Tax Tips - 914 Tax | Ron Friedman, CPA

Self-Employed and Gig Workers: Should You Claim the Home Office Deduction?

March 23, 2021

The rise of freelancing, self-employed and gig work is one of the biggest labor stories of the last 20 years. More and more workers have been looking beyond the normal nine to five and making their own way in the world, creating an income they can rely on, one that is directly tied to their skills and abilities. COVID-19 only accelerated this trend.

Working as a freelancer or gig worker can also open up a world of tax savings possibilities. From retirement plans with generous contribution limits to health savings accounts to cover the high cost of private insurance to the ability to write off office supplies and other essentials, this class of workers enjoys some truly phenomenal tax breaks.

Generous Deduction or Audit Trap?

One of the most generous of those tax breaks is also one of the most misunderstood. The home office deduction has been around for decades, but many freelancers and members of the gig economy are still afraid to take it.

The idea that simply taking the home office deduction will trigger an audit is outdated but rooted in historical fact. In past decades, the home office deduction was widely regarded as a tax dodge, and the IRS often took a dim view of it.

Times have changed, however, and these days the home office deduction is no more likely to trigger an audit than any other business deduction. And while small business owners, including freelancers who claim their income on Schedule C, are still more likely to be audited, the overall audit rate is hovering at all-time lows. So, should you take the home office deduction, and how can you tell if you are eligible? Here are some basic guidelines to go by.

Note: If you do find yourself under audit and owe the IRS money for back taxes, don’t try to fix it on your own! Reach out to our tax resolution firm and we’ll help you negotiate with the IRS and get tax relief. Get help from Ron Friedman, CPA..

Exclusive Use

One of the most important things to keep in mind is that your home office must be used exclusively for your business. Many freelancers and small business owners block off a section of their home and use it exclusively for their business, and that typically qualifies them for the home office deduction.

You do not have to give up large portions of your home to claim the home office deduction. Even a part of one room could qualify as long as it is distinct and separate from the rest of the area. You could, for instance, partition off a section of a spare bedroom and claim it as a home office.

Regular Use

In order to qualify as a home office, the space you claim must be used regularly as part of your business. If you block off a room or set of rooms, you cannot go back and forth between business and personal use.

If you plan to claim the home office deduction, it is a good idea to keep records of how the space is used. Keeping a log of the hours you spend there and the business activities you perform can help you back up the deduction if the IRS comes calling.

Primary Place of Business

The last part of the qualification process is the nature of the business and how the home office supports it. In order to qualify for the home office deduction, the space you designate must serve as your primary place of business.

That means your home office is where you meet with clients, where you perform your work and where you complete your business-related paperwork. If you rent space outside your home or regularly meet with clients somewhere else, you may not be able to justify the home office deduction in the event of an audit.

The nature of your business matters as well. If you work as a freelance writer or website designer, the IRS will probably not question your home office deduction. But if your primary source of freelance income is driving for Uber or Lyft, the tax agency may question the legitimacy of your home office.

Solid Recordkeeping is Essential

You should not be afraid to take the home office deduction if you are eligible for it, but you should be ready to back up your claim if the IRS comes calling. Solid recordkeeping is a must for freelancers and gig workers claiming a home office deduction, and those records should be highly detailed and readily available.

Keeping a daily log of your freelance and gig work activities is a good start. You can keep this log manually or electronically, but it should be up to date and complete. If you are diligent with your recordkeeping and eligible for the home office deduction, even a full-fledged audit could be no big deal.

The home office deduction is widely misunderstood and underutilized, especially in the age of gig work and widespread freelancing. If you are eligible for this generous deduction, you should definitely take it. Working for yourself is hard work, and every tax break you can get will make your efforts more valuable.

OWE BACK TAXES?

If you’re going to owe money to the IRS after filing your return, It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.

Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Get help from Ron Friedman, CPA.

Self-Employment Taxes and The Common Traps To Avoid So You Don’t Owe Back Taxes

March 7, 2021

People often dream of quitting their jobs and going into business for themselves so that they can pursue a passion and work without a boss. Self-employment can be a rewarding career decision, but it can lead to higher taxes and tax returns that are more complex that what you initially bargained for.

If you’re self-employed, it is important to understand how taxes work so you can avoid making a mistake and owing more than your fair share of taxes.

Note: If you owe back taxes and need tax relief, our firm can help! We specialize in resolving complicated self-employed and small business back tax problems. Contact our firm today! Get help from Ron Friedman, CPA.

Definition of Self-Employment

The IRS considers you to be self-employed if you work as a contractor, freelancer, small business owner or are otherwise in business for yourself. If you earn income directly from clients and you don’t have an employer that withholds money from your pay for tax purposes, you are self-employed.

Tax Withholding and Estimated Taxes

If you work as an employee, your employer automatically takes a certain amount of money out of your pay each month to cover your tax obligations, which is called tax withholding.

Self-employed workers do not have an employer to withhold income for tax purposes, so they are responsible for paying their own taxes to the IRS through estimated tax payments. Estimated tax payments must be sent to the IRS on a quarterly basis if you expect to owe at least $1,000 in income tax at the end of the year.

The due dates for estimated tax payments are April 15, June 15, September 15 and January 15. Failure to plan properly and pay enough estimated taxes during the year can result in a tax penalty and a large surprise tax bill. If you pay at least 90 percent of the tax you owe or 100 percent of the total tax you owed from the previous year, the IRS typically will not assess a tax penalty.

Self-Employment Taxes

Self-employed workers must pay the self-employment tax (SE tax) which goes toward Social Security and Medicare in addition to normal income tax. Employees split the cost of paying into Social Security and Medicare with their employers, but self-employed workers must pay the full amount themselves.

We always recommend hiring a professional to handle your taxes and stay compliant, but we especially recommend hiring a qualified tax relief firm if you find yourself behind on any taxes or you’re hit with a large tax bill you can’t afford to pay.

Do I Have To Report Side-Income If I Have A Normal Job As Well?

Individuals with self-employment income must file an income tax return if they have net income from self-employment of $400 or more. In addition, you must report any self-employment income you make during the year on your taxes even if you hold down a normal job.

For example, if you work as an employee year-round but you take on small contract jobs on the side to make extra cash, that money must be reported as self-employment income when you file your tax return even if you don’t make enough extra cash to warrant paying estimated taxes.

It’s a common misconception that you don’t have to file or report income if it’s “cash” or if it’s from a side hustle. Not reporting it could lead to more trouble than it’s worth and the IRS will add penalties and interest on top of the taxes owed.

OWE BACK TAXES?

How to Amend a Tax Return for a Prior Year

February 15, 2021

Tax returns can often be filed with incomplete or incorrect information, leading you to more tax trouble than you bargained for. If you filed early, you might have overlooked income from a temporary job or a side gig, only to get a 1099 or late W2 for the income earned.

Other filers may eventually realize that they were entitled to an extra deduction or exemption. The Internal Revenue Service routinely processes a significant number of amended returns each year and provides a specific form for changing the status of an earlier tax return.

Individual income tax returns filed with the IRS can be amended up to three years after the due date of the original return by filing IRS Form 1040X. However, we strongly suggest consulting a tax resolution professional to help with your amended return. They can often file multiple years of unfiled tax returns, help you settle for a fraction of what you owe, and at the very least save you a headache.

Note: If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. I help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed Feel free to find me on the web at: Ron Friedman CPA Tax Relief Pro.

How Amended Tax Returns Work

Returns containing simple math mistakes are usually corrected automatically and do not require an amended return. Filing an amended return should be considered after the filer realizes the need for a change in filing status, income, allowable deductions or credits. The statute of limitations generally allows three years for each filer to claim any tax benefit not included on a prior return.

An increase in reported income is likely to result in additional tax due, but an additional deduction or allowable tax credit could result in a refund.

Unreported income is a common oversight and it’s better to report your income than it is for the IRS to come after you and add penalties and interest to your tax debt.

Prior to tax year 2019, Form 1040X is not eligible for electronic filing and must be mailed in, this is also why we recommend hiring a professional to do this for you. A separate Form 1040X is necessary for each year being amended, and each must be mailed in its own envelope to the address provided in the instructions.

The amended return essentially adds the corrections to the original return. There is a block of space on the form to explain all changes. The explanation for each line change should include the line number followed by a clear reason for the change. Lines that entail no change need no explanation. A copy of the original return itself should not be attached, but any added IRS forms must be included to support the changes. Any other supporting documents necessary to substantiate the amendment will also need to be attached.

It can take several weeks for the IRS to process an amended return. An amendment to the federal return might also require a change to the state tax return of the filer, especially if an increase in income is to be reported.

OWE BACK TAXES?

If you’re going to owe money to the IRS after filing your return, it’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.

My firm specializes in tax problem resolution. As a CPA, and a Federally Authorized Tax Practitioner, I can represent you before the IRS. I serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to my firm and we’ll schedule a no-obligation confidential case consultation to explain your options to permanently resolve your tax problem. Feel free to find us on the web at: Ron Friedman CPA Tax Relief Pro.

Do You Need A Tax Attorney if You Owe Back Taxes?

December 24, 2020

Just because you owe back taxes doesn’t mean you need a tax attorney. The same is true for hiring an accountant to resolve your tax debt. The professional to choose when looking to resolve your tax debt issues should primarily focus in tax resolution.

If you owe the IRS back taxes, it’s best to have the right tax relief firm representing you for the best possible result. Don’t try to face the most brutal collection agency on the planet alone. You’ll be sorry you did.

Note: If you already have a tax problem and owe more than $15k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.

What Should I Do?

Settling an IRS tax debt can be a very stressful task. Finding the right help can be just as daunting. Tax resolution is a niche area of tax practice. The right professional who is engaged to resolve your income tax debt should have specialized knowledge and training in tax collection rules and regulations, as well as an appreciation of those charged to collect them. There is both science and an art to resolving income tax debt matters. Consumers should be informed of what to look for when seeking help.

Tax resolution firms spend a lot of money getting your attention, claiming they can drastically reduce or even eliminate your tax debt by applying for legitimate IRS hardship programs. The truth is, most people don’t qualify for these programs. As a result, these companies are unable to resolve the tax debtor’s problem and, very often don’t even correctly complete the required paperwork for the programs the IRS offers. It leaves taxpayers still in tax debt and, to add insult to injury, they don’t provide refunds for work not completed.

The three professions that are allowed to represent taxpayers before the IRS are CPA’s, licensed attorneys and Enrolled Agents. Each designation carries with it its own licensing/certification requirements. However, not all CPA’s, licensed attorneys and/or Enrolled Agents are created equally. You wouldn’t hire a trust and estate attorney to defend you in criminal court, similarly you shouldn’t hire any CPA, attorney and/or Enrolled Agent to solve your income tax debts.

Obtaining certification as a tax resolution specialist requires the applicant to meet certain educational, experience and character requirements. They must also pass a very rigorous examination, demonstrate their expertise in tax resolution and adhere to a Code of Professional Ethics.

OWE BACK TAXES?

It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional firms.

Our firm specializes in tax problem resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential tax consultation to explain your options to permanently resolve your tax problem.

Avoid These 5 Common Tax Filing Mistakes That Can Get You In Tax Trouble

October 2, 2020

Whether you file the simple 1040EZ or a complex 1040 and a raft of schedules, making a mistake on your tax form could lead to big tax trouble. Something as simple as a math error or unsigned form could invite extra attention from the IRS.

The tax agency sees those mistakes every year, and IRS representatives warn taxpayers to be careful when filling out their forms. Even if you think you have everything filled out perfectly, it never hurts to double-check and look for these common tax day errors.

#1 – Assuming Your Tax Pro Prepared Your Taxes Properly

Blindly trusting your accountant or tax preparer to file your taxes correctly can be costly. Of course you want to assume they do a great job, and most tax professionals do, but letting them file without your thorough review is a mistake.

We resolve back tax problems for people, and often what gets people in trouble is a simple mistake; like forgetting to report income, missing deductions, or taking too many deductions.

These are sometimes honest mistakes that if not caught early, can trigger red flags and have the IRS sending you letters of balances due.

No one knows your financial situation better than you do so it’s important you double check your return so you’re not blindsided with an unwanted surprise.

#2 – Waiting Until the Last Minute

Filing taxes is stressful enough. You do not need to make things worse by waiting until midnight on April 15 to get your return in the mail. Give yourself plenty of time to gather all the necessary documents and complete your return.

Keep in mind that unexpected problems could interfere with your last-minute tax filing plans. Getting your taxes done early is the only way to protect yourself from unforeseen circumstances that can delay your tax filing.

#3 – Failing to File on Time

If you cannot file your return on time, you can ask for an extension by filling out a single form. Even if your documents are in disarray, there is no excuse for not filing on time. Filing an extension gives you six more months to get everything in order and complete your return.

Keep in mind that you will still need to estimate the tax you owe and make your payment, even if you file an extension. Filing an extension extends the amount of time you have to get your return to the IRS, but it does not provide a reprieve from your tax debt. If you wait to make your tax payment, you will get hit with penalties and interest.

#4 – Not Making a Backup or Keeping Good Records

Making backup copies of your tax returns, income documents and schedules is an essential part of tax planning and preparation. Set up a folder or file box and use it to store your tax documents as they come in, and then scan each one before you put it away.

Once you have completed your return, be sure to make copies of every document, including your W-2 form and tax schedules, before sending the return to the IRS. If you file electronically, be sure to save a PDF copy of your return before completing the final step. Save all of those electronic tax documents on your computer or cloud storage device. Ordering a lost copy of a past year’s return from the IRS is time-consuming and expensive. You can save time and money by making your own backup copies. If the IRS audits you or requests more information from you, all your records will be extremely helpful in the process.

#5 – Ignoring Letters From The IRS After You File Your Taxes.

Sometimes the IRS will send follow up correspondence, especially if you owe money to the IRS. It can be easy to ignore the first few letters. Even if you have the intention of paying your taxes soon you should still take action and either get on an installment agreement or reach out to a tax relief firm if your financial situation requires it.

OWE BACK TAXES?

Our firm specializes in tax problem resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. https://www.914tax.com/contact-us/

What is a Levy? IRS and Other Asset Levies Explained

Falling behind on your debts is never a fun place to be. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.

Note: If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief https://www.914tax.com/contact-us/. Often, we can resolve your IRS levy without you having to talk to the IRS. Call today.

What is an IRS Levy?

Simply put, if you owe back taxes and you ignore the IRS, the IRS can seize your property, take money from your bank accounts, or sell your assets in order to satisfy the balance due.

The IRS will give you plenty of notices via mail before they take this step. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account.

Other types of levies

Private creditors may issue a levy against your bank account with a court order. Court orders are not required for levies by government agencies. The creditor must notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period.

Funds earned from child support, social security, unemployment, workers’ compensation settlements and certain other types of government agency payments are exempt from levy. You must request the exemption and offer proof of the source of the funds.

Wage Garnishments

Government agencies may also garnish an employee’s wages for back taxes, child support and other delinquent payments required by law.

The IRS has the authority to levy up to 85 percent of the employee’s paycheck. The levy notice will be sent to your company’s payroll or human resources department. You must then withhold the appropriate amount of money from the employee’s paycheck and send it to the IRS or state tax board. The employee must provide a wage garnishment release if he is able to work out a payment arrangement.

If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments, payments on contracts between your company and a government agency, federal retirement annuities and travel reimbursements.

You may apply for a hardship exemption if the levy will cause your company undue financial distress. Companies going through bankruptcy proceedings are automatically exempt from IRS levies.

Seizing Your Assets

The IRS may also seize your real estate and personal property such as a car or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. This authority also extends to property and money you own that are being held by another party, such as life insurance cash value. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.

What To Do If You Have An IRS Levy

Back taxes don’t just disappear if you ignore them long enough. Putting your head in the sand will cause the problem to get worse.

If you have back tax debt, we highly recommend you reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation. https://www.914tax.com/contact-us/

Think Tax Filing Season is Over? Why You May Need to File an Amended Return

September 5, 2020

Few people look forward to tax filing season. Unless you are an accountant who loves tax season, you probably dread this time of year, and you are thrilled when your return is in and your refund is on the way or your tax debt is all paid off.

When you sign your tax return and send it in, you may think that tax filing season is finally over, and that the IRS will not be bugging you for another year. That’s unfortunately not the case. Millions of Americans get letters from the IRS stating they owe more money or asking for more information. So there are times when you may need to revisit your old return and file an amended one.

NOTE: If you have back tax debt, are under audit, or have multiple years of unfiled tax returns, we highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation. https://www.914tax.com/contact-us/

So when should you file an amended return, and how do you go about it? Here are some key things you need to know.

You Forgot to Report All Your Income

If you neglected to report all of your income, it is only a matter of time until the IRS finds out, and when they do you could be on the wrong side of a big bill. So instead of waiting for the IRS to catch up, fess up by filing an amended return.

Be sure to gather up all of your documents and compare the income you reported to the new total you have now calculated. If you owe any additional tax, you will want to pay it right away to avoid interest and penalties.

Brokerage Forms are Sometimes Late

If you have stock market holdings and own mutual funds, you will be receiving forms from the brokerage firms that hold those accounts. Those forms will provide details of the dividend income and capital gains you received, so you can provide accurate filings to the IRS.

What you may not know is that those brokerage and mutual fund statements are sometimes sent out late. Worse yet, the numbers are often updated after the fact, meaning the information you filed on your original return may no longer be accurate.

If you receive an updated 1099 from your brokerage firm or mutual fund company, you may need to file an amended return to account for the discrepancy. If you fail to update your own numbers, the IRS could come after you for additional taxes and penalties.

You Got a Tax Bill But You Know You Don’t Owe It

This can be tricky and it’s best to have representation from a tax resolution firm like ours. If the IRS is sending you letters claiming you owe money, but you’re certain you don’t owe, then filing an amended return can sometimes do the trick.

Another thing to note is that the IRS makes mistakes. So having an IRS Relief firm like ours on your side can help clear these mistakes and settle your tax debt.

You Forgot to Claim a Legitimate Credit or Deduction

Sometimes an amended return can reduce the amount you owe if you forgot to claim a legitimate tax credit or deduction.

Even if you have already filed your return, you can still go back and claim any credits or deductions you may have missed.

File Your Amended Return Within Three Years

You only have a limited amount of time to file an amended return, so you need to act quickly. In most cases you will need to file your amended return within three years, and if you miss the deadline you could be out of luck.

If you think you need to file an amended return, check out your tax records for the last three years. If you identify any potential issues, or overlooked credits and deductions, it is time to file your amended return.

Tax filing season may be over, but you can always file an amended return. As long as you are within the allowable time period, you can adjust your already filed returns to reflect previous omissions, or take advantage of overlooked deductions.

OWE BACK TAXES?

Our firm specializes in tax resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. https://www.914tax.com/contact-us/

Four Things Your Tax Preparer Won’t Tell You (and How It Can Get You In Tax Trouble)

Tax time will be here (again) before you know it. If your tax return is a simple one, you may be up to filing the return yourself. But if your situation is somewhat complicated, seeking the help of a qualified professional is probably the best move.

Our firm specializes in helping people resolve their back tax problems such as filing years of unfiled returns, settling your back taxes with the IRS, or negotiating favorable payment plans often unknown to the common taxpayer.

There are millions of people getting threatening letters from the IRS every year and we can help. But how did these mostly honest people end up in trouble in the first place?

When you hire a professional to do your taxes, you assume that the person doing your taxes is an expert, with years of training, the right licenses and certifications and the expertise needed to do the job and do it right. In many cases, that blind trust is not too bad, but you cannot simply pick any old tax preparer.

The fact that the person you hire is allowed to do taxes is no guarantee of quality, or even of qualifications. Here are five things your tax preparer may not tell you, and how they can earn you with an unwanted tax bill at the end of the year.

Note: The COVID-19 tax relief, forgivable loan programs and stimulus checks all have different and unforeseen tax consequences that you’ll need to consider. If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief https://www.914tax.com/contact-us/

#1. A Lot Of Tax Preparers Have No Tax-Specific Training or Expertise

The fact that an individual, or an employee of a large tax preparation company, is allowed to complete tax returns means almost nothing. The tax preparer is not required to have tax-specific training or expertise to obtain the paid preparer tax identification number (PTIN) they need. The only requirement for getting the required PTIN is the completion of a simple form – one that takes about 15 minutes to fill out.

Before you hire any tax professional, you should ask about their specific training, qualifications and expertise. Find out how long they have been doing taxes, ask about audits they have been involved in and share your personal tax situation. Above all, do not hire anyone until you feel comfortable with their ability to handle your tax return properly.

A CPA or Enrolled Agent licensed by the IRS is your best bet when looking for qualified tax professionals. We hear horror stories from our tax relief clients all the time where the tax preparer messed up something on their tax return or didn’t give the client the right tax strategy, so they ended up with a burdensome tax bill.

#2. They Won’t Be Preparing Your Return

It is an open secret in the world of tax preparers that returns are prepared in stages. That means the owner of the firm or the most experienced professional will probably not be the one who initiates your return.

Instead, a junior associate will likely enter your income information and other relevant data, identify potential deductions and tax credits and give your return a quick review. Once that is done, a senior advisor or tax preparer should look at the return, verify that it is correct and sign off on it.

This can often cause a communication breakdown causing issues that could land you with a large tax debt. Most taxpayers blindly trust their tax pro and don’t thoroughly review the deductions and tax return draft.

If you are not comfortable about this multi-step process, it is important to share your concerns with your preparer. The sheer number of tax returns large firms handle during a busy season makes this multi-step process necessary, but it is important to know how things work and what you can do to ensure the right level of attention.

It’s also extremely important to review the return in full detail to avoid any unwanted surprises, audits, or unforeseen tax debt.

#3. I May Not Research Unusual Deductions and Tax Breaks

Professional tax preparers tend to be a pretty conservative bunch, and that is good news when it comes to your chances of being audited. It can be bad news, however, for your overall tax bill.

Your tax preparer will no doubt apply the most common deductions and tax credits to your return, things like the deduction for educational expenses and health care costs and the earned income and retirement tax credits. What they may not do is research more unusual tax credits and deductions, even if they could potentially save you money.

If these special circumstances apply to your return, you should discuss the situation with your tax preparer and look for ways to include them with your filing. You may need to pay an extra research fee or renegotiate the cost of preparing and filing your return, but the tax savings could be worth the extra cost.

#4. CPA Does Not Mean Tax Relief Pro

When clients get into tax trouble or get behind on paying their tax debt, they often turn to the very same tax pro that prepared the return. Unfortunately, most CPAs and tax preparers are not skilled in tax relief.

Tax relief means they know all the available programs the IRS has to settle your tax debt or give you favorable payment terms that don’t drown you in penalties and interests. Even if they think they know, they often aren’t experienced in negotiating with the IRS on your behalf.

It is easy to assume that every CPA is a tax relief expert. After all, the CPA designation is one of the most difficult professional statuses to obtain, and only the most qualified accountants get to put the letters CPA on their business cards.

Even so, not all certified public accountants are tax relief experts, and many do not know any more about settling your tax debt than you do. Some CPA firms prepare tax returns for their clients as a courtesy, but their staffs may not have specific training or expertise in tax law, or tax relief negotiations.

If you have back tax debt, we highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation https://www.914tax.com/contact-us/

Considering Bankruptcy to Get Rid Of Your Back Taxes? 3 Alternatives to Explore Before You File

August 7, 2020

If you are drowning in debt and working harder and harder to make ends meet, you may think a bankruptcy filing is the only way out, but that is not necessarily the case. Filing for bankruptcy is one solution, but it is a drastic step that should only be taken as a last resort.

This is especially true if you owe back taxes to the IRS or state. Depending on what type of taxes you owe, you might not be able to wipe out your back taxes in bankruptcy proceedings.

It’s important to weigh all your options and get a clear picture of your financial situation, so in this article, we share with you 3 smart steps to take before declaring bankruptcy.

Depending on how much you owe, who your creditors are, and how the rest of your financial life looks, you may be able to dig yourself out of the hole and take back control without having to declare bankruptcy. Here are three smart alternatives to consider before calling a bankruptcy attorney.

3 Alternatives to Explore Before You File

Contact A Tax Relief Firm

Most bankruptcy attorneys aren’t familiar with the complex tax laws so they won’t accurately be able to assess your tax situation.

A tax relief firm like ours can help you assess your back tax situation and often help you settle your back tax debt with the IRS. If you owe a substantial amount of back taxes, this may be a good way to reduce your overall debt burden. This can also be a good first step to getting back on track with your finances.

Request a Lower Interest Rate On Other Debts

When you are paying 18% or more in interest, it can be hard to keep up with the charges, let alone make any headway on the outstanding balance. Credit card interest rates are among the highest around, and those outrageous rates have trapped many consumers in a spiral of ever increasing debt.

How different would your finances look if your interest rate was cut in half? Would you finally be able to get ahead of the interest charges and start paying down your balance? If so, it is time to get your credit card issuer on the line.

Even if you do not think your credit card issuer will be receptive, it never hurts to ask. And when the credit card company finds out that you are thinking about filing bankruptcy, they may be more willing to negotiate than you think.

For tax debt, the IRS can sometimes remove penalties and interest from your tax debt, so it’s important to reach out to our firm to see what your options may be.

Refinance Your Debt

Even if your credit card issuers and lenders are not willing to budge on the interest rates, you could still save money and avoid bankruptcy. Refinancing your existing debt through a home equity line of credit, a personal loan or other means could lower your interest rate substantially and slash your monthly payments.

If you do decide on this strategy, it pays to shop around. The more you can lower your interest rate, the more money you can save – and the faster you will be able to pay off your debts.

But it’s incredibly hard to refinance your debts if you have an IRS tax lien or wage levy. Our firm can get these released and help you get on financial track.

A bankruptcy filing can provide a fresh start for those in dire financial circumstances, helping them recover and rebuild their shattered monetary lives.

Even so, bankruptcy is not the only way out, and it is important for those considering this solution to research the alternatives first. The three bankruptcy alternatives listed above can also give you the fresh start you need, without the stigma or long-lasting impacts of a bankruptcy filing.

IMPORTANT: We highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other relief programs or get your penalties and interest forgiven. Reach out to our firm today for a consultation.

Bankruptcy FAQ for Individuals

Filing for bankruptcy is a difficult and draining process. People often feel ashamed, scared, or confused. If you find yourself with no other options, bankruptcy can be a good way to clear out old debts, change financial patterns, and most importantly get a fresh start. Here is everything you need to know about filing for bankruptcy.

Note: Depending on what type of taxes you owe, you might not be able to wipe out your back taxes in bankruptcy proceedings. Our firm specializes in tax resolution and back tax debt settlements with the IRS. So if you’re considering bankruptcy in part because of your back tax burdens, reach out to us today for more information on how you can get tax relief.

Who Should File for Bankruptcy?

If you owe money to a creditor and cannot repay it, you can file for bankruptcy. Businesses and individuals are eligible; however there are caveats. If you have filed for bankruptcy once before, there is a waiting period before you may file again. After filing for Chapter 7 bankruptcy, you cannot claim bankruptcy again for eight years. After filing for Chapter 13 bankruptcy, you must delay a second claim for at least two years.

What Types of Debt Can I Discharge Through Bankruptcy?

You can discharge most types of debt through bankruptcy, including medical debt, credit card debt, payday loans, and mortgage debt.

Certain types of debt cannot be discharged through bankruptcy, meaning that you will still need to repay these debts even if everything else is forgiven. Debts that cannot be wiped out in bankruptcy include spousal support, child support, student loans, and back taxes in most cases.

Any debt you take on after you’ve filed for bankruptcy is ineligible to be discharged through the filing, since you did not have the debt when you asked for debt relief.

Why is Filing Bankruptcy Helpful?

When you can’t keep up with the bills, you’re under a high level of stress. Bankruptcy is never a first option for people; many have tried things like getting extra jobs, selling unwanted possessions, or asking family members for loans before arriving at bankruptcy as their best option for debt relief.

By wiping out debts, bankruptcy reduces stress immediately. Collectors are not allowed to come after individuals who are going through bankruptcy, so threatening phone calls and letters will end immediately.

A Chapter 13 bankruptcy can promote good financial habits, because in this form of bankruptcy, some amount of debt is repaid under a plan. By helping to increase financial literacy and instilling good financial habits, this partial repayment can keep people in the black once debts are discharged.

The biggest downside to filing for bankruptcy is that it impacts your credit, so you may find it difficult to take out loans for up to ten years after the bankruptcy. Your credit score also impacts things like the interest rate offered on loans and your ability to pass a tenant screening, so there are other ramifications to consider.

If you’re not sure whether a certain debt will be forgiven or which type of bankruptcy is right for you, there are resources to help you explore your options, such as credit counselors. If you are thinking of filing for bankruptcy, it’s helpful to get a counselor’s opinion on your specific circumstances and what to expect after filing.