income taxes

Will IRS Really Settle Tax Debt for Pennies on the Dollar?

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The latest radio commercials claim that if you owe the IRS $10,000 or more in back taxes or delinquent tax, that there are government programs that will help you settle that tax debt for pennies on the dollar. They go on to say that, with this company’s help, of course, you can make you tax debts go away, including fees and penalties. Sound too good to be true? It probably is. How IRS Settles Delinquent Tax Debts In many ways, the IRS is just like any other creditor. If someone owes them money, then they want to get paid that money. However, in many other ways, the IRS is unlike any other creditor out there. For most companies, collecting on a delinquent debt is a cost-reward calculation. The amount of possible debt recovery is compared to the cost of getting that money. For a very large debt from someone with the means to pay it, it is worth it to engage lawyers and go to court to seize assets and garnish wages. For smaller debts, or for debtors with no assets, the cost of collecting the debt isn’t worth it. There comes a point where trying to collect the debt …

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IRS Mileage Rate 2014

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Note: The latest standard mileage rate deduction amount from the IRS can be found at the updated, current article. Here come the end of year numbers from the IRS for 2014. Recently, the Internal Revenue Service released the official 2014 standard mileage rates. Keep in mind that these are the number for miles driven during 2014. You’ll be using the 2014 numbers in early 2015 when you are filing your 2014 taxes. If you need the mileage rates for 2013 those are the one you use for the income taxes you are filing in early 2014. 2014 Mileage Rate Deduction Standard As always, the IRS allows two ways to deduct expenses associated with tax deductible use of a motor vehicle. The taxpayer may claim either the actual expenses for vehicle, or claim a standard amount per mile instead. To claim the actual expenses for driving an automobile for deductible reasons, the taxpayer must keep complete records of all expenses occurred during the year. Considering how complicated filing income taxes is in the first place, why add another layer of complexity by keeping even more records, and making even more calculations. The 2014 Mileage Rates are: 56 cents per mile for …

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Tax Season Bumped Back by IRS

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The IRS announced that it was moving back the beginning of tax filing season due to the government shutdown. Apparently, workers finalizing tax forms and systems for the end of the 2013 tax year and getting them ready for the 2014 filing season were not part of the essential government workers that kept working during the recent government shutdown. As a result, the IRS is about two weeks behind on getting ready for the tax filing season. The original date when taxpayers were first allowed to file tax returns was supposed to be January 21, 2014. However, after having basically making no progress during the 16-day shutdown, that date is being moved back. Although no official date has been set for when the IRS will begin accepting 2014 returns, the agency announced a “one- to two-week delay.” That means that the earliest date would be January 28, 2014 and the latest start date would be February 4, 2014. The delay is not due to big changes to paper forms, but rather to ensuring that the electronic systems for filing, as well as the electronic tax preparer data provided to firms like TurboTax, are up to date. In addition, the IRS …

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IRS Mileage Rate 2013

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The current IRS standard mileage deduction amount is in the updated article. One of the most common tax deductions is deducting miles driven for business purposes. Even if you can’t deduct your mileage because your employer reimburses you, chances are that reimbursement rate is set to the IRS standard mileage rate. Of course, you may also deduct your actual expenses for operating a motor vehicle rather than taking the standard rate per mile. However, this requires that you keep all receipts for any expenses and properly account for a variety of complicated factors. Most small businesses and self-employed individuals use the standard rates which is simpler, and in most cases, just a generous as deducting actual expenses. Standard IRS Mileage Rate Chart There are actually three different types of IRS mileage rates for 2013. For miles driven for business, the IRS rate per mile is 56.5 cents for each mile driven. For miles driven for medical purposes, or for taxpayers deducting moving expenses, the standard IRS rate per mile is 24 cent for each mile driven. For miles driven for charitable purposes, the standard deductible mileage rate is 14 cents per mile for each mile driven. The standard deduction mileage …

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Taxes Due April 15 2013

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Don’t forget (as if you could) that your federal income taxes are due on April 15 in 2013. For the past two years, taxes were actually due on April 16th, thanks to weekends and a holiday last year in Washington D.C. No such reprieve this year, Monday April 15 is the income tax deadline for 2012 taxes being filed in 2013. If you don’t file your taxes on time, there can be some pretty stiff penalties and interest. Don’t forget, you can get an automatic six month extension to file your taxes by submitting a Form 4868 to the IRS by April 15th instead of your actual 1040 tax forms. You still have to pay your best estimate and you’ll be on the hook for any taxes due that you miss, but it is still better than not filing. If you don’t pay your taxes, they can always come after your wages and hold any future refunds. For small business owners and the self-employed, it sometimes gets lost in the shuffle of the bigger income tax deadline, but the first estimated quarterly tax payment for 2013 is also due to the IRS on April 15th. The next estimated quarterly tax payment for 2013 will …

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New Tax Withholdings for 2013

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The deal to avert the so-called fiscal cliff held most taxes steady for most taxpayers. This was, after all, the overlapping part of the political goals of Democrats and Republicans. Democrats wanted the Bush tax cuts extended for taxpayers making less than $250,000 per year, and Republicans wanted them extended for taxpayers at all income levels. The final deal keeps the tax cuts for more Americans than the Democrats wanted, and less than the Republicans wanted. To put a more specific point on this issue, however, is that the IRS issued guidance to businesses on December 31st to begin withholding higher amounts from worker’s paychecks. Since no deal was reached by the end of the year, the IRS had to move forward with the current law. On January 3, 2013, the IRS issued revised guidance that kept the withholding for everyone making under $400,000 (filing single), or $450,000 (married filing jointly), the same. Taxes Up for Everyone in 2013? Depending upon how you choose to view things, the fiscal cliff deal meant no tax increases for most Americans. However, most taxpayers will actually see a smaller paycheck in 2013. For part of President Obama’s stimulus plan, the amount employees pay …

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Quarterly Estimated Tax Payments Due Soon

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Estimated tax payments are due to the IRS on June 15 for the second quarter. (If you use a fiscal year calendar, then your second quarter payments are due by the 15th day of the 6th month of your fiscal tax year.) Use the 2012 tax tables to estimate your income and determine an approximate payment. Small business owners are required to make estimated tax payments because U.S. income tax is a “pay as you go” system. You can’t just wait until next April and pay everything at once. Remember there is a sort of tax withholding safe harbor that states that if, over the course of the tax year, you pay 100 percent of the amount of taxes you owed the previous year, you will not be liable for an under-withholding penalty. However, you will still have to pay any amount you owe come April of next year.

Tax Due Date 2012

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Taxes for 2011 are almost due. As always, the IRS tax filing deadline for 2012 is April 15th, only it isn’t. April 15th is a Sunday and taxes are not due on weekends, especially Sundays. You don’t expect government bureaucrats to work on the weekend, do you? Not to mention, you can’t get a postmark on Sunday because the Post Office is closed. So, your taxes should be due on April 16th, but they aren’t due then either. Just like last year, the Monday your taxes would normally be due on is a holiday. It isn’t a Federal holiday, but it is a holiday in Washington D.C. and when it comes to the Internal Revenue Service, the holiday schedule includes those D.C. holidays. After all of that, it comes down to for 2012 taxes are due on Tuesday April 17th. Technically, of course, that means that your taxes must be postmarked by midnight April 17th. As always, there will be certain post offices open late, some until midnight, where you can mail your taxes right up to the deadline and still get that all important postmark. If you don’t file your taxes on time, you’ll owe penalties and interest. If …

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Higher Tax Audit Chances?

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Shortly after publishing my post about your odds of being audited by the IRS, a reader sent me a message with a link to a CBS News article suggesting that your chances of being audited were actually much higher than previously thought. That is what the bold type headline screams, at least. In reality, if you read the entire article, you’ll find that the odds of triggering an IRS audit are pretty much right in line with what I said in my article. What this other news article points out is that there are ways for the IRS to contact you that aren’t really audits. If you include these not-audits in the count of actual audits, then you get, not surprisingly, a much higher number of audits. In particular, the article focuses on ominous letters that IRS sends out to taxpayers, which are very much not audits. In fact, the letters cited in the article are about as far from an audit as you can get. One of the letters informs taxpayers of a math error in their tax returns. This is not an audit. This is a notice that you messed up your math and therefore need to pay …

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IRS Audit Odds

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As tax season approaches, America’s thoughts turn to the required filing of income taxes. Theoretically, America’s tax system is a voluntary reporting system, however, that voluntary part is backed up by a pretty big stick, IRS audits. Odds of Being Audited According to IRS statistics, the chances of being audited by the IRS is about one in 100, or one percent. A deeper look, however, reveals the the IRS audits certain tax returns much more often than other returns. IRS audit statistics suggest that high-income taxpayers and those who own small businesses are more likely to be audited that middle and low income taxpayers who earn the majority of their income from wages and salary or brokerage-style investments. The reasons certain groups get audited more than others are two-fold. First, and foremost, there is more money to be gained by auditing higher income taxpayers. For example, consider a middle income wage earner, who is married filing jointly, bringing down a salary of $70,000 with no other income. Taking the standard deduction for 2011, of $11,600 for married couples filing joint, that leaves $58,400 of taxable income. Do the math and that taxpayer isn’t going to pay any more than around …

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