business or individual purposes. Maintaining a good tax history can ensure that you are approved every time you are in need. Also, ensure filing a tax return before your VISA processing. There might be certain travel restrictions imposed by the government on people who have not filed their returns.

Registration of your immovable assets, in individual states, requires you to show tax returns, and, without it, the specific property or asset cannot be registered in your name. If you have filed your profits, the whole process can be a lot easier for you. Also, certain credit cards will not approve non-filers; therefore, if you want to have a credit card, file as soon as possible.

Filing a Tax Return for Government Tenders

For someone who has a business that involves dealing with government institutes and some private corporations, tax returns must be filed. In some cases, you may have to show the receipts for the past five years because they like to ensure that they are dealing with an individual or business who has a good track record. However, this is not a hard and fast rule, and, in some cases, you may get the tender without showing the returns. Therefore, it depends on the institution with which you are dealing. Check out America's Best Bookkeepers

Faster Refunds

Refunds in taxation work on a first-come, first-serve basis. The earlier you file your return, the sooner you will get your refund. When you are filing a tax return, you disclose everything that you have earned in that financial year. The IRS reviews your returns and, individuals who filed earlier are eligible for the reimbursements quicker than others. Filing early ensures that, if you had made a mistake, you have enough time to review it and correct it.

Therefore, there are numerous benefits to filing a tax return on time. As a responsible citizen of your country, it is your moral obligation to ensure that you do so.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers