Read This if You Need More Time to Pay Your Taxes

We have been monitoring information disseminated from the IRS and thought that the information below would be useful for you as the end of the tax season approaches.  As noted by the IRS, in order to avoid potential interest and penalties, the tax payer should strive to ensure that their 2010 Federal Income Taxes are paid in full by April 18, 2011. In the event that the taxpayer is unable to fully pay their 2010 Federal Income Taxes by that date, the IRS has made various payment options available to the taxpayer.

In March 2011, the IRS issued an article that provides advice to the taxpayer who may require additional time to pay their Federal Taxes.   Excerpts from that article are included below.

Issue Number: IRS Tax Tip 2011-64 / Published 03.31.2011

Taxpayers who owe taxes may be relieved to know that there are some options for those who owe and can’t afford to pay the full amount right away.

Here are the top 10 things the IRS wants you to know if you need more time to pay your taxes.

  1. Taxpayers who are unable to pay all taxes due are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less.
  2. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.
  3. If you cannot pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive.
  4. You may want to consider financing the full payment of your tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.
  5. If you cannot pay in full immediately, you may qualify for a short amount of additional time, up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest you incur.
  6. You may also want to consider an installment agreement. This arrangement allows you to make monthly payments after a one-time fee of $105 is paid. If you choose to pay through a Direct Debit from your bank account, the fee is reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43.
  7. To apply for an installment agreement you can use the Online Payment Agreement application available on the IRS website; file a Form 9465, Installment Agreement Request; or call the IRS at the telephone number shown on your bill.
  8. In some cases, a taxpayer may qualify for an offer in compromise, an agreement between the taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.
  9. Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make the final payment.
  10. It is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.

More information on the collection process is available at http://www.irs.gov.

Key Things to Know About Paying Your Federal Taxes and Receiving Your Federal Tax Refunds

As April 18, 2011, the deadline for filing your 2010 Federal Income Tax Returns, is fast approaching, it is important to consider some keys aspects about making your 2010 Federal Income Tax payments and receiving your 2010 Federal Tax Refunds.  In April 2011, the IRS issued several articles that address these issues and provide guidance to the taxpayer.   Excerpts from these articles are included below.

 

A.      Ten Things You Should Know About Making Federal Tax Payments  

(Issue Number:    IRS Tax Tip 2011-67 / Published on 04.05.2011)

Are you making a payment with your federal tax return this year?  If so, here are 10 important things the IRS wants you to know about making tax payments correctly.

  1. Never send cash!
  2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
  3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.
  4. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit the IRS website at http://www.irs.gov and search e-pay, or refer to Publication 3611, IRS e-File Electronic Payments for more details.
  5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.
  6. Enclose your payment with your return but do not staple it to the form.
  7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
  8. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
  9. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.

For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at http://www.irs.gov

B.      Three Ways to Pay Your Federal Income Tax

(Issue Number:    IRS Tax Tip 2011-68 / Published on 04.06.2011)

If you owe taxes but can’t pay the full amount by the April 18 deadline you should still file your return on time and pay as much as you can to avoid penalties and interest. You should also contact the IRS to ask about alternative payment options. Here are three alternative payment options you may want to consider:

1. Additional Time to Pay: Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at http:www.IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

2. Installment Agreement:  You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, Installment Agreement Request, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on http.www.IRS.gov.

3. Pay by Credit Card or Debit Card:  You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95.  Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

Link2Gov Corporation:

To pay by debit or credit card: 888-PAY-1040 (888-729-1040), www.pay1040.com

RBS WorldPay, Inc.

To pay by debit or credit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com

Official Payments Corporation:

To pay by debit or credit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed

For more information about filing and paying your taxes, visit http:www.IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at http://www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).

 

C.      Ten Things to Know About Tax Refunds 

(Issue Number:    IRS Tax Tip 2011-66 / Published 04.04.2011)

Are you expecting a tax refund this year? Here are 10 things the IRS wants you to know about your refund.

  1. Refund Options:  You have three options for receiving your individual federal income tax refund: direct deposit, U.S. Savings Bonds or a paper check. You can now use your refund to buy up to $5,000 in U.S. Series I Savings Bonds in multiples of $50.
  2. Separate Accounts:  You may use Form 8888, Allocation of Refund (Including Savings Bond Purchases), to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.
  3. Tax Return Processing Times:  If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received. If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
  4. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.
  5. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.
  6. Check the Status with IRS2Go IRS2Go is a smartphone application that lets you interact with the IRS using your mobile device. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and the exact whole dollar amount of your refund shown on your return.
  7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 available on the IRS website at http://www.irs.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
  8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
  9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
  10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

For more information, visit the IRS website at http://www.irs.gov or call 800-829-1040.

Links:

  • Where’s My Refund?
  • Form 3911, Taxpayer Statement Regarding Refund (PDF 62K)
  • Form 8888, Allocation of Refund (Including Savings Bond Purchases) (PDF)
  • Tax Topic 152 — Refunds
  • Frequently Asked Questions

YouTube Videos:

  • Where’s My Refund? English|Spanish |ASL
  • Free IRS2Go Phone App: English|ASL
  • Use Split-Refund Option to Buy Bonds: English |Spanish|ASL  

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Keeping Good Records Reduces Stress

The IRS issued an article, reprinted below, in mid August as advice to tax preparers regarding the need to maintain proper records and how an efficient and accurate recording keeping system will benefit you during tax season. As an individual and a business owner, I think it is important to maintain proper records for more than just tax reporting requirements. Having an accurate set of financial records will provide you with a wealth of information to support decision making, plan for future events, avoid unnecessary expenses, and allow you to obtain a good understanding of your financial position at any given time.

From an individual perspective, I think the tips are good, basic guidelines to follow. You should make sure that you have a sound filing system and you take reasonable steps to preserve your important financial records from disaster or loss of access. There are numerous off the shelf applications that you can use to support your record keeping and streamline your tax reporting requirements. These applications are relatively inexpensive and provide an intuitive user interface to allow any user to easy track their financial information. With more reliance on paperless billing and internet based information sources, you should consider what information is acceptable to be available on your service providers polices verse information you should download and maintain on your computer or print and file away. Many vendors will only keep a very minimum amount of billing and other information available on their website, so it will be important for you to make sure you obtain a copy of this information and then properly store it.

As a small business owner, I think some of the most important considerations that you must have are around maintaining proper substantiation for transactions. There is a significant portion of the tax code relating to documenting and supporting the business purpose and use of various assets; especially those assets that may also be used for personal purposes. It is very important that business owners capture contemporaneous evidence and substantiation to help protect themselves from any issues that may develop between them and the IRS. Some common issues that tax payers can run into include, re-characterization of distributions as wages, support for vehicle expense, establishing the basis of contributed assets, etc. A good record keeping system will allow you to be able to quickly retrieve necessary information should the IRS question your return.

Please take a read of the IRS tip, which is reprinted below. If you have any questions or would like to discuss any of the information below or any technology bases solutions that may be available, please feel free to contact us at info@fusionaccountingllc.com or (312) 970-1122.

Keeping Good Records Reduces Stress at Tax Time

You may not be thinking about your tax return right now, but summer is a great time to start planning for next year and to make sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.

Here are a few things the IRS wants you to know about recordkeeping.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

  • A home purchase or improvement
  • Stocks and other investments
  • Individual Retirement Arrangement transactions
  • Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

  • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
  • Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
  • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAXFORM (800-829-3676).