How to Notify the IRS of an Address Change
If you are looking to update your address in the IRS records, there are several ways to go about doing this. All changes can take up to 4-to-6 weeks to process fully in the IRS system.
Address Change
- Electronic Notification
If you are looking to update your address because your refund check was sent back to the IRS, then an electronic notification can be sent to the IRS to help expedite the check back out to you. Using the “Where’s My Refund” website for the IRS, you can successfully change your address online. You will need to provide the following information: amount being refunded to you, social security number, and your filing status.
- Written Statement
If you want to send a written statement to the IRS notifying them of a change of address, you will need to provide the following information: social security number or individual taxpayer identification number or your employer identification number, your full name including middle and last name, old address on file and your new address. Send the statement to the same address used to file your last statement.
- Tax Return
If you haven’t filed your taxes yet, you don’t need to notify the IRS. Simply fill your address section with your new address and it’ll automatically update in the IRS’s system.
- IRS Form for Businesses
If your business has changed addresses, you can fill out the Form 8822-B on the IRS website. This can be mailed to your nearest IRS office.
Changing your address is not important unless you are actively engaged with the IRS (dealing with tax returns and funds for an active tax year).
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The Most Outrageous Excuses for Not Filing Taxes
So many people feel that they have a good excuse for not filing their taxes. However, the Internal Revenue Service (IRS) doesn’t feel the same way and considers it to be tax fraud. In fact, they prosecute up to 75% of all their tax fraud cases annually. So here are some excuses that you may feel are legitimate, but are really outrageous excuses to the IRS for not filing your taxes.
- You Think It’s Voluntary
Taxes are not voluntary. Many people believe that because the Form 1040 return states that the tax system is voluntary, it means they don’t have to file for federal taxes. The IRS says the voluntary status of it is from allowing taxpayers to determine and file their own taxes according to the forms without the IRS doing it manually. However, filing the actual forms is not voluntary.
- You Don’t Owe if You Don’t File
Just because you refuse to file, doesn’t mean you don’t owe the IRS. If you decide not to file, you could pay more in restitution fees and you’ll have a Tax Fraud on your permanent record.
- You Didn’t Receive a W2 Form
Some people don’t file because they can’t contact of their employer to send their W2. The IRS has procedures for people who can’t get a physical copy of their W2, so it’s no excuse to not file.
- You Believe the IRS Will File the Return
There’s a tax code that says the IRS is required to file returns for taxpayers who haven’t filed by a certain date. The IRS says it’s a flawed perception of the code that leaves people facing criminal and civil charges.
Don’t let yourself fall into believing any of these excuses. Failure to file your taxes, especially if you owe money, can lead to both civil and criminal penalties.
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Three Things You Should Do If You Miss the Income Tax Deadline
The cut-off date to file taxes in 2016 in the U.S. was April 18 due to a government-specific holiday observance. This means that the cut-off date for those receiving extensions is October 18. If you missed the filing deadline, do not panic. It is a rather simple thing to fix.
File ASAP
If you do not require an extension, file as soon as possible. You will be subject to late filing penalties. In some cases, you may be able to get the IRS to waive these penalties. If you are due a refund, the penalty will be taken directly out of the sum you are owed.
Contact the IRS for an Extension
You can file an extension or call the IRS directly. An extension gives you an additional six months to file if it is done before the tax filing deadline. The end of the extension period is typically October 15, but exceptions exist for government-observed holidays.
Make Payment Arrangements for Late Filing Penalties
If you owe any amount to the IRS, you will owe a little more once they tack on late filing penalties and interest. Make a payment arrangement with the IRS so that you can have time to pay what is owed. The IRS will setup a suitable payment arrangement with you.
Closing Thoughts
Time gets away from people and the tax filing deadline seems to approach faster every year. Start early, as soon as all of your required documents have been received. The earlier you start on your return, the less likely you are to miss the filing deadline.
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Three Most Common Tax Mistakes
Mistakes on tax returns can trigger audits and lead to rejected returns. It is important to double and triple check your returns before filing them to prevent delays in processing your returns. Below are the three mistakes which are most commonly made on tax returns.
Transposed Numbers
Transposing numbers is easy to do. It is important to enter two or three digits at a time, and use something to keep your place when transferring long series of numbers. A pencil or highlighter is a good way to maintain your place in the sequence.
Misspelled Names
It is rather unlikely that you will misspell your name or a family member’s name, but tax professionals can make mistakes. It is necessary that you double-check all names before submitting returns. Even check that your children’s names are properly spelled as that can have an effect on your return.
Incorrect Filing Statuses
If you are married, your filing status has to match, especially when you opt to choose the married filing separately option. If you are a single parent or in a domestic partnership, you and your partner should decide who will claim head of household. Single parents should make sure they can claim their children as both parents cannot claim the same child.
Final Thoughts
Take the extra few minutes to check all of your calculations, spellings, and sign your forms. Make sure that you have completed all of the additional forms and worksheets associated with your return. Run through your entire return, even electronic versions, before submitting your return.
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Will The Family Business Estate Tax Loophole Be Closed?
Family business estates often require a team of accountants and financial advisors to sort through. During tax time, the wealthier portion of family estate business owners do whatever they can, within established legal boundaries, to reduce their tax liabilities. Some maneuvers are seen as dishonest and the Treasury plans to close in on these loopholes in the future.
Restricting Assets Loophole
Donors, or family estate executors, can transfer assets and gifts to other family members without tax liability. Estates with a value of $5.45 million for a single person or $10.9 million for married couples are taxed. Some wealthier estates are artificially reducing values of assets to reduce tax liabilities.
Placing restrictions on assets is done to justify discounting values when gifts/shares/donations are transferred. This reduces the tax liability but does not reduce the value of the entire estate.
Minority Shareholder Discount
Financial advisors for large estates can help their clients by assisting that they divide shares or sell shares of the company to ensure that they own a minority number of shares. This would reduce a stakeholder’s power in voting and lower their level of control in the business. This discount can no longer be taken. This is one loophole that has completely closed for wealthy family estates.
Closing Thoughts
It is important that your family business estate account for every dollar appropriately. It is also vital to claim the proper values of assets and belongings. An annual appraisal of assets and possessions should be completed and available for the IRS to view when questions do arise.
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Three Tax Tips to Keep in Mind if You Win the Lottery
Winning the lottery brings on immediate excitement, relief and fear. The fear is that you have an almost unlimited amount of money to spend in your lifetime as most jackpots are more than a single person needs to cover their expenses for the remainder of his life. You have to know how to claim your winnings and how to invest it to reduce your tax burden.
Check State Income Tax Laws
Not all states have individual laws requiring lottery winnings to be reported as income. Check your state laws, or inquire with an in-state tax preparation specialist, while remaining anonymous, about the laws. You may not have to claim the income for state purposes, but you will for federal income tax.
Choose the Annuity Payment Option
Choosing the annuity payment option is better for you in more than one way. In reference to taxes, you are only taxed on the amount of payments received (income) each year, not your entire winnings. It may take more time to receive your money, but it controls distribution which ultimately results in more money in your pocket.
Donate to IRS-approved Non-Profit Organizations
Making donations is something many lottery winners do, and in some cases it is merely to reduce tax liabilities. For a donation to count as a deduction of income, it must be made to an IRS-approved non-profit organization. The IRS website has a list of approved non-profit organizations available.
Final Thoughts
Before doing anything with your lottery winnings, hire a financial advisor and tax attorney to help setup bank accounts, trusts and keep your anonymity safe. It is important to claim your funds as anonymous if your state permits it.
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How Are Collectibles Taxed?
Capital gains on taxes from selling a collectible item can reach as high as 28 percent. The government sets the tax price of buying and selling collectibles high as the items are worth a significant amount of money.
What Are Collectible Items?
Collectible items are rare objects which have a unique appeal to a buyer. Some examples of collectible items are coins, stamps, rugs, books, artwork, trading cards, gems, and other antiques. These objects usually tend to be special one of a kind items or items which are part of a bigger set.
How Are Collectibles Taxed by The Government?
The tax code released by the Internal Revenue Service (IRS) has a special procedure for collectible items. The tax rates on normal item capital gains of 0, 15, and 20 percent do not apply. Taxes owed are at your normal bracket rate with a cap of 28 percent. Short-term capital gains on the sale of a collectible item are taxed at an ordinary rate.
Personal Use
Beware of the tax language which still works against you even if you purchase the collectible item for personal use. Selling collectibles the investor once owned for personal use can’t be claimed at a capital loss and selling those items for a profit will result in a taxable capital gain.
Conclusion
Being aware of how collectibles are taxed is an important part of ensuring that you’re making the right investment. Think of all of the possible ways you can avoid any capital gains taxes when investing in special collectible pieces.
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Four Types of Income the IRS Can’t Touch
Not many taxpayers are aware that there are certain types of income the Internal Revenue Service (IRS) cannot touch. No matter how much these activities improve your pocketbook they won’t increase your taxable income.
Collecting Airline Miles
Obtaining frequent flyer miles is not a taxable source of income even though this is a hotly debated topic with the IRS. The only time this can become a problem is when the passenger is compensated in the form of capital.
Rebates
Rebates are considered as a price reduction and not as a form of revenue. Using rebates towards automotive vehicles, alcohol, technology, or other items is not a reportable income for your taxes.
Carpooling
Commuting to work can become profitable if the taxpayer starts up a carpool between co-workers. Any money received from this venture does not have to be included in your income. Commuting costs in general are not deductible, but establishing a car pool where you are compensated for money is a legal way to earn non-taxable income.
Education
Going back to improve your education can be beneficial with a company that can deduct from your amount. Compensation from work to return and enhance your education is tax free as long as it goes toward undergraduate or graduate courses. Any income received from scholarships is also not taxable.
Conclusion
These are just a few examples of income which the IRS can’t touch. Make sure that any business venture you participate in follows along with the rules and regulations of the IRS.
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The Basics of Reporting Foreign Bank Accounts on Your Taxes
Americans with foreign bank accounts were once able to rely on secrecy with the IRS. Foreign bank secrecy was a longstanding tradition in many cultures, including the United States. Rampant offshore banking has significantly worn down this tradition and failure to report a foreign account is now considered criminal activity.
What Happened To Offshore Banking?
The IRS has sued the Swiss Global financial services company (UBS) claiming that they encourage American investors to hide income within unreported offshore accounts. After settling criminal charges, the UBS handed over around 52,000 undeclared foreign American accounts. The IRS is also beginning to target other common offshore bank sites.
What’s the Problem?
Not reporting the existence of a foreign account on your Report of Foreign Bank and Financial Account Form (FBAR) can result in serious fines and penalties. The biggest issue with the IRS is that taxes on foreign income earned with the foreign bank are not being paid. This can carry significant civil and criminal consequences leading to fines, penalties, and even jail time.
What Should I Do?
The best preemptive option is a “Voluntary Disclosure.” The IRS Voluntary Disclosure Program proposes a reduced penalty and promises no criminal prosecution. This is better than a “Quiet Disclosure” which involves amending past taxes, but still leads to criminal charges due to unpaid penalties.
Final Word
Failing to amend a rule-breaking foreign account puts you at serious risk and may subject you to severe penalties in the event of discovery. The IRS will only continue to crack down harder on foreign accounts in the future.
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What to Expect If You Are Accused of Tax Evasion
Most evidence obtained by the Internal Revenue Service (IRS) in tax evasion cases comes from the mouth of the accused. It’s important to consider the legal fees, penalties, and possible jail time if you purposely report your yearly income incorrectly. If you are accused of tax evasion, you can expect the IRS to follow through with their investigation in a very thorough fashion.
Keep Calm and Hire Help
The IRS will send a field agent to visit the taxpayer in order to question the alleged fraud. You can prepare yourself against this encounter by hiring an attorney experienced in tax or criminal tax cases. Anyone who questions your business should be forwarded directly to your attorney. The IRS must prove the tax return was fraudulent under the taxpayer’s own admission before they can claim it as tax evasion.
Fraud vs. Negligence
Fraudulent taxes are a “willful act done with intent to fool the IRS.” In most cases, the IRS will give you the benefit of the doubt. However, performing certain tasks such as keeping multiple financial books, claiming a false social security number, and reporting fake dependents are all examples of fraudulent cases. Any case where an individual willfully attempts fraud can result in fines of up to $100,000 and five years in jail.
Closing Thoughts
Keeping good business records, hiring a tax or criminal tax attorney, and recognizing fraudulent activities will help balance your options when it comes to being accused of tax evasion. Tax evasion is a serious offense to the IRS and should not be thought of lightly.
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