Signing off

I was recently appointed a Federal Appeals Officer for the IRS. As such, it would be a conflict of interest to give private advice on tax matters. So I'm shutting the blog down.

If you need any tax help please visit the sponsors on this site. They all provide tax relief and many give free consultations.

Take care and good luck to all!

I Don't Have To Pay The IRS Until October Since I Filed An Extension

WRONG! BUZZZZZZZ! Thanks for playing.

Many people don't realize this but when you file for an automatic extension to file your annual Form 1040 with the IRS you only get an extension on the filing of the return. You do not get an extension on paying any tax due. For those who are wondering what IRS form allows you an extension to pay, there is none. There exists no extension to pay program with the IRS.

So you filed your extension and didn't pay. Now what?

Well, write a check ASAP for an estimated amount on what you'll owe when you do get around to filing the return (before October 15th of course). That should stop the bleeding on some of the penalties and interest that have been accruing for the past 5 days.

If you can't do that then get that return in ASAP and request an Installment Agreement, Currently Not Collectible Status, or consider your eligibility for an Offer in Compromise. (See my previous post on these options). But remember, the return must be filed and the tax assessed before you can petition for any of these IRS resolution options.

I Owe the IRS Tomorrow and I Can't Pay Them!

Tomorrow is April 15th. To every American that means your annual IRS 1040 form is due. A lot of people get refund checks, but not everyone. Some have a balance due and must write the check by tomorrow to avoid late payment fees and IRS enforced collection.

But what if you can't pay it? Then what?

First, request an Installment Agreement (a pay plan). You can actually attach this request to your tax return and send them in together. The IRS form is Form 9465. If you owe more than $25,000 in taxes, be prepared to make full financial disclosures to the IRS to determine how much you can pay.

Second, if you are in a temporary bind (you lost your job or your business went into the crapper recently), you can call the IRS at 1-800-829-1040 and request a Currently Not Collectible ("CNC") status. There is no form for this. Just request it over the phone and once again be prepared to disclose your monthly income/expenses to prove you can't make monthly payments.

Lastly, if you can't pay it and will probably never be able to pay it (including liquidating all your assets), then look into an Offer in Compromise (Form 656). Be careful though. These are very tricky cases. In most cases it's best to get the help of an experienced professional (an attorney, CPA, or EA that specializes in civil tax controversies).

Good luck!

IRS "Finder's Fee" for Turning In Delinquent Taxpayers

Jimmy T. from Philly said he heard that you can get money for turning in someone to the IRS who didn't pay their taxes. Is this true?

Yes it is Jimmy. The IRS Compliance and Enforcement Division has its informants just like the law enforcement officers you see on TV. And the IRS does pay them. . . sometimes.

Here's how it works:

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30% of the additional tax, penalty and other amounts it collects.

Who can get an award?

The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.

The IRS is looking for solid information, not an “educated guess” or unsupported speculation. They are also looking for a significant Federal tax issue - this is not a program for resolving personal problems or disputes about a business relationship.

What are the rules for getting an award?

The law provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15% to 30% of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court.

The IRS also has an award program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The awards through this program are less, with a maximum award of 15% up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. Some of the rules are different from those that apply to cases involving more than $2 million.

If you decide to submit information and seek an award for doing so, use IRS Form 211. The same form is used for both award programs.

Is My IRS Stimulus Check Considered "Income" on My 2008 Tax Return?

Your stimulus payment from last year should not be included as income when you file your 2008 tax return.

Most people received the maximum Economic Stimulus Payment in 2008. However, some people may be eligible for a first time credit or for a larger payment than they were eligible for last year.

This amount is called a Recovery Rebate Credit . You'll need to have the amount of your Stimulus Payment from last year so you can figure out whether or not you're eligible to receive this credit.

Here's how you find out what your 2008 stimulus check was:

Go to How Much Was My 2008 Stimulus Check? It's an IRS link.

Make sure you have the following information or you won't be able to use this online tool:

• Your Social Security Number
• Your 2007 Filing Status
• Number of Exemptions claimed on your 2007 tax return

For more in depth details about the Recovery Rebate Credit, visit the IRS site on the topic.

Good luck and take care!

Missing Tax Returns? Here's What You Do. . .

. . .FILE THEM!

Yes, it's that simple. Even if you can't pay them you need to file them.

Why?

1. Because Willful Failure to File a tax return is technically a federal tax crime punishable up to one year in prison and a $25,000 fine for each year not filed.

2. And the IRS will not hear word one about any type of resolution to your tax debt if there are any missing returns.

So get your records together and go see your friendly neighborhood tax preparer. If you need to file them on your own then you can get previous year's forms at the IRS website.

But I don't have my records for that far back. Now what?

If that's the case then you need to prepare and file a "best-efforts" return. Basically, you need to guess at your deductions. You can get the actual income reported for you on W2s/1099s from the IRS directly. These are called "Income Transcripts." Just call 1-800-829-1040 and request the income transcripts for the years you are missing.

If you need to prepare a best-efforts return, I'd recommend hiring a seasoned tax preparer for the job. And don't hire someone from one of those chain preparation companies (you know who I mean). They do not specialize in preparing best-efforts returns.

Once all of the returns are in you can begin the process of resolving it. I know it's hard but you absolutely NEED to get those missing returns in. If you need help let me know. I can walk you through it if necessary.

Good luck and take care.

Buy A New Car, Get IRS Cash Back

The IRS announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.

See the full story at the IRS website.