taxes Archives - Tax Debt Advisors

Regular Post

Written by Craig B

12 August 2024

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Taxes and Penalties: If the IRS levies your Roth IRA, the amount withdrawn to satisfy the tax debt may be subject to income taxes and, if you are under age 59½, a 10% early withdrawal penalty on the earnings portion of the withdrawal.
Order of Withdrawal: Roth IRA withdrawals are generally considered to come first from contributions (which can be withdrawn tax- and penalty-free), then from earnings.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the levy to your account, which could trigger taxes and penalties depending on the amount and source of the funds withdrawn.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

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!

What to Do If You Have Missed The April 2024 Tax Deadline

If you have missed the April 2024 tax deadline, it’s important to take prompt action to minimize any penalties and interest charges. Here are the steps you should follow:

1. File as Soon as Possible

File Electronically: Use e-file to submit your tax return. Filing electronically is faster and more efficient than mailing a paper return.
Free File Programs: If you qualify, use IRS Free File to prepare and file your return for free.

2. Pay Any Amounts Due

Partial Payments: If you can’t pay the full amount, pay as much as you can to reduce penalties and interest.
Payment Options: The IRS offers several payment options, including direct debit, credit or debit card, and online payment agreements.

3. Request an Extension

Automatic Extension: If you missed the deadline but are still within six months of it, file Form 4868 for an automatic extension, which gives you until October 15, 2024, to file your return.
Remember: An extension to file is not an extension to pay. You still need to estimate and pay any taxes owed by the April deadline to avoid penalties and interest.

4. Understand the Penalties

Failure-to-File Penalty: Typically 5% of the unpaid taxes for each month or part of a month that your return is late, up to a maximum of 25%.
Failure-to-Pay Penalty: Generally 0.5% of your unpaid taxes for each month or part of a month after the due date, until the tax is paid in full, up to 25%.
Interest: Interest accrues on any unpaid taxes from the due date of the return until the date of payment.

5. Consider a Payment Plan

Installment Agreement: If you can’t pay your tax bill in full, apply for a monthly payment plan. You can apply online for a payment plan on the IRS website.
Offer in Compromise: In some cases, the IRS may accept less than the full amount you owe through an Offer in Compromise.

6. Seek Professional Help

Tax Professional: Consider hiring a tax professional to help you navigate the process, especially if you have complex tax issues or owe a significant amount of money.
Taxpayer Advocate Service: If you’re experiencing financial hardship or have unresolved tax issues, the Taxpayer Advocate Service may be able to assist you.

7. Review Your Withholding and Estimates

Adjust Withholding: If you frequently owe taxes or receive large refunds, you may need to adjust your withholding or make estimated tax payments to avoid future issues.
Estimated Payments: Make sure to pay your quarterly estimated taxes if you are self-employed or have significant income not subject to withholding.

8. Stay Informed

IRS Notifications: If the IRS sends you a notice or letter, respond promptly to avoid further penalties.
Keep Records: Maintain copies of your filed tax returns, payment receipts, and any correspondence with the IRS.

By following these steps, you can mitigate the impact of missing the April 2024 tax deadline and get back on track with your tax obligations.

Tax Settlement in Mesa, Arizona

Tax Questions, taxes

Regular Post

Written by Craig B

31 May 2024

First Steps When the IRS Is Auditing You

What Are IRS Audits?

A tax audit is when the IRS chooses to look into your tax return a little more comprehensive and verify that your income and deductions are true. Usually, your tax return is selected for audit when something you entered on your return is not common.

Receiving notice of an IRS audit can be stressful, but taking the right steps can help you manage the process effectively. Here are the first steps you should take if the IRS audits you:

Read the Notice Carefully:
- The IRS audit notice will outline the scope of the audit, which tax year(s) are being examined, and what specific information is being requested. Understanding the details is crucial for a timely and appropriate response.
Gather Documentation:
- Collect all relevant documents, such as tax returns, receipts, bank statements, and records that support the items being audited. Make sure your documentation is organized and complete.
Contact Your Tax Professional:
- If you have a tax advisor or accountant, inform them immediately. They can provide guidance and may represent you during the audit. If you don’t have one, consider hiring a tax professional with experience in IRS audits.
Respond Promptly:
- Respond to the IRS by the deadline specified in the notice. Timely communication is essential to avoid additional penalties

How Long Do IRS Audits Take?

As mentioned above, most of these audits will be completed within a year. There is a time limit for how long the IRS has to charge you or assess any additional taxes on the return being audited. This statute will expire three years from the due date of the return or the date when it was filed, whichever is later. For example, the statute would expire on April 15, 2026 for a taxpayer filing on April 13, 2023.

The IRS audit should be completed within a year, in most cases. Even though the IRS has three years to audit a return, the IRS likes to close audits well before the statute of limitations comes into play. The IRS does not have a statute of limitations if tax fraud is involved. When there is a large amount of unreported income, the statute is six years. However, the IRS rarely goes into an audit assuming an extended statute.

Types Of IRS Audits

There are three different kinds of IRS audits. These audits can take anywhere from just a few months to a year.

Mail Audits

No matter what kind of audit the IRS chooses to carry out, you will get notification of it through mail. A mail audit is the most straightforward kind of IRS review and doesn’t require you to meet with an auditor personally.

Usually, the IRS petitions for additional documentation to prove different items you reported on your return. For instance, if you claim $5,000 in philanthropic deductions, the IRS might send you a letter calling for evidence of your donations. Typically, submitting adequate evidence will complete the audit in your favor if the IRS is content.

Average time to complete a mail audit: 3-6 months.

Office Audits

An office audit is a face-to-face audit carried in a local IRS office. This type of audit is usually more detailed than a mail audit and typically comprise of questioning by an audit officer about details on your return.

You will be requested to bring particular information to an office audit, like the books and records for your company or your personal financial institutional statements and receipts. You additionally have the right to bring a CPA or attorney to represent you during the audit.

Average time complete an office audit: 3-6 months.

Field Audits

A field audit is the most comprehensive kind of review that the IRS carries out. In such a situation, an IRS agent will carry out the audit at your home or business. Usually, field audits are done when the IRS is double checking more than one deduction. A field audit is typically very detailed and will cover a lot, if not all, issues on the return.

Average time complete a field audit: less than 1 year.

IRS Audit Time Factors

Here are a few factors below that will help you estimate how long your audit may take.

Adjustments Found

If the IRS auditor makes a lot of adjustments to your return, he or she will often look for more. This means the auditor may even look into other tax years, resulting in a longer process overall.

Pursuing Penalties

Oftentimes, the IRS will pursue penalties if they have to make lots of adjustments. This, of course, will extend the timeline of the process. If the IRS pursues fraud, the audit could last several years. The IRS pursues this action in only about 2,000 or 155 million cases each year, on average.

Small Business Ownership

It is undoubtedly harder for the IRS to track small business income. Auditors will have to review bank records, websites, accounts, and client accounting records. This extensive review can take several more months to complete.

Taxpayer Disagrees With Adjustments

You can take your case to IRS appeals if you disagree with the auditor’s findings. Going this route will usually tack on an extra six months to the case.

Tax Settlement in Mesa, Arizona

taxes

Regular Post

Written by webtechs

1 May 2024

25 Quotes About Taxes

Here are some quotes about taxes:

“The hardest thing in the world to understand is the income tax.” – Albert Einstein
“Taxes are what we pay for civilized society.” – Oliver Wendell Holmes Jr.
“The power of taxing people and their property is essential to the very existence of government.” – James Madison
“The tax code is so complex and the forms are so complicated, that I think taxpayers often make mistakes.” – Chris Chocola
“The best measure of a man’s honesty isn’t his income tax return. It’s the zero adjust on his bathroom scale.” – Arthur C. Clarke
“To tax and to please, no more than to love and to be wise, is not given to men.” – Edmund Burke
“The nation should have a tax system that looks like someone designed it on purpose.” – William Simon
“Taxes grow without rain.” – Jewish Proverb
“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” – Denis Healey
“I’m proud to be paying taxes in the United States. The only thing is, I could be just as proud for half the money.” – Arthur Godfrey
“You don’t pay taxes – they take taxes.” – Chris Rock
“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.” – Will Rogers
“The reward of energy, enterprise and thrift is taxes.” – William Feather
“The politician’s promises of yesterday are the taxes of today.” – William Lyon Mackenzie King
“You can’t tax business. Business doesn’t pay taxes. It collects taxes.” – Ronald Reagan
“Any tax is a discouragement and therefore a regulation so far as it goes.” – Oliver Wendell Holmes
“I am thankful for the taxes I pay because it means that I’m employed.” – Nancie J. Carmody
“You must pay taxes. But there’s no law that says you gotta leave a tip.” – Morgan Stanley
“A penny saved is worth two pennies earned… after taxes.” – Ragnar Tornquist
“When I wake up in the morning, I feel like a billionaire without paying taxes.” – Ernie Banks
“Instead of raising taxes as some would insist, we need to reduce waste and inefficiency in government.” – Tim Murphy
“Even taxpayers have rights!” – Beric J. Croome
“Tax is not a four-letter word; rather, it’s the price we pay for the country we want.” – Alex Himelfarb
“Reliable tax revenue is vital to the fiscal wellbeing of municipalities.” – Hendrith Vanlon Smith Jr.

These quotes reflect various perspectives on taxes, from their necessity for society to their complexities and challenges.

Tax Settlement in Mesa, Arizona

taxes

Quotes About Taxes

Regular Post

Written by webtechs

1 April 2024

How To Avoid Paying Taxes As An Independent Contractor

According to the IRS, independent contractors are individuals hired to do work for someone else but are not considered employees. Let’s take a look at a few ways of reducing tax liabilities as independent contractors.

What Is The Difference Between Tax Evasion And Tax Avoidance?

It is very important to distinguish between tax avoidance and tax evasion. Tax evasion is the use of illegal practices in order to avoid paying taxes. These practices include overstating expenses, concealing assets, or underreporting income. Every taxpayer must know that tax evasion is unlawful and can result in either fines or imprisonment.

Tax avoidance, meanwhile, refers to the lawful use of strategies and provisions written within the tax code to minimize tax liability. This involves organizing your finances in ways that reduce your tax obligations while still following the tax laws.

How Independent Contractors Avoid Paying Taxes

Use these five tips below to minimize your tax deductions while working as an independent contractor.

Take Business Expense Deductions

As a self-employed worker, you have the opportunity to lower your tax liability by deducting various business-related costs. These expenses can include equipment costs, vehicle usage for business, and advertising/marketing expenses.

It’s crucial to keep track of all receipts to accurately report the deductions on your tax return. Typically, this will be done on your Schedule C or appropriate section based on your filing method. By taking advantage of the deduction possibilities, you can reduce your taxable income as a self-employed individual.

Write Off Self-Employment Tax

You may deduct your self-employment tax from your income tax. This deduction allows an individual to write off the employer’s portion of FICA taxes when filing the return.

The IRS actually has a provision that automatically includes said deduction in your Schedule SE. Even if you forget to include it, the IRS will notify you of the error and provide a refund accordingly.

Tax-Advantaged Investment Accounts

It goes without saying that contributing to a retirement account can help reduce your taxable income. Retirement accounts, such as IRAs and SEP IRAs, are typically tax-deductible.

This means that the amount of money you choose to contribute ultimately reduces your taxable income for the year. The money you contribute can grow tax-deferred until you withdraw them in retirement, potentially leading to larger growth over time.

Consider The Structure Of The Business

The structure of the business organization can have an impact on your tax burden. For instance, you may be able to lower your liability by choosing to organize the business as an S-Corp.

Opting for an S-Corp will allow you to pay yourself a salary and potentially avoid some self-employment taxes.

Use Self-Employment Health Insurance

As a self-employed worker, you can benefit from tax savings by using your self-employment health insurance. You do have the option to deduct the premiums you pay for medical, dental, and other qualifying long-term care insurance coverage for yourself, spouse, and dependents.

In order to claim this health insurance write-off, you can enter it on Part II of Schedule 1 as an adjustment to your income. The deduction is then transferred to page 1 of Form 1040. This allows you to enjoy the benefits, regardless of whether you wish to itemize your deductions.

How Do Independent Contractors Report Their Income?

Independent contractors have the flexibility to negotiate payment terms with their clients and/or employers. Depending on the type of agreement, payments can be made through various channels, including checks, ACH deposits, or wire transfers. These payments are not considered salary or wages for tax purposes since taxes are withheld.

During tax season, the payer must provide the contractor with a Form 1099-MISC, reporting the income paid in the previous year. If you are working with multiple clients, you can receive several copies of this form. Any earnings below $600 from a client throughout the year will not require a 1099-MISC form. However, you still must report that income on your Schedule C.

Tax Settlement in Mesa, Arizona

taxes

Regular Post

Written by Craig B

1 March 2024

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:

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.
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.
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.
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.
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.
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

Back Taxes, Debt, Property Taxes, Real estate Taxes, Retirement, Tax Lien, Tax Questions, taxes

Can You Add Money To A Certificate Of Deposit Regularly

Regular Post

Written by webtechs

19 January 2024

Can You Add Money To A Certificate Of Deposit Regularly?

Most CDs (certificate of deposit) do not allow regular additions to the balance following the initial deposit. However, it is possible to opt for an add-on CD, which allows additional deposits. Let’s take a detailed look at CDs and other great savings options.

Can You Add Money To Your Certificate Of Deposit?

Typically, CD’s do not allow individuals to add to their balance. Once you make the initial deposit, the balance will be locked in to keep earning interest until the maturity date. This is part of the reason that CDs do usually offer higher interest rates than other deposit account types.

When you invest in a CD, you commit to locking your money away for a specified period of time. You cannot add to the balance and there will often be steep penalties to pay when choosing to withdraw your money early. You will get a greater return on your deposit in exchange for less liquidity.

Other CD Options For Savings

If you’re looking for the low risk and great returns of a CD but want a bit more flexibility there are a few choices. There are two ways to contribute more money as time goes on: using the CD laddering strategy or buying an add-on CD.

CD Laddering Strategy

With a CD laddering strategy, you will purchase multiple CDs, each featuring a different term. For instance, you can invest in a CD with a six-month term and another with a one-year term. By diversifying your deposits, you can take advantage of the smaller commitments associated with short-term CDs. At the same time, you can enjoy the higher interest rates of long-term CDs.

As the CDs in your ladder mature, you may liquidate the accounts and bank both the principle and interest. Or, you can keep adding rungs to the ladder by renewing the CDs for another term, enabling you to earn more interest.

Add-On CD

Add-on CDs will differ from traditional CDs since they allow the depositor to contribute more funds to the account during its term. The terms of this type of CD can differ depending on where you purchase it from. Some institutions may have a maximum value the CD can have, while others could allow you to make a certain number of deposits during the term.

To maximize your add-on CD, it’s suggested to choose one with a longer maturity date – at least two to three years. As is the case with any CD offering, always shop around to find the best interest rates.

Alternative Savings Options

There are a few alternative ways to build your savings. These options offer greater flexibility than CDs. Depositing money directly into a savings account or opening an IRA can help you save and build your wealth over time.

Savings Accounts

Savings accounts generally offer higher interest rates than checking accounts. However, they are still usually lower than CD rates. You won’t earn as much money off your savings accounts, but you are free to withdraw your money at any time.

The FDIC insures savings accounts, so these are great options for individuals seeking the security of a CD without sacrificing liquidity.

IRAs

You should consider opening a traditional or Roth IRA alongside your 401(k). A Roth IRA is funded with your after-tax dollars, while the traditional version is funded via pre-tax income. Both of these IRAs allow you to withdraw money without penalty after the age of 59.

If you have any extra money left in your budget at the end of the month, funding IRAs can put you on a fast track to a comfortable retirement. The more time your funds have to grow, the larger they will be come time for retirement.

Tax Settlement in Mesa, Arizona

taxes

Regular Post

Written by Craig B

7 December 2023

Commonly Asked Tax Questions

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

Tax Questions, taxes

Regular Post

Written by webtechs

27 November 2023

How Long Does An IRS Audit Take?

The majority of tax audits will wrap up within a year. Let’s look at some factors that can either increase or decrease the amount of time a tax audit takes.

What Are IRS Audits?

How Long Do IRS Audits Take?