Address Change

1. 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.

2. 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.

3. 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.

4. 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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1. 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.

2. 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.

3. 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.

4. 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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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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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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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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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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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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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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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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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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