PENALTIES AND INTEREST.  For every day your tax return is late, filing penalties, payment penalties, and interest will incur on any tax you owe.

THE IRS WILL FILL OUT YOUR RETURN FOR YOU.  If the IRS receives your tax information from a third party (employers, banks, investment accounts, etc.), the IRS will then fill out your return for you, while assessing tax, penalties, and interest.  THIS IS BAD!  The IRS does NOT consider personal exemptions, deductions, credits, etc. when completing your return.  Accordingly, this often results in an overestimate of taxes, penalties, and interest due because the IRS is using incomplete and/or incorrect information!

Once the IRS fills out a substitute return, you become subject to the IRS collection procedures for outstanding balance – according  to their calculations. This procedure can include a levy on wages or bank accounts, and filing a federal tax lien against your property and assets! This is NOT a process that you want the IRS to start, especially if owe a relatively small amount of tax.

YOU ARE DUE A TAX REFUND.  Even if you think you are due a refund, you still need to file.  The IRS only gives you three years from the tax return due date to subsequently file and receive a refund from that tax year – otherwise the government keeps your refund!

OPTIONS IF YOU CAN’T PAY THE TAX NOW.  If you did not file because you can’t afford to pay the tax, consider filing an extension or setting up a payment plan with the IRS.  Even if your failure to file is due to financial hardship, you nonetheless are on the hook for getting your return filed. The Taxpayer Advocate Service or a Low Income Tax Clinic may be able to assist you if you are unable to file due to financial hardship. You can find a Low Income Tax Clinic near you at http://www.irs.gov/pub/irs-utl/pub._4134-04.pdf

MOST IMPORTANTLY:  If you missed the Tax Return filing deadline, FILE A RETURN OR EXTENSION IMMEDIATELY. As long as you file something, the IRS is more likely to work with you on a feasible payment plan. However, the IRS becomes much more difficult to work with once they begin sending you Assessment Notices.  When dealing with the IRS, a couple of old adages hold true:

Since “nothing is certain but death and taxes,” it really is “better late than never” to file your Tax Return.

Having Friends in High Places Won't Get You That Far with the IRS!

Knowing the chances of the IRS auditing your Income Tax Return is relatively slim, are you willing to take that gamble and “modify” the figures on your return to maximize your refund or minimize the taxes owed?  If so, you are definitely not alone!

But before you turn in that return, you might want to consider this – even the smallest misrepresentation on your return is TAX FRAUD! Mistakes are one thing, but knowingly changing items on your return for your financial gain is another.

So you might be wondering, how will the IRS really know if I fudge on my expenses at my rental houses or the amount I donated to the Humane Society?

Recognizing the frequency of these misrepresentations, the IRS has taken an initiative this year to crack down on those Taxpayers making “little white lies” that have flown under the radar in prior years.  And it is not just the “rich” who are subject to the new scrutiny. With the increasing number of IRS “busts” at tax preparation companies – much like the one we reported right here in Gainesville, Florida just weeks ago http://taxattorneyflorida.com/tax-scammers/ – the IRS isn’t taking anything for granted.  

Last night CNBC aired a special broadcast “The American Tax Cheat,” which highlighted the IRS crackdown on taxpayers.  Find out more here: http://www.cnbc.com/id/42154647/THE_AMERICAN_TAX_CHEAT_WILL_PREMIERE_ON_APRIL_14TH

Looks like the IRS has upped the ante – Still want to take the audit gamble?

You May Qualify for FREE Tax Prep Assistance!

If you need help filing your income tax returns, but think you cannot afford a tax preparer service, beware! Some tax preparation providers may offer you a lower fee or offer to take a percentage of your return amount – all to “help you out” so you do not have to pay out-of-pocket. Such preparation services may serve the old adage very well: “You get what you pay for.” And with some providers, you may be buying yourself a lot of trouble with the IRS.

On Time Tax Service, located in Gainesville, Florida, is under investigation for submitting fraudulent tax returns on behalf of taxpayers – most of whom were low income individuals unable to pay out-of-pocket for tax preparation services. See the full story here:  http://taxattorneyflorida.com/update-alleged-gainesville-tax-scam-on-time-tax-consultants/

If you cannot afford tax preparation services, the Volunteer Income Tax Assistance program (VITA) may be able to help you. VITA provides free tax preparation services for taxpayers whose income was less than $49,000 last year. VITA is being provided by the United Way of North Central Florida, and is available at ten sites in Gainesville, Florida, for filing 2010 income tax returns. Information on each site is available here: http://www.gainesville.com/article/20110216/GUARDIAN/110219580?tc=ar

You can take steps to protect yourself from tax prep scams by using the following guidelines when choosing your return preparer:

• Be skeptical of tax preparers who claim they can get you a larger refund than any other preparer.
• Avoid tax preparers who take their fee as a percentage of the amount of your refund.
• Use a reputable professional who signs your tax return (including their PTIN) and provides you with a copy.
• Be skeptical of tax preparers who are only open for business during “tax season.”
• NEVER, NEVER, NEVER sign a blank tax form.

On Time Tax Consultants after the Raid - You May Not See That Rapid Refund "On Time"

The IRS is cracking down on Tax Fraud by Return Preparers. While most tax return preparation providers are competent  to handle most of your tax return needs, there are still those lurking amongst us whom are con artists filing fraudulent tax returns and stealing their client’s money.

Don’t believe it can happen to you?  Think again!

On March 24, 2011—just a few days ago— On Time Tax Consultants & Mulit Services Inc., tax preparation service  in Gainesville, FL was raided by authorities for alleged fraudulent tax preparation activity.  With bars on the entrance and advertisements on the windows broadcasting such things as “Professional Tax Preparation,” “Fast and Accurate,” “Rapid Refund,” and “Earned Income Credit,” the exterior of the business looks sketchy at best.  I can only wonder if the offers of a “Referral CASH Bonus” and “Bill Pay” enticed unknowing taxpayers into their ploy.

Allegedly, On Time Tax Consultants were making up jobs and income on tax returns to qualify their Customers for a larger tax refund from the Earned Income Tax Credit.  From the tax refunds, On Time Tax Consultants were taking out 30%+ as “compensation” for their services.  Some Customers were receiving refunds as high as $7000.

On Time Tax Consultants, located on 1527 NE Eighth Avenue in Gainesville, Florida is owned by Tyrone Frederic of Lauderdale Lakes, FL according to public Florida business filings on www.sunbiz.org.  Frederic started up On Time Tax Consultants less than six months ago and oddly, his business address is still listed as Sunrise, FL.  Frederic appears to be operating the business with the assistance of Jason Jimeno – the company’s COO and Registered Agent.  See the full story here: http://www.gainesville.com/article/20110324/articles/110329678

How Could This Affect ME?

According to law, YOU, the taxpayer, are ultimately responsible for all information provided on your tax return. Thus, even if someone else, such as a tax preparation service, fills out your tax return, you must act in good faith to ensure all information on the return is correct.

If the information on your tax return is incorrect, the IRS will come after YOU for any underpayment, in addition to penalties and interest.

If you willfully submit a fraudulent tax return, you can be charged with a felony, punishable by up to one year in PRISON and a $10,000 FINE.

Bottom line – You don’t want to be the subject of an IRS audit or investigation, especially for something someone else did!

ANSWER:  Depending on your particular situation, there are several options.  If you are going through a financial hardship, the IRS may be willing to suspend collection activity to allow you the opportunity to get back on your feet.  This process is explained below.

Economic Hardships

You may have the funds to pay the tax you owe the IRS, but if you used those funds to pay your income taxes you may not be able to afford your necessary living expenses and other bills. If you can show that collection of the taxes would cause you or your family financial hardship, the IRS may classify your account as “currently not collectible” and not pursue collection against you. This will allow you to improve your financial condition so that paying income taxes is not an economic hardship. In order to request this status, you must file IRS Form 433-A (employees and self-employed individuals) and/or 433-B (for businesses). Note the following aspects which apply to the suspension for economic hardship:

• Collectability Reviewed Every Year. “Currently not collectible” accounts are reviewed each year. If your financial situation improves during the year, the IRS may remove the suspension and initiate collection of payments. The IRS then may also enter into a compromise agreement with you to satisfy your full tax liability.
• Penalties and Interest Continue. During the period that collection on your account with the IRS is suspended, penalties and interest continue to accrue on the amount of the tax. Even though you do not have to make payments toward the tax liability during the suspended period, it is costing you money in penalties and interest to keep collection at bay during the period.

Keep in mind, the IRS is the most powerful creditor in the United States. If you owe the IRS taxes, as a creditor they can levy on almost any asset or account that you have.  You do NOT want to give the IRS reason to use this power against you, therefore you must report all assets and property to the IRS.  Failure to report all assets may even expose you to liability for tax fraud, which is a CRIMINAL OFFENSE you do not want to defend against!

The most important advice I can give, is urge you to stay in contact with the IRS and keep them informed with your situation and your intent to pay your tax liability.

ANSWER: Yes!

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15.   By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.  You can find out more about the date change for the filing deadline on the IRS’s website.

ANSWER: YES, YES, and YES!

Even though you will not be able to pay the full amount of your taxes when you file your Income Tax Return, you should still file on time to prevent the 5% per month Late Filing Fee.

Extension to File. You can also file an IRS Form 4868 “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” Filing Form 4868 must be done by the regular due date for your return and gives you an additional six months to file your income tax return. Although this extension for time to file extends the period for you to file your return without incurring Late Filing Fee penalties, your payment of income tax is considered due on the regular due date for your return. This means that you may still owe interest and penalties for Late Payment.

Remember, if you do not file anything by the regular due date for your return, you will owe both Late Filing AND Late Payment penalties. And most importantly, failure to file income tax returns is a CRIMINAL ACT which you do not want to catch up to you!

• IRS Letter 531: Notice of Deficiency. This is a notice from the IRS that you owe additional tax for certain years that are listed in the notice. If you do not agree with the additional assessment of taxes for the year(s) listed, you may file a petition with the tax court within ninety days of the date on the notice.

• IRS Letter 692: Request for Consideration of Additional Findings. This letter from the IRS is sent with a report detailing adjustments made to your tax return. If you do not agree with these adjustments, you must submit a Request to Appeal/Protest within 15 days of the date on the notice.

• IRS Letter 915: Letter to Transmit Examination Report. This letter from the IRS is sent to notify you of adjustments in your tax amount. If you do not agree with these adjustments, you must file an Appeal/Protest within thirty days of receiving the letter.

• IRS Letter 950: 30 Day Letter Straight Deficiency or Over Assessment. This letter is sent after IRS Field Audits. It is used for unagreed, straight deficiency or straight over assessment. If you do not agree with the findings, then you must file an Appeal/Protest within thirty days of the date on the letter.

• IRS Letter 3391: 30 Day Non-filer Letter. This letter from the IRS is sent to notify you of any proposed adjustments in tax liability due from returns which you have not filed. If you do not agree with the adjustments, you must file an Appeal/Protest within thirty days from the date on the letter.

To learn more on the letters listed above or if you received a letter not listed, check out the information provided by the IRS:

http://www.irs.gov/individuals/article/0,,id=96199,00.html?portlet=1

Understanding why the IRS is contacting you can help expedite the process and get the IRS out of your life as quickly as possible.  Furthermore, understanding the correspondence will help you decide whether it’s necessary to enlist the services of a tax attorney.

In some situations, the IRS sends correspondence after an audit without any prior communication.  Alternatively, the IRS correspondence may serve as notice that they are planning to audit your return.

The following explains various types of audit letters and notifications:

• IRS Form 566(CG): Correspondence Audit. A correspondence audit is requested when there are questions regarding specific items on your tax return. This is the most common type of audit, and is conducted by correspondence with the IRS through the U.S. Mail. This type of audit is triggered by the IRS computer systems when there is an error in computing the tax contained within the tax return itself. This is usually due to a mathematical error on the tax return, and you will be either issued a refund or assessed additional tax accordingly. The IRS may also request through Correspondence Audit additional information or documentation from you to substantiate such items as income, deductions, credits, and expenses claimed by you on your tax return.

• IRS CP 2000: Automatic Adjustment Notice. In most cases, this letter from the IRS is simply a Request for Information. It will contain a proposed change to your income tax return which may propose that you owe additional tax. This proposed change is generated by a “matching error,” which is a discrepancy between information you provided on your tax return and information provided to the IRS by other sources. The IRS compares the income, payments, credits, and deductions you provide on your tax return with the information your employers, banks, businesses, and other payers report to the IRS. If the information you provided on your tax return and the information provided by other sources do not “match,” then the IRS sends the CP 2000 Letter. This letter proposes any corrections and changes in the amount of your tax liability based upon the information provided by other sources. If you agree with the proposed changes to your return, then you can accept the changes by paying the amount of tax owed. However, if you do not agree with the proposed changes, you may provide documentation to the IRS to prove or explain any discrepancies which triggered the changes. If you do not respond to the CP 2000 Letter, the IRS will treat the proposed changes as correct and continue to assessment of the additional amount of tax in the proposal. For a step-by-step guide to answering questions concerning the CP 2000 letter, see the IRS website: http://www.irs.gov/individuals/article/0,,id=136857,00.html

• IRS Form 3572: Audit at the IRS Office. These types of audits are usually directed at self-employed persons and small businesses. This type of audit requires the taxpayer to gather and provide requested information and documentation at a meeting with a field agent at the local IRS office. This type of audit is usually conducted to allow a taxpayer to prove certain deductions, credits, or business expenses. In this situation, it is the duty of the taxpayer to provide documented proof of any item questioned by the IRS.

• Field Audit. This type of audit is the most comprehensive form of IRS audit, and is most common for businesses. In conducting this audit, the IRS will send field auditors to the business owner’s home or business and conduct an on-site examination of the business’ records. The field auditors’ main objective in a Field Audit is to determine whether your deductions are accurately stated on your tax return. Usually the field auditors not only inspect business records, but also the business facility and physical items claimed as deductions, expenses, etc. Field Audits usually require several visits from the auditors and are the most complex and difficult to resolve.