Tax "Must Knows"
How To Shop For a Tax Relief Specialist
If you are having tax problems and are facing serious consequences such as owing tens of thousands of dollars in back taxes, facing foreclosure or a lien on your property, you are probably searching for tax relief, you may want to consider hiring a professional to help you resolve the matter. But when shopping for a tax professional, you should be very cautious.
Just as is the case with other professions, there are well-qualified and honest tax professionals who can help offer you some tax relief, and there are others whose credentials and ethical standards may be lacking.
This is a serious matter that requires a professional with solid credentials and integrity. After all, you are looking for tax relief, not someone who will promise to solve your tax problems only to charge you a large fee and fail to represent you. So when looking for tax professionals, shop carefully, and fully investigate their qualifications and reputation before paying for any services. For help with this, follow some of the guidelines below:
• Make sure your tax professional has the proper license. Most tax professionals who offer tax relief with IRS tax problems call their specialty "tax representation." They work with you, the IRS and your state income tax board to design a manageable plan for you to file your taxes and to get out of debt. The only professionals that are allowed to deal with the IRS are Certified Public Accountants, Enrolled Agents or Tax Attorneys. CPA's and tax attorneys must be licensed in the sate they are practicing in, while Enrolled Agents can practice in any state. Verify their qualifications. For accountants, check their license with your local State Board of Accountancy For tax attorneys, check with your local American Bar Association. To verify an Enrolled Agent's qualifications, check with the IRS.
• Any complaints on file? Check with the Better Business Bureau (www.bbb.org) to see if there are any complaints on file against the tax representative you are considering.
• Check for references. Understand that due to privacy rules, tax professionals cannot offer referrals without their customers' express consent. Still, if the professional is unable to provide you with a list of any past clients who were willing to go on the record about how their tax problems were successfully handled, you may want to take the lack of references into consideration.
• Beware of guarantees and extreme promises. The old adage, "if it sounds too good to be true, it probably is" certainly holds true when it comes to looking for tax relief. If a tax representative promises to wipe away your tax problems with little or no cost to you, you may want to remain skeptical and shop for tax relief somewhere else.
If you are searching for a tax professional and are looking for tax relief, shop carefully. The last thing you want is someone who will charge you high fees and leave you with your tax problems.
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Learn How to Avoid a Tax Audit
All around our country, people are struck with the fear of running into trouble with the IRS and possibly encountering an audit. However, you can manage to stay on top of things with proper preparation and organization and avoid an audit.
It’s virtually impossible to determine the chances of getting audited by the IRS. However, there are some key factors which could help decrease the chance of such to occur.
• Keep detailed and organized easy-to-find records of any deductions you make.
• Avoid reporting a deduction twice. If you are filing using multiple schedules, it may be easy to mistakenly deduct the same expense on two different schedules.
• If a W-2 or 1099 form you received was incorrect, ask the issuer to send you a corrected copy and send it along with your return.
• Keep copies of all substantiating material, such as W-2's, 1099's, canceled checks and relevant receipts filed with completed copies of your return. This will make them easier to locate if you are audited.
• Report all of your income on the proper lines of your tax return. If the income from your W-2's isn't reported where it should be, the IRS could get confused, and ask you to clarify.
• Make sure you report all of the income that is associated with your social security number. (W-2's, 1099's and interest payments) The IRS uses your social security number to track income attributed to you, and matches it against the income you report.
If you do get audited, don't panic. Remember that some people are selected to be audited at random, while other selections are based on certain statistical comparisons. However, receiving an audit notice doesn't automatically mean that you are in trouble with the IRS, or that you owe them more money. It simply means they have questions on your return. Your chances of successfully surviving an audit are greater if you are properly prepared, and have supporting documents for the information on your return.
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IRS Penalties and Interest For Late Tax Payments
There are very specific penalties and interest that the IRS charges for late or non-payments of income tax owed. The IRS also is very diligent about charging the penalties and interest and is usually timely in sending notices after the review of the tax return.
April 15th is the deadline for most people to file their individual income tax return and pay any tax owed. If you have not paid the tax in full and if there is any money owed, you will be sent a bill. Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short–term rate (currently 7%) plus 3 percent. Interest is compounded daily.
If you file on time but don't pay all amounts due on time, you'll generally have to pay a late payment penalty of one–half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is applied. Further, the one–half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals, who file by the return due date, the one-half of one percent rate decreases to one-quarter percent for any month in which an installment agreement is in effect.
If you owe tax and don't file on time, the total late–filing penalty is usually four and one-half percent of the tax owed for each month, or part of a month, that your return is late up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.
You must file your return and pay your tax by the due date to avoid interest and penalty charges. For individuals, the due date is April 15 th of each year unless that date falls on a weekend. In that case, the due date is the first Monday after the 15 th.
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