Thursday, April 26, 2012
Missed the Income Tax Deadline – IRS Offers Help for Taxpayers
The IRS has some advice for taxpayers who missed the tax filing deadline.
Don’t panic but file as soon as possible. If you owe money the quicker you file your return, the less penalties and interest you will have to pay. Even if you have to mail us your return, the sooner we receive it, the better.
E-file is still your best option. IRS e-file programs are available for most taxpayers through the extension deadline – October 15, 2012.
Free File is still available. Check out IRS Free File at irs.gov/freefile. Taxpayers whose income is $57,000 or less will qualify to file their return for free through IRS Free File. For people who make more than $57,000 and who are comfortable preparing their own tax return, the IRS offers Free File Fillable Forms. There is no software assistance with Free File Fillable Forms, but it does the basic math calculations for you.
Pay as much as you are able. Taxpayers who owe tax should pay as much as they can when they file their tax return, even if it isn’t the total amount due, and then apply for an installment agreement to pay the remaining balance.
Installment Agreements are available. Request a payment agreement with the IRS. File Form 9465, Installment Agreement Request or apply online using the IRS Online Payment Agreement Application available at irs.gov.
Penalties and interest may be due. Taxpayers who missed the filing deadline may be charged a penalty for filing after the due date. Filing as soon as possible will keep this penalty to a minimum. And, taxpayers who did not pay their entire tax bill by the due date may be charged a late payment penalty. The best way to keep this penalty to a minimum is to pay as much as possible, as soon as possible.
Although it cannot waive interest charges, the IRS will consider reductions in these penalties if you can establish a reasonable cause for the late filing and payment. Information about penalties and interest can be found at Avoiding Penalties and the Tax Gap.
Refunds may be waiting. Taxpayers should file as soon as possible to get their refunds. Even if your income is below the normal filing requirement, you may be entitled to a refund of taxes that were withheld from your wages, quarterly estimated payments or other special credits. You will not be charged any penalties or interest for filing after the due date, but if your return is not filed within three years you could forfeit your right to the refund.
More information can be found at irs.gov.
Tuesday, April 17, 2012
Eight Facts to Know if You Receive an IRS Letter or Notice
The IRS sends millions of letters and notices to taxpayers for a variety of reasons. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.
Here are eight things to know about IRS notices and letters.
1. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return.
2. Each letter and notice offers specific instructions on what action you need to take.
3. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
4. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
5. If you do not agree with the correction the IRS made, it is important to respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left of the notice. Allow at least 30 days for a response.
6. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right of the notice. Have a copy of your tax return and the correspondence available when you call to help the IRS respond to your inquiry.
7. It’s important to keep copies of any correspondence with your records.
8. IRS notices and letters are sent by mail. The IRS does not correspond by email about taxpayer accounts or tax returns.
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Here are eight things to know about IRS notices and letters.
1. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return.
2. Each letter and notice offers specific instructions on what action you need to take.
3. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
4. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
5. If you do not agree with the correction the IRS made, it is important to respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left of the notice. Allow at least 30 days for a response.
6. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right of the notice. Have a copy of your tax return and the correspondence available when you call to help the IRS respond to your inquiry.
7. It’s important to keep copies of any correspondence with your records.
8. IRS notices and letters are sent by mail. The IRS does not correspond by email about taxpayer accounts or tax returns.
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Failure to File or Pay Penalties: Eight Facts
The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.
Here are eight important points about the two different penalties you may face if you file or pay late.
1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.
3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.
7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect
Here are eight important points about the two different penalties you may face if you file or pay late.
1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.
3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.
7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect
Tuesday, April 10, 2012
Everything You Need to Know About Making Federal Tax Payments
If you need to make a payment with your tax return this year, the IRS wants you to know about its payment options. Here are 10 important facts to help you make your tax payment 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 checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, 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. If you file on paper, you can 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 on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.
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.
10. 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 www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
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 checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, 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. If you file on paper, you can 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 on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.
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.
10. 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 www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Three Ways to Pay Your Federal Income Tax
If you cannot pay the full amount of taxes you owe, don’t panic. You should still file your return and pay as much as you can by the April 17 deadline to avoid penalties and interest. You should also contact the IRS to ask about payment options. Here are three alternative payment options you may want to consider and a tip on penalty relief under the IRS Fresh Start Initiative:
1. Pay by credit or debit card You can use all major cards (American Express, Discover, MasterCard or Visa) to pay your federal taxes. For information on paying your taxes electronically, including by credit or debit card, go to www.irs.gov/e-pay or see the list of service providers below. There is no IRS fee for credit or debit card payments. 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:
WorldPay US, Inc.:
To pay by credit or debit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com
Official Payments Corporation:
To pay by credit or debit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed
Link2Gov Corporation:
To pay by credit or debit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
2. 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 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. There is no fee for this short extension of time to pay.
3. Penalty relief To assist those most in need, a six-month grace period on the late-payment penalty is available to certain wage earners and self-employed individuals. An approved request for a six-month extension of time to pay will result in relief from the late-payment penalty for tax year 2011 if:
4. Installment agreement You can apply for an IRS installment agreement using the Online Payment Agreement (OPA) application on IRS.gov. This web-based application allows taxpayers who owe $50,000 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, eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, or Form 9465-FS, Installment Agreement Request, make your request in writing, or call 800-829-1040. For balances of more than $50,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. You may be able to avoid the filing of a notice of federal tax lien by setting up a direct debit installment payment plan. For more complete information see Tax Topic 202, Tax Payment Options and the Fresh Start page on www.IRS.gov.
For more information about filing and paying your taxes, visit 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 www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).
1. Pay by credit or debit card You can use all major cards (American Express, Discover, MasterCard or Visa) to pay your federal taxes. For information on paying your taxes electronically, including by credit or debit card, go to www.irs.gov/e-pay or see the list of service providers below. There is no IRS fee for credit or debit card payments. 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:
WorldPay US, Inc.:
To pay by credit or debit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com
Official Payments Corporation:
To pay by credit or debit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed
Link2Gov Corporation:
To pay by credit or debit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
2. 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 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. There is no fee for this short extension of time to pay.
3. Penalty relief To assist those most in need, a six-month grace period on the late-payment penalty is available to certain wage earners and self-employed individuals. An approved request for a six-month extension of time to pay will result in relief from the late-payment penalty for tax year 2011 if:
- your income is within certain limits and other conditions are met;
- your request is received by April 17, 2012; and
- your 2011 tax, interest and any other penalties are paid in full by Oct. 15, 2012.
4. Installment agreement You can apply for an IRS installment agreement using the Online Payment Agreement (OPA) application on IRS.gov. This web-based application allows taxpayers who owe $50,000 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, eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, or Form 9465-FS, Installment Agreement Request, make your request in writing, or call 800-829-1040. For balances of more than $50,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. You may be able to avoid the filing of a notice of federal tax lien by setting up a direct debit installment payment plan. For more complete information see Tax Topic 202, Tax Payment Options and the Fresh Start page on www.IRS.gov.
For more information about filing and paying your taxes, visit 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 www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).
Monday, April 2, 2012
Taxpayers Get More Time to Contribute to IRAs in 2012
You have two extra days this year to make contributions to your Individual Retirement Arrangements. That’s because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.
Here are the top 10 things the IRS wants you to know about setting aside retirementmoney in a traditional IRA.
1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.
2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.
3. The funds in your IRA are generally not taxed until you receive distributions from it.
4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.
5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.
6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.
8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.
Here are the top 10 things the IRS wants you to know about setting aside retirementmoney in a traditional IRA.
1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.
2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.
3. The funds in your IRA are generally not taxed until you receive distributions from it.
4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.
5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.
6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.
8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.
Eight Tips to Determine if Your Gift is Taxable
If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. You must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more
than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. You must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more
than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
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