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How to Respond to an IRS Notice (Including Sample Letters)

How to Respond to an IRS Notice (Including Sample Letters)

By on Sep 20, 2018 in Debt Relief | 0 comments

Receiving a written notice from the IRS can be one of the most stressful moments a taxpayer experiences. These letters are much easier to handle than you might think, however. Most letters simply request adjustments to recent returns or ask for additional documentation. You may also receive a letter warning you that a payment is late. By keeping the lines of communication you have with the IRS open, you’ll be able to solve nearly any tax issue that they contacted you about. Few people find putting their response down in writing to be an easy task, nevertheless, this is usually your best bet when responding to the IRS.   Key Points for Writing a Letter of Explanation   Once you receive a notice, you’re on the clock and responsible for answering before a set deadline. The letter you receive will clearly state one or more questions that the IRS has about your tax situation.   Present all the answers to these questions in a clear, professional tone. Notices generally come with additional instructions you’ll need to follow.   For example, if the IRS stated that you didn’t specify income in your return because you neglected to include a 1099, then simply attach a copy of it with the letter of explanation you send them. Include up-to-date contact information and then sign your letter to make it official.   Correcting the IRS   While you might think of them as not regular people, IRS agents are human beings who have been known to make mistakes. If there’s a problem, then you shouldn’t ever make hostile remarks. However, you can take the opportunity to respectfully clarify where you think they erred.   In a few odd cases, the IRS has even been known to send notices that include a refund check that a taxpayer did not earn. If you get an erroneous refund, then you shouldn’t cash it because the IRS can charge you interest on it later. Write “void” in the endorsement section on the check’s reverse side and include it with your letter of explanation.   Every letter that you send to the IRS should include, at minimum, the following information   Taxpayer’s Name and Social Security Number (SSN)...

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IRS Repayment Options Explained

IRS Repayment Options Explained

By on Sep 13, 2018 in Tax relief | 0 comments

Taking no action is the worst thing you can do if you owe any federal tax debt, especially considering that there are options. If you’re not able to pay your taxes by the original filing due date, then the balance is immediately subject to interest and late penalties. You may also be responsible for penalties associated with never having filed a return. Every day that ticks by allows that debt to grow larger. We will describe below some of the options available to help you repay all the money you to the IRS. You can ease your burden by taking action early on. Consider the following options you have to repay whatever you owe the federal government. Paying IRS Debts Outright Taxpayers who have the money to pay their debt immediately can do so with an electronic funds transfer or with a debit card. Once you’ve paid off the debt, no further interest or penalties can be assessed to you. The IRS will even accept payment from any major credit cards you might have.   Full Payment Agreements Short-term tax debts are the easiest to fix. Say you don’t have the money to pay your taxes in full by the time the due date rolls around, but you’ll have the money within several months. This often happens because you need to deal with an emergency right as tax time rolls around. If you find yourself in this situation, then you can apply for a full payment agreement from the IRS. While interest and penalties will accrue until you’ve paid off your total liability, there’s no other fee associated with the application. Taxpayers who qualify for this option can get up to 120 days to repay their debt.   Monthly Installment Agreements Apply for an installment agreement if you can’t pay off the debt in the near future. Since this involves a formal application process, it does require you to pay a fee. However, it’s much easier to pay your tax debt off if you’re approved because you’re given the freedom to make fixed monthly payments to the IRS without interest. This turns your tax debt into a predictable, monthly expense that you can budget for.   Currently Not Collectible...

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How to Calculate Underpayment Penalty

How to Calculate Underpayment Penalty

By on Sep 6, 2018 in blog, Tax relief | 0 comments

If you underpaid your federal taxes in the past, then you might be looking at a penalty from the IRS. Taxes are generally withheld by your employer, but self-employed entrepreneurs don’t get income taken out of their payment. You may have accidentally underestimated how much money you were going to make over the next quarter and, therefore owe the IRS additional taxes plus a fee. Fortunately, calculating the underpayment penalty you owe shouldn’t be that difficult. You simply need to get your hands on the right IRS form to do it. That’s especially good news considering that you probably don’t want to have to spend any extra time doing something as unpleasant as calculating how much more money you owe the feds! In an overwhelming majority of cases, you’ll only need form 2210 to get the job done. Using IRS Form 2210 to Calculate An Underpayment Penalty IRS Form 2210 is known as the Underpayment of Estimated Tax by Individuals, Estates and Trusts form. You can easily acquire it from the federal agency. It features a flowchart designed to help you calculate the penalty, which should make it easy enough to follow. The flowchart is very general, so you shouldn’t run into a situation where you have to worry about whether or not a certain step applies to you. Part I of underpayment form 2210 will ask you to enter your total tax responsibility after the credits cited on your normal 1040. You’ll also need to add any other relevant taxes such as the self-employment tax as well as any refundable sums, like the premium tax credit. It should then ask you to add these values together and multiply them by 90 percent. Keep in mind that you don’t want to multiply them by the number 90 unless you feel like giving the IRS a whole bunch more of your money! They’re actually concerned with 90 percent, so if your calculator doesn’t have a “%” key you’ll want to multiply the sum of those two values by .9 instead. You’ll want to make sure there’s a decimal point in front of it if you don’t have that elusive percent sign. You’ll then need to subtract your withholding taxes from...

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How to Calculate the Interest Rate on an IRS Installment Agreement

How to Calculate the Interest Rate on an IRS Installment Agreement

By on Aug 29, 2018 in Debt Relief | 0 comments

If you are late submitting and/or paying your annual tax filing, then you need to prepare your finances to pay more that what you actually owe. This is because the Internal Revenue Service (IRS) penalizes taxpayers for each day they’re late filing and/or paying their taxes. This is where tax debt can get out of hand quick, fast, and in a hurry.   The Frustration of Making the Best out of a Situation   The stress of knowing that your tax debt will balloon each day your account is neglected can be stressful. Even if you are communicating with the IRS, there isn’t always a resolution at the end of every phone call. Tax matters can become complicated as the deadlines continue to be missed and it might seem impossible to determine exactly how much money you actually owe as the interest and penalties continue to increase.   Determining the Tax Payoff Amount   There is a way to calculate exactly how much money you’ll need to pay off.   Two determining factors are the date in which you plan to pay the debt off and how much money you can afford to pay in one lump sum. We understand that for many, if they could afford to pay the lump sum, there wouldn’t be a tax issue to begin with. However, the amount in which one can afford to pay will contribute to the payoff date. The longer the payoff date is extended, the less the monthly payments might be, but you then have to account for the penalty and interest rates. So in reality, the quicker you’re able to pay your tax debt off, the less money in penalties and fees you’ll have to pay. Paying more upfront will actually save you more money.   Here are a few things you’ll need to know in order to calculate the interest rate on an IRS Installment Agreement:    1. Determine what type of taxpayer you are.   Tax matters start getting complicated when you run a business. If you own a business, then you’ll have to be a bit more specific in determining the type of taxpayer you are. It will be one of the following:   Individual...

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Do You Have to Pay Your Dead Relative’s Back Taxes?

Do You Have to Pay Your Dead Relative’s Back Taxes?

By on Aug 21, 2018 in Tax relief | 0 comments

Taxes, change, and death are three certainties we have in life. The death of a relative can have a significant impact on an individual in terms of taking care of his or her estate. We are all are aware of this kind of scenario—of all the psychological consequences death represents. Back taxes, as it should be known, are partially or fully unpaid taxes from the year that they were due.   As the Internal Revenue Service (IRS) clearly states, the income tax return of a decedent is prepared in the same way as if the person were still alive. All income must be reported and all the deductions to which the deceased is entitled may be claimed. This also means that all debt must be paid. Debts can be paid by getting loans from Loanlingo co uk   Are We Responsible for our Relative’s Unpaid Debt?   To answer it simply: no. If a person dies leaving unpaid taxes, the relatives are not responsible for the debt. The only individual held responsible for a decedent’s debt is the estate executor under specific circumstances. The estate executor becomes responsible if he or she distributes the assets according to what is stated in the will before the taxes have been paid, or if he or she is aware of the existences of debt and stills transfers or sells the property of the deceased, ignoring the fact that a payment must be made.   More about Estate Taxes   Estate taxes are taxes that are imposed on the net value of a decedent’s property before it is distributed to the rightful heirs. If a person dies owing money to the IRS, his or her assets will be put under a legal claim known as a tax lien. This means that said assets cannot be neither sold nor transferred to another person until everything has been paid off. If the debt cannot be financed in its entirety, then the IRS has the right to seize the property. Exceptions to the Rule   Now, as with every rule, there are some exceptions. This means that in some cases, relatives are held responsible for unpaid taxes if:   They co-signed for a loan that remains...

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