IRS aid with delinquent taxes

Several tests are used by the IRS to decide whether to remove interest penalties. The tests to reduce the IRS tax interest are stricter than the tests used to reduce the fines.

To reduce the IRS tax interest, a taxpayer must demonstrate that the interest was one of the following:

  • Attributed to certain Irrational errors or delays by the IRS [IRC 6404 (e) (1)]
  • Due to an account for a Taxpayer located in a declared disaster area [IRS 7508A]
  • The IRS tax interest was used against a taxpayer while the taxpayer was located in a combat zone [IRS 7508]
  • Was used against a taxpayer while the taxpayer qualified for military deferment [Title 50 Appendix section 570 USC]
  • Excessive, erroneously or illegally blocked by statute, the IRS tax interest [IRC 6404 (1)]
  • Evaluated in the wrong refund [IRC 6404 (e) (2)]
  • The IRS tax interest is due to an additional liability that was not identified by the IRS in a timely manner [IRS 6404 (g)]

A taxpayer can never argue “reasonable cause” (or extenuating circumstances) to lower the IRS tax interest. A taxpayer can use “reasonable cause” and various other options to request the reduction of penalties. Reducing penalties involves a different process than removing IRS tax interests, and therefore a tax professional can provide aid.

The IRS will consider reducing penalties if a taxpayer can prove one of the following:

  • Trust in the erroneous written advice of an IRS official or employee
  • Trust in the erroneous written advice of a tax advisor
  • Reasonable cause
  • First time reduction (FTA)

The two most regular requests for penalty reduction are for (3) Reasonable Cause and (4) First Time Reduction (FTA).

There is logical cause when a taxpayer exercises prudence and ordinary business care, but is still unable to file the claim on time, pay on time, or meet their tax obligations. Basically, taxpayers must demonstrate that, despite their best efforts, they were prevented from meeting their tax obligations due to events beyond their control. Some examples of logical causes include serious illness, death, natural disasters, major family events, unavoidable absence from the country, and military service. Fine reduction requests generally require supporting documentation to be successful.

First Time Reduction (FTA) is available to taxpayers who:

  • either they have been required to file a return or no prior penalties have been imposed on the returns filed during the previous 3 years, and
  • have submitted all currently required returns and paid or arranged to pay any taxes due

First Time Reduction (FTA) can only be used for a single tax period. For instance, if a taxpayer requests a reduction in the penalty for fiscal years 2013, 2014, and 2015, the first-time reduction will only apply to the oldest period (2013). To reduce the fines for 2014 and 2015, the taxpayer must demonstrate confidence in written notice or reasonable cause.

IRS tax interest and penalty reduction are available to taxpayers who qualify for these services. Be sure to check with Community Tax to see if your delinquent tax problems can be resolved today.

IRS FormsHow to file taxes with IRS Forms 1099-MISC

If you receive a 1099-MISC form for the services you make available to a client as a sovereign contractor and the annual net income you receive totals $ 400 or more, you will need to file your taxes a little differently than a taxpayer who collects a Regular income as an employee reported on a W2 form.

One of the most trivial reasons you may have received Form 1099-MISC is if you are self-employed or worked as an independent contractor in the past year. The Internal Revenue Service (IRS) refers to this as “non-employee compensation.” In most conditions, your clients are required to issue Form 1099-MISC when they pay you $ 600 or more in any year. As a self-employed person you are required to report your income from self-employment if the net amount you receive from all sources totals $ 400 or more. In this case, the process for filing your taxes is a little different than a taxpayer who only receives regular income from employment in a Form W-2.

Take deductions

One of the benefits of receiving a 1099-MISC instead of a W-2 is that you can submit deductions on your Schedule C, which is used to calculate the net income from your self-employment. Deductions must be for business expenses that the Internal Revenue Service (IRS) considers ordinary and essential for your activities.

An expense is ordinary if it is made by self-employed individuals in a related field.

An expense is necessary if it is useful for you to complete your work. An expense does not have to be essential to be necessary. For example, the cost of a sophisticated computer program is an ordinary and necessary expense for a freelance graphic designer. On the other hand, the cost of hiring a limousine to travel to clients can be useful, but it is not necessary according to tax regulations.

You can submit Schedule C-EZ which is shorter if your deductible business expenses are $ 5,000 or less. Whether you use Schedule C or C-EZ, you will calculate your net income by taking total income as a self-employed person, including earnings not reported on a 1099-MISC form and subtracting deductible business expenses you incur. The net profit that results must be transferred to Form 1040 and combined with your other income to calculate your taxable income.

Estimated tax payments

One of the things you will notice on your 1099-MISC forms is that your customers don’t withhold income tax from your payments like they do for their employees. However, this does not imply that you can wait until you prepare your tax return to pay 100% of your tax liability. Instead, you’re probably required to make up to four estimated tax payments to the IRS during the year. The amount and frequency of your estimated payments will depend on how much income you have, withholding tax from other employment income, and the method you choose to calculate your estimated taxes. Use form 1040-ES to find out your estimated tax liability.

 

 

Self-employment tax

As a self-employed person, you must always pay Social Security and Medicare taxes. However, since your income on Form 1099-MISC is not subject to withholding taxes on your own account, you are required to calculate and pay these taxes yourself and not with a tax expert like a tax attorney. These reflect on Schedule SE, which must be fixed to your tax return. Only the net profit reported in Schedule C is calculated on self-employment taxes in Schedule SE. Income from investment earnings is not subject to Social Security and Medicare.