Can The IRS Take Your 401K
Regular Post
Written by Craig B

Preparing For Tax Season

Preparing for tax season can be a smooth process if you organize your financial records and understand the necessary steps. Here’s a guide to help you get ready:

1. Organize Your Financial Documents

Start by gathering all the paperwork you’ll need to file your taxes:

  • Income Records:
    • W-2s (for employees).
    • 1099 forms (for freelancers, contractors, or investment income).
    • Bank or brokerage statements for interest, dividends, and capital gains.
  • Expense Records:
    • Receipts for deductible expenses (e.g., medical bills, education, or charitable donations).
    • Business expenses if you’re self-employed.
  • Other Forms:
    • 1098 forms for mortgage interest or student loan interest.
    • Statements for contributions to retirement accounts (e.g., IRA).
  • Last Year’s Tax Return:
    • Helps ensure you don’t miss any deductions or credits.

2. Know Key Dates

Mark these critical tax deadlines:

  • Filing Deadline: Typically April 15 (or the next business day if it falls on a weekend/holiday).
  • Quarterly Estimated Payments (if applicable): January 15, April 15, June 15, and September 15.
  • Extensions: File Form 4868 by the tax filing deadline to get an extension until October.

3. Understand Recent Tax Law Changes

Stay informed about any changes in tax laws that may affect:

  • Standard deduction amounts.
  • Child tax credit or dependent care credits.
  • Limits on deductions or contributions to retirement accounts.
  • New benefits for small businesses or pandemic-related tax provisions.

4. Choose the Right Filing Method

  • DIY Filing: Use trusted tax software like TurboTax, H&R Block, or Cash App Taxes if your tax situation is straightforward.
  • Hire a Professional: Consult a certified public accountant (CPA) or enrolled agent for complex returns (e.g., owning a business, significant investments, or international income).

5. Check for Deductions and Credits

Identify deductions and credits you may qualify for:

  • Common Deductions:
    • Mortgage interest, state/local taxes, student loan interest.
    • Business expenses if self-employed.
  • Popular Credits:
    • Earned Income Tax Credit (EITC), Child Tax Credit, or Education Credits.

6. Review Your Withholding and Payments

  • If you’ve overpaid taxes through paycheck withholdings, you might get a refund.
  • If you underpaid, you may need to make an additional payment or adjust your withholding for the next year using Form W-4.

7. Contribute to Tax-Advantaged Accounts

Maximize contributions to accounts with tax benefits by the deadline:

  • Traditional IRA/401(k): Contributions may lower taxable income.
  • Health Savings Account (HSA): Tax-deductible contributions and tax-free withdrawals for medical expenses.

8. Plan for Refunds or Payments

  • Refunds:
    • Decide how to receive your refund (e.g., direct deposit or check).
  • Owed Taxes:
    • Prepare to pay any owed taxes by the filing deadline to avoid penalties.

9. Protect Yourself from Fraud

  • Beware of tax scams and phishing attempts.
  • Use the IRS website for official information and secure filing.
  • Shred sensitive documents you no longer need.

10. File Early

  • Avoid last-minute stress by filing as soon as you have all required documents.
  • Early filing reduces the risk of identity theft (where someone uses your SSN to file a fraudulent return).

Checklist for Tax Season Preparation

  • Gather all tax documents (W-2s, 1099s, receipts, etc.).
  • Review last year’s tax return for reference.
  • Update personal and contact information with your employer or bank.
  • Choose your filing method (self or professional).
  • Identify eligible deductions and credits.
  • Review recent tax law changes.
  • File before the deadline to avoid penalties.

 

 

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Why Do I Owe Taxes
Regular Post
Written by webtechs

Why Do I Owe Taxes This Year?

There are many reasons why you might owe the Internal Revenue Service this year. It’s certainly possible to owe taxes even when you have withheld money from your paycheck all year.

Why Do I Owe Taxes?

Because everyone’s situation is unique, there are several different reasons why you may owe money on your taxes. A few common reasons are outlined below.

1. Failing To File

Failure to file on time is a common reason why you’ll end up owing taxes. State tax dues will vary. Whenever you file late and don’t apply for an extension on time, you can incur late fees and interests that will increase your tax bill. If you are wondering why you still owe taxes this year, it’s certainly possible that you submitted a tax return after the due date.

2. Not Withholding Enough From Your Paycheck

The amount that’s taken out of your paycheck each year is an estimate of what you will owe when it comes time to file taxes. You will receive a tax refund if you overpay. If you do not pay enough throughout the year, though, you will end up with a bill come tax season.

3. Tax Code Changes

Recent tax code changes will undoubtedly impact how much you’ll owe in taxes. If you expect to receive a refund each season, it may not be the case with new tax laws put in place. When the IRS updated its tax brackets, it’s possible you were put into a new category, altogether.

4. Changes In Deductions

If you didn’t qualify for typical deductions and credits you expected, then you may owe taxes this year. For instance, the earned income tax credit comes with annual limits. If you have made more money this year than in previous tax years, you may not qualify. Many parents will take advantage of the child tax credit, which comes with income limits and age restrictions.

5. Higher Income

Receiving higher pay this year will mean you are going to pay more in taxes. If you worked more hours while getting paid hourly or a salary gets raised, you could have been bumped into a higher tax bracket.

6. Significant Life Changes

All sorts of life changes can factor into your tax situation. One big change that can raise your tax burden is when your children start to get older. For instance, once your children are 17 years or older, you cannot claim the child tax credit.

While you’re no longer able to claim the child tax credit, you can still claim your children as dependents and claim a few other tax credits on your tax return.

7. You Owe Capital Gains Taxes

If you bought and sold investments for either a profit or loss, which includes anything from single stocks to cryptocurrency, you must report those gains or losses on your tax return.

With a capital gains tax, short-term capital gains are taxed at the normal income tax rate. Long-term gains, however, are taxed at a lower rate.

What To Do If You Owe Taxes

Thankfully, there are numerous options if you cannot pay your entire tax bill when it’s due. Here are a few payment options for you to consider:

  • Sign up for an IRS installment plan.
  • Apply for a full-time agreement if you are able to pay taxes within 120 days.
  • Make an offer in compromise.
  • Consider a loan or other financing options to make tax payments.

It’s crucial to stay informed about your tax obligations and ensure accurate and timely filing and payment of taxes. If you find yourself owing taxes, it’s advisable to address the issue promptly by filing your return or payment, seeking professional tax assistance, or exploring options such as installment agreements, Offer in Compromise, or penalty abatement if you’re unable to pay the full amount owed.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

Can You Compromise With the IRS?

es, you can compromise with the IRS through a program called the Offer in Compromise (OIC). This program allows taxpayers to settle their tax debt for less than the full amount owed if they can demonstrate that paying the full amount would create a financial hardship or if there is doubt about the liability or collectibility of the debt. Here’s how the process works:

1. Eligibility Criteria:

  • Inability to Pay: The IRS will consider an Offer in Compromise if you can demonstrate that you are unable to pay the full amount of your tax liability either in a lump sum or through a payment plan.
  • Doubt as to Liability: If you believe that the tax assessment is incorrect, you can file an OIC based on doubt as to liability.
  • Doubt as to Collectibility: This applies when there is doubt that the IRS can collect the full amount of the tax debt from you due to your financial situation.
  • Effective Tax Administration: Even if you can technically pay the full amount, you might qualify for an OIC if doing so would create an economic hardship or be inequitable.

2. Offer Amount:

  • Reasonable Collection Potential (RCP): The IRS evaluates your ability to pay by determining your RCP, which is the sum of your assets and future income. Your offer should generally be equal to or greater than the RCP.
  • Calculating the Offer: You’ll need to calculate your offer based on your income, expenses, and the value of your assets. The IRS provides forms (Form 433-A for individuals and Form 433-B for businesses) to help with these calculations.

3. Application Process:

  • Form 656: You must submit Form 656, Offer in Compromise, along with a $205 application fee (which may be waived for low-income applicants) and an initial payment.
  • Supporting Documents: You’ll need to provide detailed financial information, including income, expenses, and asset documentation, to support your offer.
  • Payment Options: You can choose to pay your offer amount in a lump sum or in installments. The IRS requires a down payment with your application—20% for lump-sum offers or your first monthly payment for periodic payment offers.

4. Review and Decision:

  • IRS Review: The IRS will review your offer, which may take several months. During this time, you must continue to comply with all filing and payment requirements.
  • Acceptance: If the IRS accepts your offer, you must comply with all terms, including filing and paying taxes on time for the next five years. If you fail to do so, the IRS can revoke the offer and reinstate the original tax liability.
  • Rejection: If your offer is rejected, you have the right to appeal the decision within 30 days using Form 13711, Request for Appeal of Offer in Compromise.

5. Considerations:

  • Impact on Credit: Unlike bankruptcy, an OIC is not public information and doesn’t directly affect your credit score. However, the IRS does file a Notice of Federal Tax Lien, which could impact your credit.
  • Not a Guarantee: The OIC is not guaranteed, and the IRS accepts less than half of all offers. Proper documentation and a realistic offer increase your chances of acceptance.
  • Professional Help: Given the complexity of the process, many taxpayers seek help from tax professionals to navigate the OIC application.

6. Alternatives:

  • Installment Agreement: If your offer is not accepted, you may still be able to set up an installment agreement to pay off your tax debt over time.
  • Currently Not Collectible (CNC) Status: If you are unable to make any payments, the IRS may temporarily halt collection actions by placing your account in CNC status.

In summary, the Offer in Compromise is a legitimate way to settle your tax debt for less than what you owe, but it requires careful preparation, documentation, and understanding of the IRS’s criteria. If successful, it can provide significant financial relief.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

Can The IRS Take Roth IRA

The IRS generally cannot directly take or seize your Roth IRA, but there are situations where your Roth IRA could be affected if you owe taxes to the IRS. Here’s how it works:

1. IRS Tax Levy:

  • Levies on Financial Assets: The IRS has the power to levy (seize) financial assets, including bank accounts, brokerage accounts, and retirement accounts, to satisfy unpaid tax debts. This includes Roth IRAs.
  • Process: Before levying your assets, the IRS will typically send several notices demanding payment and providing you with opportunities to resolve the debt. If you do not take action, the IRS may issue a levy and seize funds from your Roth IRA.
  • Exemptions: Certain assets may be exempt from IRS levies, but retirement accounts like Roth IRAs are not automatically exempt.

2. Impact of Early Withdrawal:

  • Taxes and Penalties: If the IRS levies your Roth IRA, the amount withdrawn to satisfy the tax debt may be subject to income taxes and, if you are under age 59½, a 10% early withdrawal penalty on the earnings portion of the withdrawal.
  • Order of Withdrawal: Roth IRA withdrawals are generally considered to come first from contributions (which can be withdrawn tax- and penalty-free), then from earnings. The IRS would apply the levy to your account, which could trigger taxes and penalties depending on the amount and source of the funds withdrawn.

3. Avoiding IRS Levies:

  • Payment Plans: If you owe taxes and are concerned about a levy, you can contact the IRS to arrange a payment plan or offer in compromise, which may allow you to pay your tax debt over time or settle for less than the full amount owed.
  • Communication: Promptly addressing IRS notices and seeking professional advice can help you avoid more severe collection actions, such as a levy on your Roth IRA.

4. Bankruptcy Protection:

  • Protection in Bankruptcy: Under certain circumstances, Roth IRAs may be protected from creditors, including the IRS, during bankruptcy proceedings, subject to specific limits and rules under federal bankruptcy law.

5. State Laws:

  • State Protections: Some states offer additional protections for retirement accounts against creditors, including the IRS. These protections vary by state and may limit the IRS’s ability to levy your Roth IRA.

In summary, while the IRS can levy your Roth IRA if you owe back taxes, this typically occurs after multiple notices and opportunities to resolve the debt have been provided. To avoid this, it’s important to address any tax issues promptly and seek professional advice if you are unable to pay your tax debt.

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If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2024

Student loans can have various implications for federal taxes, including potential deductions, credits, and consequences for repayment. Here are some key points to consider regarding student loans and federal taxes:

  1. Student Loan Interest Deduction: Taxpayers who have paid interest on qualified student loans may be eligible to deduct up to $2,500 of the interest paid on their federal income tax return. This deduction is available even if the taxpayer does not itemize deductions, making it accessible to many taxpayers. However, there are income limitations and other eligibility criteria that must be met to claim this deduction.
  2. Education Tax Credits: Taxpayers who are paying for higher education expenses, including student loan interest, may be eligible for education tax credits such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). These credits can help reduce the amount of tax owed or result in a refund if the credits exceed the taxpayer’s tax liability.
  3. Income-Driven Repayment Plans: Borrowers who are enrolled in income-driven repayment plans (IDRs) for their federal student loans may have a portion of their outstanding loan balance forgiven after making qualifying payments for a certain period. However, the forgiven amount may be considered taxable income in the year it is discharged, potentially resulting in a higher tax liability for the borrower.
  4. Taxability of Loan Discharges: In certain circumstances, such as total and permanent disability or death, federal student loans may be discharged, meaning the borrower is no longer required to repay the remaining balance. However, the discharged amount may be considered taxable income unless an exception applies.
  5. Employer Student Loan Repayment Assistance: Some employers offer student loan repayment assistance as a benefit to employees. Under current law, employer contributions to employee student loans of up to $5,250 per year may be excluded from the employee’s taxable income, providing potential tax savings.
  6. Tax Withholding Adjustments: Borrowers who expect to have a significant tax liability due to forgiven student loan debt or other factors may need to adjust their tax withholding or make estimated tax payments to avoid underpayment penalties.

It’s important for borrowers to understand the tax implications of their student loans and to consult with a tax professional or financial advisor for personalized advice based on their individual circumstances. Additionally, tax laws and regulations may change over time, so borrowers should stay informed about any updates that may affect their tax situation.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2023

Student loans can have several implications for federal taxes in the United States. Here’s how they work with federal taxes:

  1. Student Loan Interest Deduction: One of the primary ways student loans affect federal taxes is through the student loan interest deduction. Borrowers who are repaying qualified student loans may be eligible to deduct the interest they’ve paid on those loans during the tax year. As of my last knowledge update in 2022, this deduction allows eligible taxpayers to reduce their taxable income by up to $2,500 per year, subject to income limitations. The loan must have been used for qualified education expenses, and there are income phase-out limits.
  2. Taxable Forgiveness: In some cases, if you have federal student loans that are forgiven through income-driven repayment plans or Public Service Loan Forgiveness (PSLF), the forgiven amount may be considered taxable income. This means you could owe taxes on the amount forgiven. However, certain forgiveness programs, like PSLF, offer tax-free forgiveness after 120 qualifying payments.
  3. Income-Driven Repayment Plans: Under income-driven repayment plans (e.g., Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn), your monthly loan payments are calculated based on your income and family size. These plans can help make your payments more manageable, but they can also affect your tax liability. If your monthly payments are reduced, you may have a higher taxable income because your discretionary income is lower. This could result in a larger tax bill in some cases.
  4. Tax Credits for Education Expenses: While not directly related to student loans, there are federal tax credits available, such as the American Opportunity Credit and the Lifetime Learning Credit, that can provide tax benefits for qualified education expenses. You can’t double-dip by claiming these credits for the same expenses that you used to deduct student loan interest.
  5. State Tax Implications: In addition to federal taxes, it’s important to consider how student loans may impact your state income tax liability. State tax laws vary, and some states offer their deductions or credits for student loan interest.

It’s important to keep accurate records of your student loan payments, interest paid, and any relevant documents related to your loans. When it comes to tax matters related to student loans, it’s advisable to consult with a qualified tax professional or use tax software to ensure that you take advantage of available deductions and credits and understand the potential tax consequences of loan forgiveness. Additionally, it’s essential to stay informed about changes in tax laws and regulations that may affect student loans and tax liability.

Are you able file your taxes or comprehend what you owe Uncle Sam? There is a strong chance you’re confused about tax regulations. On the bright side, we’ve compiled a list of answers to 5 common tax questions you may be asking — including if you should hire a tax preparer, if you should file if you’re a college student, when you’ll receive your tax refund and more.

  1. Should I hire a tax preparer?

If you choose to hire a tax professional is subject to your comfort level with the tax-filing procedure and the convolution of your return. If you’re seeking a tax preparer with a greater degree of experience, consider a CPA or E.A. Both professionals are required pass specific exams to get licensed.

  1. What is the standard deduction?

The standard deduction is an allocated amount of money of which you aren’t taxed. The total of the standard deduction that you claim is subject on your tax status and the year that you’re filing. Taxes filed in 2019, the standard deduction $12,000 for filing single and $24,000 for married couples filing together.

  1. When will my tax refund get to me?

When your tax refund will get to you is subject on how and when you filed. According to the IRS 90% of federal tax refunds are distributed within twenty-one days, and details are usually available within a day from when the IRS receives an e-filed tax return or 4 weeks following them receiving a traditional paper return. Utilize the IRS Where’s My Refund? device and the IRS2Go app to track it.

  1. Should I file taxes if I’m enrolled in college?

Prior to you filing taxes as a student going to college, think about your income and if your parents will claim you as a dependent on their taxes. Students that earn less than $12,000 don’t need to file a tax return but might still gain from filing if taxes were withheld from their paycheck or want to claim specific tax benefits like the American opportunity tax credit.

  1. How can I get the largest tax refund this year?

To receive the largest tax refund this year, begin to think about your tax circumstances early, preferably prior to the tax year ending. Next, consider how to make the most out of deductions through itemizing if you’re able to, declare tax credits and deductions in which you qualify for and give to your retirement accounts. When your tax situation is convoluted, think about working with an experience tax preparer.

  1. How do I select the preferable tax-filing software?

When evaluating the preferable tax-filing software for your circumstance, think about the costs and services offered. A great place to begin is with the dozen software businesses that work alongside the IRS-affiliated Free File Alliance. They are IRS approved and satisfy specific security and privacy conditions.

  1. Who is established as a dependent on my taxes?

Dependents may include qualifying children, family members and other people that you support. Dependents need to satisfy certain age, income and housing conditions.

  1. How can I evade IRS tax scams?

Evade typical IRS tax scams by handling suspicious or out of left field communications from alleged IRS officials with a healthy suspicion. The IRS will usually reach out by regular mail first, so be cautious of e-mails, any texts or phone calls insisting to be from the IRS. Additionally, be vigilant for poor grammar, threats of calling the police and demands for payments through gift cards or wire transfers.

  1. Should I choose direct deposit?

Yes, when you want to get your tax refund as fast as possible, choosing direct deposit can be faster than, for instance, petitioning a check to be mailed out.

  1. Can I decrease my chances of getting audited?

To decrease the chance of a tax audit, make sure there are no errors, disclose all of your income, retain correct records and stay away from illegal or inappropriate tax moves like exaggerating charitable donations.

Whereas these answers to common tax questions may help you begin in fulfilling your tax responsibilities, you might still have questions as you start to file your return. If you see any questions you do not see on this list, contact us and we will be more than happy to answer them.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

How Much Should I Offer In Compromise to the IRS?

Determining the amount to offer the IRS in a formal Offer in Compromise (OIC) is a complex process that depends on your unique financial situation and the specific tax debt you owe. An Offer in Compromise is a program that allows eligible taxpayers to settle their tax debt for less than the full amount owed. The IRS considers several factors when evaluating OIC requests. Here’s a general guideline to help you decide how much to offer:

  1. Calculate Your Reasonable Collection Potential (RCP): The IRS uses a formula to determine your RCP, which is essentially your ability to pay. It takes into account your income, expenses, assets, and future earning potential. The RCP calculation considers:

    • Your monthly income: This includes wages, self-employment income, rental income, and other sources.

    • Your allowable monthly expenses: These are based on IRS standards and include expenses like housing, transportation, and food.

    • Your equity in assets: The IRS may consider the value of your assets, including real estate, vehicles, bank accounts, investments, and other assets.

  2. Add Lump Sum Cash Offers: If you have a lump sum of money available, such as from savings or a loan from family or friends, you can offer this amount in addition to your RCP. The IRS will consider this in your OIC evaluation.

  3. Select the Payment Option: You have two options for making payments in your Offer in Compromise:

    • Lump Sum Cash Offer: You offer a one-time payment, usually within five months of acceptance.

    • Periodic Payment Offer: You make a series of payments over a specified period, which can extend up to two years.

  4. Determine the Total Offer Amount: If you choose the lump sum cash offer, add your lump sum amount to your RCP. If you choose the periodic payment offer, add your first proposed installment to your RCP.

  5. Filing Fee and Initial Payment: Include the appropriate filing fee and an initial payment (if applicable) with your OIC application. As of my last knowledge update in September 2021, the filing fee is $205. The initial payment amount depends on your payment option:

    • For a lump sum cash offer, include 20% of the total offer amount with your application.

    • For a periodic payment offer, include the first proposed installment with your application.

  6. Consult a Tax Professional: Given the complexity of OIC calculations and the importance of submitting a comprehensive and accurate offer, it’s highly advisable to consult with a tax professional or tax attorney experienced in OIC submissions. They can help you gather the necessary financial information, complete the required forms, and ensure that your offer reflects your true ability to pay.

Remember that the IRS evaluates OIC requests on a case-by-case basis, and not all offers are accepted. If your offer is accepted, you must comply with all IRS filing and payment requirements for the next five years. Additionally, if your financial situation improves during this period, you may be required to pay any newly accrued tax liabilities.

As tax laws and IRS guidelines can change, it’s essential to check the latest information and consult with a tax professional for guidance tailored to your specific circumstances.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

Can The IRS Take Your 401K

The IRS (Internal Revenue Service) generally cannot directly seize your 401(k) account to satisfy tax debts or other liabilities. 401(k) accounts are protected by various laws, including the Employee Retirement Income Security Act (ERISA), which provides safeguards for retirement savings.

However, there are some situations where the IRS may indirectly access funds from your 401(k):

  1. Early Withdrawals: If you make early withdrawals from your 401(k) account before reaching the age of 59½, you may be subject to income tax on the withdrawal amount, as well as a 10% early withdrawal penalty. These taxes can reduce the funds available to you.

  2. Required Minimum Distributions (RMDs): Once you reach the age of 72 (or 70½ if you reached that age before January 1, 2020), you are required to start taking minimum distributions from your traditional 401(k) account. These distributions are subject to income tax.

  3. IRS Levy: While the IRS cannot directly seize your 401(k), if you have a tax debt that you are not paying and the IRS issues a levy against you, they can potentially levy other assets, such as your bank accounts. If you decide to withdraw money from your 401(k) to cover the tax debt, it may still be subject to taxes and penalties.

  4. Divorce or Court Orders: In the case of divorce or other court-ordered settlements, a portion of your 401(k) may be subject to division between you and your former spouse or another party, as determined by a court.

  5. Bankruptcy: In the event of bankruptcy, your 401(k) is generally protected from creditors. However, this protection may vary depending on your state’s bankruptcy laws, so it’s essential to consult with a bankruptcy attorney for guidance specific to your situation.

Here are some things you can do to avoid having your 401(k) levied by the IRS:

  • File your taxes on time and pay your taxes in full.
  • If you cannot pay your taxes in full, contact the IRS to set up a payment plan.
  • Keep your 401(k) balance low. The less money you have in your 401(k), the less the IRS can take if they levy it.
  • Consider rolling over your 401(k) to an IRA. IRAs are not protected from levies by the IRS, but they may be less attractive to the IRS than 401(k)s because they are more difficult to access.

If you have any questions about whether or not the IRS can take your 401(k), you should speak to a tax advisor.

It’s crucial to consider the tax implications and penalties associated with early withdrawals from a 401(k) before taking any action. Generally, it’s advisable to preserve your retirement savings for its intended purpose—retirement. If you are facing financial difficulties and have a tax debt, it’s a good idea to contact the IRS to explore options for resolving the debt through installment agreements or other means that do not require depleting your retirement savings. Additionally, seeking advice from a tax professional or financial advisor can help you make informed decisions regarding your financial situation and retirement accounts.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Filing Back Taxes in 2022
Regular Post
Written by Craig B

Filing Back Taxes in 2023

If you need to file back taxes, this post can help. These are only common guidelines, for thorough guidelines you should consult the IRS website, an IRS agent, or an enrolled agent, such as Tax Debt Advisors, Inc.

How to File Back Tax Returns

Step 1: Gather your tax papers

To file your back-tax returns, you going to need the W-2’s or 1099 forms you got for those tax years for reporting your income. If you’re qualified for deductions and credits, you are also required to gather any receipts or other supportive records that demonstrate your qualifications to claim them.

Step 2: Petition for missing papers

If you’re lacking any tax papers from the last decade, you can petition a copy from the IRS by filing Form 4506-T.

  • Only use this form to petition for W-2s, 1099’s and possibly 1098’s that could provide support for many of your deductions.
  • Although you won’t receive an identical version of the original form, the IRS will give you with a duplicate of all related information, in which is satisfactory to file back tax returns.
  • It may take the IRS up to forty-five days to process your petition.

Step 3: Download previous year IRS tax forms

You need to always file your back-tax returns on the primary forms for the tax years you’re filing for. You could always search the IRS website to find the forms, but for faster access, you should utilize advanced tax preparing software, like TurboTax.

Step 4: Prep your back-tax returns

You can’t complete previous year tax forms using guidelines from the current year.

  • Tax laws change each year and using the incorrect guidelines could require you to prepare the return once again.
  • Verify to be sure the guidelines you are using are for the identical tax year as the return you are getting ready to file.

Step 5: Submit the forms

Submit your forms to the IRS at the address on the Form 1040’s guidelines.

  • When you owe added income tax for any of the previous years, be sure to make as large of a payment as possible to decrease any interest charges.
  • Different from tax penalties that stop adding when the limit is reached, monthly interest still gets added until until the tax is paid off.
  • After the IRS gets the tax returns, you should expect to get a notice of the clear-cut penalty and interest charges you will be responsible for paying.

Source

  1. TurboTax – Taxes, I. (n.d.). How Do I File Back Tax Returns? Retrieved October 16, 2020, from https://turbotax.intuit.com/tax-tips/irs-tax-return/how-do-i-file-back-tax-returns/L535BxMms

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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IRS Online Payment Plans 2022
Regular Post
Written by Craig B

IRS Online Payment Plans 2023

If you are a qualified taxpayer or authorized representative (Power of Attorney) you can apply for a payment plan (including installment agreement) online to pay off your balance over time. Read on to learn more. You can a payment plan at: https://www.irs.gov/payments/online-payment-agreement-application

Qualification

Your specific tax situation will determine which payment options are available to you. Payment options include full payment, a short-term payment plan (paying in 120 days or less) or a long-term payment plan (installment agreement) (paying monthly).

You may qualify to apply online if:

  • Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
  • Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.

If you are a sole proprietor or independent contractor, apply for a payment plan as an individual.

Note: Setup fees may be higher if you apply for a payment plan by phone, mail, or in-person. Get more information on other payment plan options and fees.

Payment Plan Applications

  • Name exactly as it appears on your most recently filed tax return
  • Valid e-mail address
  • Address from most recently filed tax return
  • Date of birth
  • Filing status
  • Your Social Security Number or Individual Tax ID Number (ITIN)
  • Based on the type of agreement requested, you may also need the balance due amount
  • To confirm your identity, you will need:
    • financial account number or
    • mobile phone registered in your name or
    • activation code received by postal mail (takes 5 to 10 business days)
  • If you previously registered for an Online Payment Agreement, Get Transcript, or any Identity Protection PIN (IP PIN), you should log in with the same user ID and password. You will need to confirm your identity by providing the additional information listed above if you haven’t already done so.

Costs

Pay Now

  • $0 setup fee
  • No future penalties or interest added

Pay amount owed in full today directly from your checking or savings account (Direct Pay)  or by check, money order or debit/credit card.
Fees apply when paying by card.

Short-term Payment Plan (120 days or less)

  • $0 setup fee
  • Plus accrued penalties and interest until the balance is paid in full

After applying for a short-term payment plan, you can pay the amount owed directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.
Fees apply when paying by card.

Long-term Payment Plan (Installment Agreement)  (Pay monthly)

Pay monthly through automatic withdrawals

  • $31 setup fee (low income: setup fee waived)
  • Plus accrued penalties and interest until the balance is paid in full

Pay amount owed through Direct Debit (automatic payments from your checking account), also known as a Direct Debit Installment Agreement (DDIA). This is required if your balance is more than $25,000.
Pay each month (non-Direct Debit)

  • $149 setup fee (low income: $43 setup fee that may be reimbursed if certain conditions are met)
  • Plus accrued penalties and interest until the balance is paid in full

After applying for a long-term payment plan, pay amount owed through non-Direct Debit (not automated) monthly payments, including payments directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.
Fees apply when paying by card.

Revise an Existing Payment Plan (Installment Agreement) or Reinstate After Default

  • $10 fee, which may be reimbursed if you are identified as low income and certain conditions are met.

IRS payment plans, also known as installment agreements, offer several advantages for taxpayers who owe back taxes but are unable to pay the full amount immediately. These payment plans are designed to help individuals and businesses fulfill their tax obligations while managing their financial circumstances. Here are some key advantages of IRS payment plans:

  1. Affordable Payments: Payment plans allow taxpayers to spread their tax debt over a specified period, making it more manageable to budget for regular payments. The IRS considers your financial situation when determining the monthly payment amount, which helps prevent financial hardship.
  2. Avoid Collection Actions: Entering into an IRS payment plan can help prevent more aggressive collection actions, such as wage garnishment, bank levies, or asset seizures. As long as you meet the terms of the agreement, the IRS generally suspends collection activities.
  3. Maintain Good Standing: Complying with an installment agreement helps you remain in good standing with the IRS. It demonstrates your commitment to resolving your tax debt and can positively impact your credit score and financial reputation.
  4. Flexible Terms: The IRS offers different types of payment plans, including short-term (120 days or less) and long-term (more than 120 days) plans. Taxpayers can choose the plan that best fits their financial situation.
  5. Reduced Penalties: If you enter into an installment agreement, you may be eligible to request a reduction in certain penalties, such as the failure-to-pay penalty. While interest continues to accrue on the unpaid balance, penalty relief can result in cost savings.
  6. Avoid Additional Costs: Failing to pay your tax debt on time can lead to additional costs in the form of penalties and interest. By entering into an IRS payment plan, you can stop the accrual of some penalties, potentially saving money in the long run.
  7. Structured Approach: Payment plans provide a structured approach to resolving your tax debt. You’ll have a clear payment schedule and a set date by which your debt will be fully paid, helping you stay on track.
  8. Avoid Negative Impact on Credit Score: While a tax lien may be filed when you enter into a payment plan, it’s typically not reported to credit bureaus. This means that your credit score may not be negatively affected, as long as you make your payments as agreed.
  9. Easier to Budget: Knowing the exact amount and due date of your monthly payments makes it easier to budget and plan your finances accordingly.
  10. Temporary Financial Relief: Payment plans can provide temporary financial relief, allowing you to address other financial priorities while still meeting your tax obligations.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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