|Posted on November 16, 2017 at 10:20 AM||comments (3109)|
The IRS mails millions of letters to taxpayers every year for many reasons. Here are seven simple suggestions on how individuals can handle a letter or notice from the IRS:
1. Don’t panic. Simply responding will take care of most IRS letters and notices.
Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
2. Compare it with the tax return. If a letter indicates a changed or corrected tax return, the taxpayer should review the information and compare it with their original return.
***Contact your tax professional for assistance***
3. Only reply if necessary. There is usually no need to reply to a letter unless specifically instructed to do so, or to make a payment.
4. Respond timely. Taxpayers should respond to a letter with which they do not agree. They should mail a letter explaining why they disagree. They should mail their response to the address listed at the bottom of the letter. The taxpayer should include information and documents for the IRS to consider. The taxpayer should allow at least 30 days for a response.
When a specific date is listed in the letter, there are two main reasons taxpayers should respond by that date:
To minimize additional interest and penalty charges.
To preserve appeal rights if the taxpayers doesn’t agree.
6. Don’t call. For most letters, there is no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can use the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling.
7. Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.
|Posted on November 1, 2017 at 12:05 AM||comments (483)|
The IRS has released the below information regarding underpayment of taxes and ways to eliminate the penalty.
10 Million Taxpayers Face an Estimated Tax Penalty Each Year; Act Now to Reduce or Avoid it for 2017; New Web Page Can Help
WASHINGTON — The Internal Revenue Service today reminded taxpayers assessed an estimated tax penalty for tax year 2016 that they still have time to take steps to reduce or eliminate the penalty for 2017 and future years.
To help raise awareness about the growing number of estimated tax penalties, the IRS has launched a new “Pay as You Go, So You Don’t Owe” web page. The IRS.gov page has tips and resources designed to help taxpayers, including those involved in the sharing economy, better understand tax withholding, making estimated tax payments and avoiding an unexpected penalty.
Each year, about 10 million taxpayers are assessed the estimated tax penalty. The average penalty was about $130 in 2015, but the IRS has seen the number of taxpayers assessed this penalty increase in recent years. The number jumped about 40 percent from 7.2 million in 2010 to 10 million in 2015.
Most of those affected taxpayers can easily reduce or, in some cases, eliminate the penalty by increasing their withholding or adjusting estimated tax payments for the rest of the year. With a little planning, taxpayers can avoid the penalty altogether.
By law, the estimated tax penalty usually applies when a taxpayer pays too little of their total tax during the year. The penalty is calculated based on the interest rate charged by the IRS on unpaid tax.
How to Avoid the Penalty
For most people, avoiding the penalty means ensuring that at least 90 percent of their total tax liability is paid in during the year, either through income-tax withholding or by making quarterly estimated tax payments. Keep in mind exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers, fishers, casualty and disaster victims, those who recently became disabled, recent retirees, those who base their payments on last year’s tax and those who receive income unevenly during the year. For details, see Form 2210 and its instructions.
Taxpayers may want to consider increasing their tax withholding in 2017, especially if they had a large balance due when they filed their 2016 return earlier this year. Employees can do this by filling out a new Form W-4 and giving it to their employer. Similarly, recipients of pensions and annuities can make this change by filling out Form W-4P and giving it to their payer.
In either case, taxpayers can typically increase their withholding by claiming fewer allowances on their withholding form. If that’s not enough, they can also ask employers or payers to withhold an additional flat dollar amount each pay period. For help determining the right amount to withhold, check out the Withholding Calculator on IRS.gov.
Taxpayers who receive Social Security benefits, unemployment compensation and certain other government payments can also choose to have federal tax taken out by filling out Form W-4V and giving it to their payer. But some restrictions apply. See the form and its instructions for details.
For taxpayers whose income is normally not subject to withholding, starting or increasing withholding is not an option. Instead, they can avoid the estimated tax penalty by making quarterly estimated tax payments to the IRS. In general, this includes investment income —such as interest, dividends, rents, royalties and capital gains —alimony and self-employment income. Those involved in the sharing economy may also need to make these payments.
Tips to Make Estimated Tax Payments
Estimated tax payments are normally due on April 15, June 15, Sept. 15 and Jan. 15 of the following year. Any time one of these deadlines falls on a weekend or holiday, taxpayers have until the next business day to make the payment. Thus, the next estimated tax payment for the fourth quarter of 2017 is due Tuesday, Jan. 16, 2018.
The fastest and easiest way to make estimated tax payments is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. Taxpayers may also use Form 1040-ES to figure these payments. IRS Publication 505, Tax Withholding and Estimated Tax, is a resource on withholding and estimated payments.
|Posted on September 9, 2016 at 11:55 AM||comments (3)|
Have you ever wondered whether or not to hire a new employee or contract the work out?
Below are several cost to consider when you are faced with determining what works best for you.
To hire a new employee, not only do you need to consider what their salary will be but also the additional benefits you will pay.
- signing Bonus
- moving expenses
- vehicle / mileage reimbursement
- annual bonus
- vacation / holiday / sick pay
- salary / hourly compensation
- employers portion of taxes
- employer subsidized insurance
- employer retirement match
- unemployment tax
- workers compensation insurance
- office equipment
- cell phone
- payroll processing cost
The alternative to hiring a new employee is to hire an independent contractor. The cost associated with an independent contract are listed below.
- additional compensation outside of original contract
- incentive to meet goals
The additional costs for hiring a contractor may be limited by the terms of the contract (ie, will not be paid for completing task prior to deadline or must provide own computer equipment). Always consult with a lawyer regarding all contracts.
Per the recently released report from the Bureau of Labor Statistics on 9/8/2016, the additional cost of hiring an employee ranges from 20% to 40%. You can find the report here (www.bls.gov/news.release/pdf/ecec.pdf) The report takes into account the additional cost and salary for total compensation paid. This is further broken down to reflect the average annual salary accounts for less than 70% of the total cost per employee.