UPDATED FOR 2022
As long as your kids are doing legitimate work for your business you can hire your kids.
As long as they’re doing legitimate work for your business, you can hire your kids and pay each of them up to $12,000 per year tax-free.
It’s true. And all of this while they earn a little money AND start saving for college or that first business. And it’s all tax-free.
So you may want to hire your child(ren) to work in your business. And you want to do it for many good reasons: to teach them about entrepreneurship, develop a strong work ethic, AND for the tax-free income — up to $12,000 per child.
You can hire your kids and pay each of them up to $12,000 per year tax-free. If you hire your son to stuff envelopes and your daughter to update your website then you get to lower your personal income by $24,000! Simply by engaging your children in the family business.
If they stay under this limit, they don’t even have to file a tax return, which means they don’t pay any income tax on it. And you get to deduct their wages, which lowers your business’ taxable income.
BUT WAIT. THERE'S MORE.
The IRS ACTUALLY Rewards You For It! Source: Publication 929 (2020), Tax Rules for Children and Dependents)
If you have children between the ages of 7 - 22, you can use this strategy to save some money. Here is how it works:
- Each of your children can be employed by your business and paid an annual wage of $12,000. This is an important amount because it is the standard deduction amount for single individuals.
- Your business gets to take a deduction for the payment, thus decreasing your taxable income.
- Your children will then file their own tax return, & since they only made $12,000 they pay no federal income tax because of the standard deduction of $12,000, their taxable income is ZERO.
- So the business gets to take a deduction, but the kids pay no federal income tax. It does not get much easier than that!
This strategy can also be combined with IRA and 401k strategies to really maximize the benefit. For instance, if you paid each child $12K each as salary. You could put $6K into an IRA that is deductible, and you can use their standard deduction to take their taxable income to zero.
In that case, your business can deduct $18K per child, but again, no taxable income.
If you want to save money then hire your kids and make sure you have them actually work!
Keep track of the hours and tasks your children perform and make sure it’s age-appropriate. DOL Rules Regarding Youth & Labor The IRS isn’t going to believe your 5-year-old earned $12,000 analyzing dental records. But that 5-year-old can model those pearly whites in photographs to be used on your website or brochure! It’s easy to document an “image agreement” that pays an ongoing licensing fee right from the start.
Using this strategy, rather than just dumping change into their jar, (money you likely paid personal taxes on) you’ve moved those taxable dollars from your tax rate to your child’s tax rate and bracket, which, is zero, and you still keep the money in the family!.
There are countless jobs kids can do for you, and remember, you can pay them at the SAME RATE you would pay any other employee or outsourced company.
- Cleaning the office
- Washing company cars
- Updating customer lists on the computer
- Simple to advanced Data-entry
- Transcribing video or audio
- Trips to the post office or general errands
- Helping at the office, passing out handouts, and more
- Walking door to door, placing fliers for your business
- Updating your social media accounts (They won’t even equate this as work!)
But then, let’s say after reading the guide, you find out that this strategy “doesn’t work” if your business is a corporation.
The Corporation “Problem,” and Its Simple Solution to Hire You Kids
There are different rules for different types of businesses. And that when the owners of a corporation hire their child, there are still payroll taxes like FICA to deal with.
We even pointed this out in your free guide. See for yourself:
FICA tax may not have to be withheld on work performed by a child under the age of 18 while employed by a parent in an unincorporated business (sole-proprietorship, single member LLC or a partnership where the only partners are the child’s parents). However, there is no FICA or FUTA exemption for employing a child in an incorporated business (S or C Corp) or in a partnership that includes non-parent partners. In these cases, the children are subject to the same withholding rules that apply to all other employees.
So you DO NOT have to pay payroll taxes for employing your kids if your business is a sole-proprietorship, a single-member LLC taxed as a disregarded entity, or an LLC taxed as a partnership and owned solely by you and your spouse.
But if your business is a corporation, the IRS’s rules are clear. You must pay payroll taxes on income given to your children.
So are you stuck if your small business is set up as an S or C Corp? Or if you’re planning on switching to an S Corp like we normally recommend for maximum tax advantages?
Well, it turns out there is a workaround.
As one high-profile tax strategist says: in order to lower your tax, just change the facts.
Here’s how to do it:
The Payroll Tax Workaround to Hire Your Kids
If your business is set up as an S or a C corporation, or as a partnership with other non-parent partners, the IRS says you have to withhold payroll taxes when employing your kids.
But there is a way to get around this restriction utilizing a little creativity and a “hybrid” approach.
Instead of paying your children directly from your S Corp, you pay them out of a family management company.
You can create this simple family management company as a Sole Proprietorship separate from your S Corp, and owned by yourself or your spouse.
Its only purpose is to support the operations of your Corporation, which can include the scheduling and monitoring of jobs done by your child(ren) — and all the bookkeeping and documentation necessary to keep the jobs within IRS standards.
The family management company charges the Corporation a management fee for these services and can then pay your child — which removes them from your corporate payroll.
And since the family management company is a Sole Proprietorship owned by a parent, you, or your spouse, it falls under the IRS exemption where payroll taxes don’t have to be withheld.
By following this workaround, you’ve found a way to truly pay your kids $12,000 per year tax-free using nothing but the IRS’s own rules.
For more tax-saving tips check out how my blog on Tax Deductions VS Tax Credits! Then put on your HR hat, because you've got some little new hires to train!
The richest Americans pay less tax via paid overall a lower tax rate than average due to what the IRS shows they do differently.
The ultra-rich save the most tax, according to IRS statistics. And over 90% of them have one thing in common. They do not sign their own returns. They hire tax pros instead. It shows they paid at a combined 24% rate on average, down 1% compared to the 25% national average.
The more money you make, the more complicated the returns. But it also means the more money you have for tax planning, to pay someone to navigate the complex tax system. They find ways to legally avoid paying tax.
Most less wealthy Americans don't pay for tax planning. Thus they miss out on the various ways of legally avoiding paying taxes. Tax avoidance is finding ways within the law to keep taxation at its smallest amount. That, after all, is what the paid professionals are there to do.
Here’s what you need to know.
What Tax Planning Really Does
Tax planning is the art of arranging your affairs in ways that postpone or avoid taxes as allowed through the ever-changing tax regulations. By employing effective tax planning strategies, you can have more money to save and invest or more money to spend.
Put another way, tax planning means deferring and flat out avoiding taxes by taking advantage of beneficial tax-law provisions, increasing and accelerating tax deductions and tax credits, and generally making maximum use of all applicable breaks available under our fabulous IRS Code.
While the federal income tax rules are now more complicated than ever, the benefits of good tax planning to pay less tax are arguably more valuable than ever before.
BOOK YOUR NO-COST NO-OBLIGATION APPOINTMENT HERE TO SCHEDULE A CONFIDENTIAL VIRTUAL MEETING FROM THE COMFORT OF YOUR HOME OR OFFICE!
You might ask yourself if you can afford Tax planning, but the real question is - Can you afford not to plan and pay less tax?
There are three main collection alternatives taxpayers use to resolve an IRS back-tax debt: Installment Agreement, Uncollectable Status and Offer-in-Compromise.
Collection alternatives if you cannot pay the tax debt
We know the story: things are tight financially, so you either (1) do not file the tax return, or (2) file the return but don’t pay the balance due. But do not worry, you tell yourself, next year will be better.
Now it is 2-3 years later and a letter arrives from the IRS, and the threats start, and maybe it has even gotten to the point of actual levy and seizure activity.
Now the IRS is wreaking havoc on your financial life and you simply do not know what to do.
We know. We have helped many clients through that exact scenario. Fear not, there is a light at the end of the tunnel.
The most commonly used alternatives are extensions of time to pay and streamlined installment agreements. That’s because most individual taxpayers just need a few weeks to get the funds to pay their tax bill, or they can pay monthly.
As it turns out the IRS is usually only too happy to work with taxpayers, but there are some ground rule you need to be aware of and a roadmap to follow.
1. Tax Compliance
The first step in resolving your tax issue is to get into “tax Compliance.” Compliance means that you have filed all tax returns due for the last 6 years and have made your current tax payments. Once you are in tax compliance we can now work on resolving the back-tax issue.
2. Collection Alternatives
There are three main collection alternatives to resolve a back-tax debt: Installment Agreement, Uncollectable Status, and Offer-in-Compromise.
An installment agreement is an agreement to pay the taxes back over time. There are three variations of the installment agreement: Regular, Streamlined, and Partial-Pay.
Which type of agreement works best for you will depend upon your personal circumstances and is something we can help you address when you are ready.
Uncollectable status is when the IRS determines that you are unable to make current tax payments.
When a taxpayer is deemed uncollectable the IRS may still file a Notice of Federal Tax Lien to secure its position in the taxpayer’s assets but will not otherwise take enforcement action to seize (or levy) the taxpayer’s assets or income streams.
If you cannot pay the IRS, you can request currently not collectible (CNC) status, which strictly limits allowable expenses to necessary living expenses limited by IRS collection financial standards. CNC status is usually temporary; the IRS uses manual and automated procedures to determine whether your client’s financial situation has improved.
For CNC arrangements, the IRS will file a tax lien if more than $10,000 is owed. To request a CNC arrangement, you must contact the IRS by phone, in writing, or in person.
An Offer-in-Compromise is an agreement where the IRS agrees to accept less than the total amount owed to it and the taxpayer agrees to pay the amount negotiated, as well as maintain his or her tax compliance for 5 years following the acceptance of the Offer-in-Compromise (“Offer”).
The basis for an Offer is a formula referred to as “Reasonable Collection Potential” or “RCP.” RCP is effectively the net equity in assets plus the taxpayer’s excess future income for 12 or 24 months, depending upon how the Offer is structured.
There can be significant planning done to help a taxpayer maximize the potential for the Offer acceptance.
If you or someone you know has an issue with paying their federal taxes and needs help to end their IRS nightmare, please contact us by either phone at 844-888-1040.
Your Best Defense Against A Bank Levy
A Collection Due Process Hearing, also known as a CDP hearing, maybe your last best chance to resolve a tax controversy and stop a bank levy with the IRS short of tax litigation.
The IRS does not allow taxpayers to request these hearings for “frivolous” reasons. That includes refusing to pay tax on religious or moral grounds.
What Are Some Legitimate Reasons to Request a CDP Hearing?
- You want to seek payment alternatives such as a payment plan or an offer in compromise. To get these plans accepted, you must file all delinquent returns.
- You have a terminal illness and overwhelming medical bills.
- You can’t pay because you’re living on Social Security or unemployment.
- You can’t afford to pay with your income—the IRS has strict guidelines on this type of hardship arrangement.
Generally, the IRS must issue a Notice of Intent to Levy and Right to Request a Hearing before it sends a levy. Requesting a Collection Due Process Hearing
Complete Form 12153 Request for a Collection Due Process Hearing, and send it to the IRS at the address shown on the lien or levy notice within 30 days.
The taxpayer should check the IRS actions that he disagrees with and explain why he disagrees with such actions.
If the taxpayer receives both a lien and a bank levy notice, the taxpayer may appeal both actions.
The taxpayer must identify all reasons for disagreement, and may raise the following issues relating to the unpaid tax:
a. Appropriateness of collection actions;
c. Appropriate spousal defenses; and
d. The existence or amount of the tax, but only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability.
- To preserve the right to go to court, Form 12153 must be sent to the IRS within 30 days of receipt of the notice from the IRS.
- Under CDP, a taxpayer is entitled to only one hearing relating to a lien notice and one hearing relating to a levy notice, for each taxable period.
- If a taxpayer receives a subsequent lien or levy notice after requesting a hearing on an earlier notice, Appeals can consider both matters at the same time.
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Frequently Asked Questions
What Is A Financial Institution (Bank Account) Levy?
A bank levy is an order from the IRS to seize money from a taxpayer's bank account. The levy can be in the form of all the money in the account or a certain percentage of it. The IRS is usually pretty aggressive in going after levies, so taxpayers should always try to reach out and negotiate with the agency if they're having trouble paying their taxes.
How A Bank Account Levy Works?
A bank levy is when a creditor seizes money from a debtor's bank account to satisfy a debt. The money seized can be used to pay the creditor directly, or it can be used to pay off the debt in full. If there's not enough money in the account to cover the entire debt, the creditor may seize whatever money is in the account, even if that means taking all of the money and leaving the debtor with an empty bank account.
The Federal Government has several options for collecting tax debts, including wage garnishment, asset seizure, and bank levy. Which option they choose depends on several factors, including how much money they think they can get from the debtor and how much hassle they're willing to go
Avoiding A Financial Institution Levy: What Can We Do?
Try to negotiate a payment plan with the IRS. They may be more willing to work with you if they know you're trying to make a payment plan and not just ignoring them. You may be able to avoid legal action and have taxes withheld from your paycheck if you pay off any outstanding debts before they become due.
How Long Does A Levy Stay On Your Bank Account?
A levy stays on your bank account until it's paid in full or released. A levy is a legal seizure of your property to satisfy a debt. The IRS can seize funds from your bank account, wages, or assets to pay your tax debt.
Americans who are struggling financially and find it impossible to make tax payments can apply for IRS back tax relief through the IRS Fresh Start program.
How to Get IRS Back Tax Relief
Has the pandemic caused created you to fall behind on filing your federal income tax year return or paying your federal IRS tax liabilities? If it has, you are not the only one looking for IRS back tax relief.
More than 22 million taxpayers in the United States had either failed to file a current tax return or are behind in paying their IRS taxes due and that was before the pandemic hit.
This relief ranged from postponing certain installment payments related to Installment Agreements and Offers in Compromise to the collection and limiting certain enforcement actions.
Past-Due tax returns were still due and the IRS "continued its work to secure unfiled tax returns" but told taxpayers' in an official statement that they "should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020" thus moving the April 15th deadline and extending the filing season.
Mission-critical functions continued with certain IRS services such as live assistance on telephones, processing paper tax returns, and responding to correspondence were and still are extremely limited.
Current year Tax return bills did not go away and unpaid taxes for prior years still accrued penalties and interest.
If things have been tight financially, it can be easy to ignore the task of filing and paying your federal taxes to the IRS. Some might think that they can get caught up “next year” when things get better.
However, unfortunately, for many their financial hardship won't get better and they will skip tax filing again. And maybe again allowing the situation to snowball.
Initially, one might think they have gotten away with not paying the IRS, but eventually, the IRS will catch up with you. While procrastinating, the penalties and interest build-up to a dollar amount that is way more than what would have been owed if the returns were filed and the taxes were paid on time.
What Can The IRS Do If You Fail To Get IRS Back Tax Relief?
Internal Revenue Service Restructuring and Reform Act of 1998 was a landmark law that put respect for the individual taxpayer back into the system. It forced the IRS to more fully communicate with the public and grant taxpayers "due process" rights.
But make no mistake about it, the IRS is not a joke and has almost unlimited power. They can take away your car, your house, garnish wages, clean out your bank account and retirement fund, as well as restrict your travel by seizing your passport.
They will take anything of value – jewelry, precious family heirlooms, artwork, your gun collection, even garnish part of your social security earnings.
By then, the penalties and interest will be so high that it will feel like an impossible situation to get out of.
Did you know that some of IRS debt may not be forgiven if one declares bankruptcy? This is correct.
Just the anxiety alone is not worth getting behind on your taxes. Especially at a time when everyone needs to keep their stress level low and their immune system in tip-top shape to fight the coronavirus.
For some, the added stress could cause a more severe illness. And that's the last thing that is needed because in a worst-case scenario, that can lead to lost wages and hospital bills on top of your IRS debt.
Save Your Marriage With IRS Back Tax Relief
You owe it to yourself and your loved ones to begin the journey of coming clean with the IRS. A huge burden will be lifted from your shoulders and you will feel enormous relief when you take the first step toward getting your IRS issues resolved.
Sleep at night with IRS Back Tax Relief
So, let's see if we can begin to relieve some of that anxiety. We will take a look at all of the steps and options that you have when you get behind in filing or paying your federal income taxes to the IRS.
Facts about IRS Back Tax Relief or Tax Debt Resolution
Here are some facts about resolving your debt with the IRS.
1. The IRS wants to work with taxpayers and grant IRS back tax relief The IRS is actually on your side, in a way. The agency is typically eager and happy to collect old debts. It truly wants to work with taxpayers, but there are many, many rules you need to know about and a process to follow.
2. Only 3 types of professionals can represent you before the IRS.
While you can represent yourself in front of the IRS. It might not be the best idea, especially if your debt is very high or you've ignored the situation for a long time.
There are only three types of professionals that can represent your case at the IRS:
1) CPAs, Certified Public Accountants. But be careful: not all CPAs are experienced in IRS representation.
2) EAs, Enrolled Agents. Again, make sure the EA has experience representing clients to the IRS.
3) Attorneys. Same story as above. Not all attorneys are tax attorneys, and even not all tax attorneys have a bustling representation practice.
A great question to ask anyone you are looking to hire is “What is your offer-in-compromise acceptance rate?” 3. You'll probably need to get your bookkeeping caught up.
If you're behind on your taxes, it can often follow that you are behind on your bookkeeping as well. Anyone you hire is going to need good numbers in order to work with you, so a good first step is to catch up on your bookkeeping.
Often, tax resolution professionals provide bookkeeping catch-up services. They'll do the minimum you need in order to get you or your business in compliance.
4. You will probably need to open all of your IRS mail.
Yep, we know you. It's sitting in a stack somewhere in your home. If you haven't opened the mail, start opening it up.
It's helpful for tax professionals to know what type of notice you received. In most cases, tax resolution specialists will know the letter by form number, and that will give them an idea of where to start with your case.
The Internal Revenue Service, state tax agencies, and local entities will send a letter if one of the following happens:
- You miss a deadline for filing payroll tax reports.
- You miss a deadline for filing your personal or corporate income tax returns.
- You miss a deadline for paying the tax due from your personal or corporate income tax returns.
- You miss a deadline for filing and/or paying corporate franchise tax due.
- An amount paid is short or over what the IRS or another tax agency calculates as due.
- The agency notices a discrepancy on any of your tax returns and needs an explanation.
- You have been selected for an audit.
- You fail to respond to previous correspondence.
Getting into Compliance for IRS Back Tax Relief
Here is what you need to do to get into “compliance” with the IRS. You can't have any debt forgiven until you get into compliance.
5. You should almost always file your past due tax returns, but there are some exceptions and filing needs to be done carefully so additional debt is not triggered.
Before any debt can be forgiven, the taxpayer needs to get into compliance.
This means all past-due returns must be filed. You don't have to pay off all your debt at this time; we'll talk about what you need to pay in the next item.
However, there are a couple of really big “ifs” when it comes to this step. In rare situations, filing can trigger more debt. Also, filing a particular way can also trigger more debt.
That's why it just makes sense to get a tax resolution professional involved in every step of this process, so they can keep you out of more trouble than you're already in.
6. Pay your current taxes.
While you don't have to pay all of your old IRS debt, you do have to be paying your current taxes. This is part of getting into compliance. You need to be able to show IRS that you can pay your taxes that are current.
This means that if you have a job as an employee, withholding is being withheld from your current paychecks. Or, if you're an entrepreneur taking draws, that you are currently making your estimated tax payments.
Paying Off Your IRS Debt: Options for IRS Back Tax Relief
Here are the options you have for paying off your IRS debt.
7. Pay off the entire amount, including penalties and interest.
If you can afford to, just pay it off. You will save on legal fees, but if you're a first-time offender, you may be paying penalties and interest that you might have gotten out of if you hired someone.
8. If the IRS has made an error, get the error corrected.
For this you need a Tax Resolution Professional – they can get into the RIS files and find what they have on you. It can be scary to talk to an IRS person directly.
Review return for errors, amend return, file paper return to IRS.
IRS errors usually refer to when the IRS files a return on your behalf (called a "Substitute For Return" or SFR) and only uses the info they have on hand. Therefore, no deductions are used.
9. Spouse issue You may also have a special situation with your spouse if they promised to file and did not or they do not file correctly, or they don't pay.
As a business or an individual taxpayer, you may receive a penalty on top of what you owe to the IRS. It allows compliant taxpayers to request abatement or remove certain penalties.
A penalty abatement is a tax problem resolution designed to fully eliminate or lessen the degree of IRS penalties.
The IRS penalties can roll out penalties that range from imprisonment to civil fines.
Those fines can be over 25 percent of the total owed to the IRS.
If you have tried applying for an offer in compromise and it was rejected, penalty abatement is the next best tax problem resolution to consider.
You can use it when negotiating repayment method terms or an installment agreement.
There are several types of installment agreements:
- In Business; and
11. Understand RCP: Reasonable Collection Potential One of the key concepts in getting IRS back tax relief can be Reasonable Collection Potential or RCP.
It is the basis for making an offer to the IRS as to what you can pay.
RCP is a complicated formula based on the assets and income you currently have.
A tax representation professional can work with you to create a personal budget that can be used to present an offer to the IRS.
We will discuss offers a little later in this article.
When good, hard work is performed to create the budget, the taxpayer's chances of getting their offer accepted by the IRS improve.
When the IRS lets you know that you owe taxes, a common and reasonable response is panic, particularly if you owe a lot of money to the government. People often seek help from tax relief services. These firms represent you before the IRS, submit Offer In Compromises, discuss payment plans, innocent spouses relief, and other IRS collection alternatives.
After you receive a notice that you owe IRS money, you are likely to begin getting mail from companies claiming that they can help you negotiate the complex system of the IRS. Although these tax debt relief programs promise to be a godsend, you should be conscious that this industry has a lot of scams and fraudulent organizations.
There are legitimate companies to choose from, and if you do choose to engage a tax relief business, it is important that you pay attention and ensure that the service you use is legitimate. To read more about IRS tax debt forgiveness and related issues, check out our posts on tax debt relief services and other issues.
Do I Need a Tax Debt Relief Agency, or Can I Do It Myself?
When you're looking for tax debt relief, it's important to take into account all of your choices. These companies are experts at interacting with and handling the IRS and can save you time and frustrations, but perhaps you should know that there are options for someone like you to make arrangements with the IRS on your own, completely for free with no need for guidance. If you want to work directly with the IRS, try the IRS Fresh Start Program. Guidance and representation can also be sought from the Taxpayer Advocate Service.
IRS Fresh Start Initiative for Tax Debt Relief
Tax Debt Relief Using the Taxpayer Advocate Service
What to Expect When Choosing an IRS Tax Debt Relief Firm
The worst thing you can do when you start receiving notifications from the IRS is nothing. Whether you choose to deal with the IRS on your own or employ a tax debt relief company, make sure to find out what's going on before tax levies are put on your account and before the government collects your property and assets.
The best tax debt relief companies will work with the IRS in advance to investigate your circumstances and figure out where your tax debt comes from and what initiatives and programs you are qualified for. Some may charge a fee for performing this service also known as a transcript analysis and evaluation.
What Tax Debt Relief Negotiations Can You Expect?
A legitimate tax debt relief firm will not guarantee that you will obtain a specific type of relief. You may meet the criteria for an offer in compromise, which is where you and the IRS pay less than what you owe, provided that you can prove that you can not pay the full amount.
How Can I know if a Tax Debt Relief Business is Legitimate?
A lot of companies advertise that they can help you resolve your tax debt for "money pennies" or offer a deal that is only valid for a very limited amount of time. You might receive mail and phone calls that offer outstanding results that they can not really ensure. You should be mindful that these are common tactics used by tax relief scam artists.
I strongly recommend that you shouldn’t share any personal information with, and definitely do not pay any money to, any organization until you feel satisfied that it is legitimate. If you contact a company for more info, be sure to ask questions and evaluate the credentials of the owners of the organization.
Ask Questions & Check Qualifications of Tax Debt Relief Firms
A Final Word About Tax Debt Relief
Do You Owe The IRS Money?
Possible IRS Tax Resolution Strategies to Set Your Mind at Ease
Even for honest taxpayers, the IRS can be frightening. Unlike most other government agencies, it has the power to attach your wages, freeze your bank account and even confiscate your property, and that is enough to send a chill up the spine of any taxpayer.
If you receive a letter from the IRS saying that you owe additional taxes, it is important not to panic. It may be a frightening situation, but there are things you can do to settle your tax debt and get back on the good side of the agency.
Taxpayers have options when resolving tax disputes and paying additional taxes due and knowing what those options are can set your mind at ease.
As an expert Tax Resolution Firm, we encourage all readers facing a tax problem to contact us for a free consultation!
Regardless, it’s important to an educated taxpayer so here are three strategies you can use to resolve your tax debt and get on with the rest of your life. Not all of these options will be right for everyone, but it is important to be informed as a taxpayer.
The IRS may be frightening, but they can be surprisingly reasonable - if you know what to say and how to approach the situation.
Review the Amount Owed to the IRS and Your Tax Return in Question
If the IRS says you owe money, you should not assume they are right. The tax agency makes mistakes, as do tax prepares and ordinary taxpayers.
Whether you filed your taxes on your own or hired someone else to do it for you, it is important to examine your return and compare what you find with what they are claiming.
It pays to seek professional help for this tax review, even if you filed your own taxes.
A professional with IRS experience may uncover errors and inconsistencies you would have missed on your own, and that could end up saving you money.
There is no guarantee this review will eliminate the extra taxes they say you owe, but it never hurts to be sure. There have been many cases in which taxpayers who thought they owed money to the IRS ended up owing nothing - or even being owed a refund from the IRS.
Set Up a Payment Plan
Getting a notice of additional tax due from the IRS is frightening if you cannot afford to pay what the agency says you owe. Keep in mind, however, that you do not have to pay the bill all at once.
The IRS is often willing to set up payment plans with taxpayers, and those payment plans could make paying what you owe easier and less stressful. Once again, seek professional help and guidance here - the IRS can drive a hard bargain, and you do not want to end up with a payment plan you cannot afford.
If you fall behind on the payment plan you agreed to, you could be subject to additional enforcement action, including the tax agency garnering your paycheck or even freezing your bank accounts. Getting the help of a tax resolution professional upfront can help you avoid these serious consequences.
Explore an Offer in Compromise Settlement
If you truly cannot pay the money the IRS claims you owe, you may work out a smaller payment. The IRS may not advertise this program, but the tax agency is often willing to work with taxpayers by accepting lesser amounts if those taxpayers have few assets and a limited income. Sometimes these can be for a fraction of what’s owed if you qualify. We offer a free no obligation consultation to find out if you qualify.
If you plan to explore this last option, I advise you to work with a tax resolution expert. These compromise offers can be complicated, with legalese and language that can be difficult to understand.
You do not want to make a misstep here, and you want to ensure that paying the compromised account will result in a complete settlement of your tax bill.
Few things are as frightening as getting a letter from the IRS. That official-looking letterhead is bad enough, but what the letter says is even worse.
If you receive such a letter, you need to take positive steps right away. Ignoring the situation will not make it go away, and the sooner you start exploring your tax resolution options the better off you will be.
If you want the help of an expert tax resolution professional who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to resolve your tax problem.
Call #TheCPATaxProblemSolver toll-free at 844-888-1040 TODAY and SLEEP MUCH MUCH BETTER TONIGHT!
If you have workers in your company you are expected to owe payroll tax. Based on the size of your payroll you can need to make tax deposits with the IRS as soon as you pay your workers on the day after.
Whenever taxes are not paid on time then the IRS imposes interest and fines. If you let things go too long the fines and interest can surpass the payroll taxes.
HOW PAYROLL TAX ISSUES AND PROBLEMS OCCUR
Payroll tax issues occur in a variety of ways. When a business is short on cash and they are not paying your vendors or landlord, they are going to be out of business very soon.
In comparison, the IRS works slowly. It can be months before the IRS gets serious. Many company owners hope they will have enough money to fix their payroll problems by the time the IRS calls or visits.
Unfortunately, it does not normally happen. Instead, the issues with payroll taxes increase quarter after quarter, and interest and fines continue to accrue. By the time IRS appears things got so bad that the IRS threatens to shut down the company.
In certain cases, failure to pay payroll taxes can be a criminal offense subject to incarceration or a fine penalty. With my professional help, I may be able to prevent the IRS from making the owner taking personal responsibility for these payroll tax debts.
Under the IRS rules and regulations, there are tools that you are entitled to include the ability to contact a CPA to help you get tax relief. As a CPA with expertise in IRS tax cases, I will help you address your tax problems.
SOLUTIONS FOR PAYROLL TAX ISSUES & PROBLEMS
Solutions for your problems may include:
-Send an Offer In Compromise deal to reduce the tax debt
-Get a short-term deferral of your tax liability to give you time to get back on track
-Negotiate an Installment Payment Plan to settle your tax obligation
-Check your records to find if the IRS has determined your taxes correctly
-Determine if the IRS has expired or will expire early to recover your payroll tax debt
-Negotiate waivers of federal tax obligations so you can get a loan to cover your taxes
-Getting your tax debt ruled noncollectable so you can get a tax break from your old payroll tax debts
-Seeking relief from payroll tax levies
-Filing interest and penalty waiver charges
Each case is of course different and you need an experienced tax professional to advise you about the best approach to your situation.
BANKRUPTCY FOR PAYROLL TAX ISSUES & PROBLEMS
Insolvency filing isn't going to fix the payroll tax issues. Even if the company is a corporation, the IRS may be entitled to obtain from the owners, officers, and often even independent contractors and workers a portion of the payroll tax debt. This is defined as a penalty for the trust fund, a penalty for the recovery of trust assets, a penalty of 100 percent, a criminal penalty, or a penalty under Code Section 6672.
As a tax expert, I will help you decide whether you are responsible for the reclamation penalty for the trust fund. If we agree you are not a responsible officer subject to the penalty for the recovery of the trust fund we will negotiate with the IRS tax officers and IRS Appeals Officers to make them withdraw the penalty for the trust fund.
I would also inform you on the best way to make any partial payments to the IRS to will your personal responsibility for the fiduciary fund tax. Many company owners make hundreds of thousands of dollars of payments to the IRS only to find later that the payments have not reduced their personal IRS payroll tax debt.
When having overwhelming tax problems, a majority of taxpayers are not comfortable calling the IRS for answers and that's where I can help.
I know what it takes to get you qualified for the best tax relief possible.
Call 844-888-1040 for information.
We’ve all heard of tax credits and tax deductions. And we know that tax credits and tax deductions are good things. And that they can save you money come tax time. But have you ever considered how they work? And if there’s a difference between them? In this post, we’ll take a closer look at these credits and deductions and explain how they work with examples.
What’s a Tax Credit?
A tax credit is an amount that’s subtracted from your tax liability. leaving you the total tax you owe for the tax year. Tax credits give you a dollar-for-dollar reduction in your tax liability. Say, for example, you owe $1,000 in taxes and you have a $600 tax credit. Your liability would go down by $600, making your total tax liability $400.
Tax credits can be very valuable, so knowing whether or not you qualify for one is advantageous. Here are some common tax credits (this information is up to date as of 2020):
Child Tax Credit:
This is a very common tax credit that depends on your income to determine what you qualify for, You can get a credit of up to $2,000 per child and up to $500 for any non-child dependents.
Child and Dependent Care Credit:
If you pay for child care or dependent care, you may qualify for the child and dependent care credit. This credit can range from 20% to 35% of up to $3,000 in care expenses for a single child or dependent or 20% to 35% of up to $6,000 for two or more dependents. Why the range? The percentage you can claim as your credit depends on your income.
Earned Income Credit:
The earned income credit is a benefit for working people who have low to moderate income. For those with a qualifying child and an AGI of around $55,000 or less, this credit can be a big help at tax time. For these taxpayers, this credit can range from $3,461 to $6,431, depending on marital status, income, and how many children they have. Lower-income taxpayers can also qualify for this credit. Even if they don’t have children. Those who make less than $15,270 as a single filer or $20,950 filing jointly can get up to $519.
The Saver’s Credit:
This is a credit that allows you to deduct money put into retirement savings accounts. Qualifying taxpayers can deduct 10% to 50% of up to $2,000 (or up to $4,000 for joint filers) contributed to certain types of savings accounts. This is a must for tax planning which you can learn more about here.
Other common tax credits include:
- The adoption credit
- The American Opportunity credit,
- The Lifetime Learning credit,
- The residential energy tax credit
- the plug-in electric motor vehicle credit.
What’s a Tax Deduction?
A tax deduction is an amount that’s subtracted from your total taxable income, which is the part of your income that’s subject to tax. For your tax deductions, you can either take the standard deduction or do itemized deductions. To give an example of how tax deductions work, let’s consider the standard deduction for single filers, which was $12,000 last filing year. If you made $45,000 in 2018, you could have taken the standard deduction of $12,000, making your taxable income $33,000.
The standard deduction is a set deduction amount that almost everyone qualifies to take. For this past filing season, the standard deduction for single filers was $12,000. For those married filing jointly, it was $24,000.
Those who qualify for the standard deduction (which, again, is almost everyone) have a choice: Either take the standard deduction amount or opt for itemizing their deductions if that amount is higher.
Itemized deductions work like standard deductions to reduce your taxable income. However, you have to list them individually on your tax return and you must have a total itemized deduction amount that is higher than your available standard deduction amount to take your itemized deduction amount.
Tax Credits and Tax Deductions
Here are the current National Standards as outlined by the IRS.
If your itemized deductions added up to $13,000 and you qualify for the $12,000 standard deduction for single filers, you could (and should) take your itemized deduction amount instead, which would reduce your taxable income by $1,000 more than the standard deduction.
There are many, many itemized deductions one can take. Some examples of common itemized deductions include state income taxes, property taxes, charitable contributions, mortgage interest, certain medical expenses that exceed a certain percentage of your AGI, and the home office deduction.
How are Tax Credits and Tax Deductions Different? Is One Better?
It’s easy to confuse tax credits and tax deductions, since they can both help you save money when you file your taxes, but they are quite different. Additionally, if you were able to pick between the two (assuming the credit or deduction dollar amount was the same), you would want to choose a tax credit.
Tax credits give you a dollar-for-dollar credit off your tax liability, while tax deductions reduce your taxable income. A $300 tax credit would reduce your owed taxes by $300. On the other hand, a $300 tax deduction would reduce your taxable income by $300, which would affect how much tax you owe, yet by a much smaller margin.
Of course, you want to claim all the credits and deductions that you’re legally able to. But know that, generally, credits tend to be very valuable and should not be missed.
Choosing the IRS tax relief professional can be confusing. Here are some tips on finding the best tax expert to help fix IRS problems and save you money.
Not Every IRS Tax Relief Professional is Alike
Choosing the IRS tax relief professional for your tax needs can be confusing. Here are some tips on finding the best to help you with your tax concerns.
When you are ready to use successful and valuable methods of resolving your problematic tax matter, hire a tax professional to advocate and guide you. You can use these tactics to find the best tax resolution service for your needs today.
DO YOU NEED IRS TAX HELP? SCHEDULE A FREE CONSULTATION WITH OUR TAX EXPERTS
As you search for an IRS Tax Relief Professional to take your case, you want to look for those that have years' worth of experience in the industry. You do not want a novice firm or tax professional to gain experience at the expense of your case. You need a tax expert who has been in the industry for several years if not longer.
This amount of experience benefits you because you get a tax professional who has more than likely handled cases just like yours or perhaps even cases that were more complicated. This individual also will know how the current tax laws apply to your case and will use them to your advantage when dealing with the IRS.
Length of Time in Business
We tie the experience that a tax resolution firm can offer to you to how long it has been in business. The industry standard for determining whether a firm has experience is if it has been in business for at least five years. Depending on the experience you are looking for, hire a company that has been in business for longer than five years.
The time an IRS tax relief professional has been in business also correlates with how experienced the staff is to assist clients like you with their tax matters. You may ask the firm you are interested in hiring, how long it has operated. A newer company may lack the experience needed to resolve your complex tax case to your satisfaction.
As a client, you want the staff of an IRS tax relief professional to assist you to your satisfaction. You should look for tax resolution companies that use people who are Certified Public Accountants (CPA) or licensed as an Enrolled Agent (EA) or certified as tax attorneys.
They should also belong to professional organizations like the American Society of Tax Problem Solvers or the American Institute of Certified Public Accountants. Tax attorneys should be members of their state bar.
As a client, you may ask an IRS tax relief professional for references before you keep its services. It should offer you the names and contact details of people who have used its services in the past. If it refuses to give you references, take this as a warning sign that the company may not operate with a higher level of scruples.
Once you have the list of references, contact those individuals and ask them about:
-Their overall experience with the company
-If the company disclosed prices and fees
-Any unexpected surprises that arose in their cases
-Were the terms of agreement and services explained well
-How professional and helpful the staff was.
Based on the answers you receive, you can decide if you would like to retain the tax professionals or choose another company to consider.
A good tax resolution firm will be clear with its pricing and tell you upfront how much you can expect to pay for its services. You want to avoid firms that say they charge flat rates for their services. In reality, they could hide fees you have to pay later after your case is underway.
You should ask how much the IRS tax relief professional will charge per hour, what the retainer fee is, and if the firm charges for expenses like courier costs, documents preparation, and other miscellaneous fees.
It should provide pricing details in writing and not be subject to change without advanced notice in writing.
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Some firms offer guaranteed satisfaction. In reality, a tax resolution company cannot guarantee the outcome of your case or that you will get the resolution you want from the IRS.
A good firm will tell you upfront that the outcome of your case will depend on factors like:
-How much you owe to the IRS
-The age of your debt
-Any penalties and interest you owe
-If the IRS has moved to garnish your wages or seize your assets
-Whether the case is resolvable with an Offer in Compromise, installment agreement, or other payment option.
These factors make it challenging for any firm to guarantee how your case will be solved.
As a client, you want to hire a tax professional who will offer you personalized service. You want to say informed and in charge of your case as it unfolds.
Personalized service allows you to meet face-to-face with the person handling your tax situation, so you know the most intimate details of it well before you meet with the IRS in an audit or court hearing. You also want to know that the tax professional handling your case will answer your phone calls and emails whenever you have questions or concerns.
Your Role in the Tax Resolution Case
Finally, you want to find out what your role will be in your own tax resolution case. You should find out what the company expects from you from Day One so you can act and prepare accordingly.
You can find out these details by insisting on speaking with the professional representing you before you put him or her on retainer. You should ask how you can say proactive in your IRS tax debt case and how you can say informed as the case gets underway.
These criteria allow you to search for and find a tax professional or tax resolution firm that is qualified to handle your tax debt case. You will retain representation to guide and advise you as you approach the IRS. You also may get the desired outcome of your tax debt situation.
The Top Myths regarding Tax Pros can be found here myths.
For more information regarding IRS tax relief visit KeithJonesCPA.com.