We'd like to provide you with an opportunity to get to know our staff as well as our firm's values before you come to see us. The following pages should give you an idea of what we're all about. We hope you enjoy them!

You’re not alone.

IF YOU OWE THE IRS WE CAN HELP!

Have you ever received a letter or notice from the IRS, ignored it, and now you owe penalties and fines on top of the taxes you already owe? 

Millions of taxpayers receive letters or notices from the IRS every year. Most of the time there’s nothing to worry about. But sometimes there is. Maybe you owe the IRS back taxes or failed to file a tax return because you owed the IRS money that you knew you didn’t have. Maybe you were recently divorced, and your tax situation seemed too complicated to figure out. Or, perhaps you were just too busy to bother filing.

We help you resolve tax problems

We'll Help You Find a Fair Solution to Your Tax Problem.

We understand how the IRS works and what it takes to successfully mediate a solution on your behalf whether it’s filing a past due return, minimizing back tax debt and any penalties or fines, or submitting an offer in compromise.

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Nationwide Partners to solve any IRS issue.

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Our Proficiency

Great things in business are never done by one person. They’re done by a team of people. We have that dynamic group of peoples

Back Taxes Owed

You have filed your returns but didn’t have the money to pay what was owed. You may think, “Oh well—I will catch up next year.” Before you know it you find yourself several years in arrears and suddenly there is a notice from the IRS, stating that you owe three or four times the original amount.

It’s truly amazing how fast tax penalties and interest add up. Now you have a choice, you can write a big fat check and pay the full amount, including interest and penalties. Or you can just keep ignoring them while the penalties and interest keep piling up.

Luckily, we offer several options when it comes to resolving unpaid taxes. Please click the link below to get a free consultation with our tax specialist.

IRS Liens

Federal Tax Liens can really make your life miserable! When your taxes are not paid the IRS establishes a lien against all of your assets (especially real estate). This gives the IRS the legal right to collect taxes from the sale of your assets, which includes just about everything you own.

The lien can be against you, your spouse, or your company. A lien against your company would seize your accounts receivables. At this point everything you own is just one short step away from becoming the property of the United States Government.

Liens filed against you by the IRS also show up on your credit report and often prevent you from opening a checking account or borrowing against any assets, like your home. The banks don’t want the extra work when the IRS comes in to take your money.

With a Federal Tax lien on your record you can’t get a reasonable loan to purchase a car. Think about paying 18-22% interest on a car that is already too expensive. You definitely cannot buy or sell any real estate. The list is endless.

IRS Wage Garnishment

You received an IRS Notice of Intent to Levy 30 days ago and you forgot or ignored it. Now it’s Payday. Expecting a check, you open the envelope and find that the IRS has taken most of your money. What’s left is not enough to pay the rent, car payment, buy groceries, or pay the rest of the bills. This action will continue on every check due you, until the tax owed is paid in full.

Now you’re in big financial trouble. No matter how hard you plead with your employer they cannot give you your money. Once a wage garnishment is filed with your employer, your employer is required by law to collect a large percentage of each of your paychecks.

We are regularly retained to negotiate the release of IRS wage garnishments by arranging a payment plan. The payment plan negotiated by us is always more favorable than any IRS wage garnishment. It allows you to receive your whole paycheck without fears of future wage garnishments.

IRS Payment Plan

If you don’t qualify for the IRS Offer In Compromise program, a Payment Plan may be the way to resolve your problem. Setting up a payment plan with the IRS gives you a little more time to pay off your tax debts.

Unfortunately, penalties and interest will continue to be charged on your outstanding balance as you pay the debt off. You are required by law to pay the interest on your tax debt.

The good news is that there’s a chance we can get your tax penalties removed. Please click on the link at the bottom of this page to get a better understanding of how we can resolve your tax problem.

Get Your IRS File

Did you know that you can obtain a copy of your IRS file? Most people would be surprised to learn how much the IRS knows about them. Obtaining a copy of your IRS file is critical in analyzing the options available to resolve your tax problems.

Requesting copies of your IRS file is best done by a professional who understands how to obtain them without raising any red flags as well as how to interpret the information in your file.

We can help you obtain a copy of your IRS file and analyze your options. Please click on the link at the bottom of this page to get a free consultation with our tax specialist.

Individual Tax Preparation

Your Source for Trusted Personal Accounting and Tax Preparation

As your trusted advisors, we evaluate your individual tax situation and guide you through any tax challenges that develop. Our goal is to minimize your tax liability so that you can keep more of your hard-earned money.

It’s also our job to stay up-to-date on current federal and state tax laws through continuing education and we use our in-depth knowledge of tax codes when we prepare your individual tax returns — so you don’t miss out on any tax credits and deductions that you are entitled to take.

Tax Preparation Services for Individuals

Here’s what else we do for you:

  • Prepare accurate tax returns that are filed on time
  • Calculate estimated taxes for self-employed small business owners
  • Develop tax planning strategies that reflect individual financial goals
  • Electronic filing and direct deposit for a faster tax refund
  • File extensions and calculate estimated tax to avoid interest and penalties

Unfilled Tax Return

Use Former IRS Agents and Managers who can get you back in the system worry free.

We have over 60 years of combined IRS experience and know the protocols and the systems to make this a very simple and affordable process.

With or without records we can file unfiled, not filed, back or late tax returns and settle your case all at the same time.

The bottom line is, we know the system.

We can close your case without fear or recourse from the IRS.

Do not worry, we can get you back in the system worry free!

Have former IRS agents, managers and tax instructors get you back in the system if you have unfiled and back tax returns.

For affordable pricing we can file all your back tax returns and if you owe taxes we can work out an IRS tax settlement.

We have a combined 60 years of direct IRS work experience in the local, district, and regional tax offices of the internal revenue service.

We have filed thousands of unfiled tax returns and we have an exact system for affordable pricing so you can get this put to bed on a permanent basis.

We know all the protocol to get you back in the system worry free. Do not let the fear of the IRS get in your way filing back tax returns because at some point in time, IRS will be making contact with you.

Our IRS agent partners can tell you that with the new IRS CADE2  computer system, in the very near future you will be getting a letter from the Internal Revenue Service  because IRS is getting more sophisticated in their income tracking.

I tell you this not to scare you but to let you know it’s best to take an assertive position with the Internal Revenue Service and get your tax returns filed and work out a settlement with them before they catch up with you.

Millions have Unfiled Tax Returns, 16 million every year

Millions of people for whatever reasons have not filed their tax returns. The Tax Gap is estimated in the billions. Some estimates have it at $5 billion.

The tax gap is a term used for taxpayers who have failed to file their tax returns and have monies owed to the Internal Revenue Service. There is a fear of filing because of what the IRS will do to them.

The government has a system in place to deal with these situations and we can help walk you back into the system without fear of your IRS back tax problem. We can file the delinquent tax returns, take care of the back taxes and start working on your IRS problems today.

The Tax Gap pertaining to Unfiled Tax Returns

The Internal Revenue Service released a new set of tax gap estimates. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. The new tax gap estimate represents the first full update of the report in five years, and it shows the nation’s compliance rate is essentially unchanged from the last review.

The tax gap statistic is a helpful guide to the scale of tax compliance and to the persisting sources of low compliance, but it is not an adequate guide to year-to-year changes in IRS programs or to year-to-year returns on IRS service and enforcement initiatives.

The Voluntary Rate ( keep in mind these Stats are current because the Treasury uses 10 year averages )

The voluntary compliance rate is  the percentage of total tax revenues paid on a timely basis — for tax year 2006 is estimated to be 83.1 percent. The voluntary compliance rate for 2006 is statistically unchanged from the most recent prior estimate of 83.7 percent calculated for tax year 2001.

On a relative basis, the tax gap is largely in line with the growth in total tax liabilities. In addition, some growth in the tax gap estimate is attributed to better data and improved estimation methods.

for example, the IRS developed a new econometric model for estimating the tax gap attributable to small corporations which was then applied to newer operational data. Also, large corporation tax gap estimates for 2006 are based on improved statistical methods and updated data.

Finally, the data related to individual income taxpayers continues to improve based on improved estimation techniques and newer data.

The tax gap can be divided into three components:

  • non-filing,
  • under reporting and
  • underpayment.

As was the case in 2001, the under reporting of income remained the biggest contributing factor to the tax gap in 2006.

Under-reporting across taxpayer categories accounted for an estimated $376 billion of the gross tax gap in 2006, up from $285 billion in 2001.

Tax non-filing accounted for $28 billion in 2006, up from $27 billion in 2001. Underpayment of tax increased to $46 billion, up from $33 billion in the previous study.

Overall, compliance is highest where there is third-party information reporting and/or withholding. for example, most wages and salaries are reported by employers to the IRS on Forms W-2 and are subject to withholding.

As a result, a net of only 1 percent of wage and salary income was misreported. But amounts subject to little or no information reporting had a 56 percent net misreporting rate in 2006.

These are the IRS problems we can handle:

 

  • Backs taxes;
  • Unfiled tax return or missing tax returns;
  • Non filer situations;
  • Missing tax records;
  • Resolution so no enforcement action is taken;
  • Amended tax returns.
  • We get your file closed with IRS so the tax problem is no longer a major stress.

So what happens if I have not filed in over 10 years? Am I in trouble? 

 

In almost all cases the IRS wants your back tax issues cleaned up and the unfiled tax years filed. Non-filers and unfiled IRS tax returns are a huge issue for IRS as well.

Their generally policy is this: Get the taxpayer back into the system so the taxpayer is now in compliance and paying future IRS taxes.

At Hopkins CPA this is what we do.

We make this happen so you can sleep at night and take the fear and stress out of your life. We will:

 

  • We secure a power of attorney so you don’t have to talk to the IRS;
  • We get a full transcript of IRS records so we know how the IRS will handle this case;
  • We contact the IRS and handle the resolution of your tax problem;
  • We file the tax returns;
  • We negotiate a settlement with the IRS and close your case.

 

 

We have handled thousands of cases. We are some of the country’s leading experts in unfiled returns, back taxes, missing returns, IRS non filer and the filing of all US tax returns. We can make this a painless process.

Large Dollar IRS Tax Cases

IRS treats Large Dollar IRS Cases differently than other cases, let us help. Call us to get started!

  • IRS treats Large Dollar Cases more aggressively than other cases;
  • IRS will look at every avenue to collect the taxes in full;
  • IRS will immediately make sure all returns are filed and your tax is being paid in the current year.
  • The IRS we uses a very seasoned investigator to work these large dollar cases because they understand that tendencies of these type of taxpayers.

Tips for Large Dollar IRS Tax Cases 

 
 
  • Hire a company that has been in the business and knows the ropes;
  • Get current on all tax return filings, because the IRS will come out swinging if you are not up to date;
  • Have an exit strategy so the IRS knows you have a plan to resolve this case;
  • Prepare a current Information Collection Statement and promptly respond to all IRS inquires.
  •  By hiring former IRS  agents and managers they will help you understand the IRS system so you can have success in dealing with your large dollar IRS case.

IRS has a Large Dollar Unit that specifically handles these cases.

IRS has specially trained Revenue Officers in the local field branches to work Large Dollar Cases. They also have a Large Dollar Case Unit, within the ACS unit, for those cases still in the collection computer system.

In working these cases, IRS will get into significantly more detail while investigating a taxpayer’s ability to pay. You will read more below on this.

It is absolutely necessary on these cases that you have professional representation because the IRS is more aggressive in handling these particular cases. Because of the dollar amount, the agent is looking for a cover up, deceit or fraud.

By all means, be represented  by a professional tax firm for large dollar IRS cases.

 

The IRS Investigations for Large Dollar Cases

We partner with IRS agents and teaching instructor with the IRS and here are some inside secrets about some of the financial investigation tools and sources that will take place during IRS investigations.

Whenever a IRS Agent get a case for back taxes the IRS will always ask for the taxpayer to give them a current financial statement and that serves as the basis  for there investigation.

It also serves to let the IRS Agent IRS know whether you have perjured yourself or have  been truthful with the Internal Revenue Service during the course of there investigation.

The basics for Large Dollar IRS Cases

IRS all starts with the basics, a courthouse search for real property and DMV search. Those are called the basics.

Here is where it can get interesting.

Many times the IRS pulls credit reports from all three credit agencies. Credit reports contain a wealth of information.

The Credit Report can let the IRS know how much the average monthly charges are, what purchases you are making, what assets you have purchased. The kicker here is this, IRS can find out who has made inquiring and whether you have turned in a financial statement to that source.

IRS can summon the company for that finical statement you turned in and they will match up the financial statement that you gave the IRS.

Our form have seen few financial statements  ever match up and the IRS can use that to there advantage. This will work to your disadvantage.

IRS also has there own internal locator.

The internal locator will have a incomes records over the last six years of all 1099’s, W-2s, tax returns or any third party reporting of income that has been given to  Internal Revenue Service.

One of the new sources that IRS is picking up FBAR information that reports overseas bank and financial records. IRS can also inquire of a bank CTR of any cash activity over $10,000 or more.

IRS will then look to a very common search engine called Accuriant or Lexis Nexis used by many creditors today. The Accuriant search engine has over 37 billion current public records can detect fraud and verify identities and also help the IRS  investigation. It is one of the go to tools that are used by the Internal Revenue Service.

The IRS will also look to other external sources. The public search engines such as Google, Bing, Yahoo, LinkedIn and  Facebook and other social media can let the IRS agent know about your life habits.

Depending on the dollar amount of the case IRS can also use information from Passports, conduct 3rd party interviews, vessel and license checks at the courthouse all at the click button.

IRS commonly will check for Patents, Trademarks, Franchises, Licenses, Domain Name of a web site.

Since IRS cannot march inside your house how they can find out about your personal assets, simply summons your homeowners policy.

Modern technology has allow not only the IRS but any government agency to ability too find out a plethora of information about you at the click of a button.

 

Hopkins CPA Firm has a special unit that handles Large Dollar IRS Cases

We partnered with a team of former IRS agents that have worked these cases while employed by the Internal Revenue Service. These cases require more experience because of the requirements that the IRS agents demand on these cases.

The IRS spends a lot more time looking at these cases and we know exactly what their questions will be. We try to remove the problem areas before the IRS gets to the case. Experience is needed to work Large Dollar Cases.

IRS uses specially trained agents that are skilled in working Large Dollar Cases

The IRS uses very experienced and specially trained agents to work these Large Dollar Cases.

These IRS agents have been around a long time and are highly seasoned. They are used to looking at the areas where most agents do not look.

If there are any issues of concern, be very careful not to represent yourself. These agents spend many hours working these cases and know how to find the proverbial “needle in the haystack”. As a general rule, these agents have been with the IRS for at least five to seven years.

ArrowQuestions on Large Dollar Cases – Feel free to email us at Info@HopkinsCPA.Tax!!!

Arrow If IRS filed a substitute tax return for you, we can help!

Innocent Spouse Tax Relief

How to file Innocent Spouse Tax Form

The rules are long and complicated but do not be stuck with your spouses tax debt!

We can help fight back. Call us today at (361) 360-3855 and we can see if you qualify.

The New Rules to apply for Innocent Spouse tax relief can help you.

How file for innocent spouse tax relief please read below.

New Innocent Spouse Tax Relief

 

The IRS announced that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests.

After a thorough review:

  •   The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
  •  A taxpayer, whose equitable relief request was previously denied solely due to the two-year limit, may reapply using IRS Form 8857 Request for Innocent Spouse Relief, if the collection statute of limitations for the tax years involved has not expired.
  •   The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.

 

The New Innocent Spouse Relief (Including Separation of Liability and Equitable Relief)

Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows.

In filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce.

Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits.

This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns.

In some cases, however, a spouse can get relief from joint and several liability.

 

There are three types of relief from joint and several liability for spouses who filed joint returns:

 

1.  Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.
2.  Separation of Liability Relief provides for the allocation of additional tax owed between you and your former spouse or your current spouse from whom you are separated because an item was not reported properly on a joint return. The tax allocated to you is the amount for which you are responsible.
3.  Equitable Relief may apply when you do not qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the correct amount of tax was reported on your joint return but the tax remains unpaid.

Please Note:

You must request innocent spouse relief or separation of liability relief no later than 2 years after the date the IRS first attempted to collect the tax from you. For equitable relief, you must request relief during the time the IRS has to collect the tax from you.

If you are looking for a refund of tax you paid, then your request must be made within the time period for seeking a refund, which is generally three years after the date the return is filed or two years following the payment of the tax, whichever is later.

You must meet all of the following conditions to file and qualify for innocent spouse relief:

You filed a joint return that has an understatement of tax (deficiency) that is solely attributable to your spouse’s erroneous item.

An “erroneous item” includes income received by your spouse but which was omitted from the joint return. Deductions, credits, and property basis are also erroneous items if they are incorrectly reported on the joint return.

  • You must establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax, and
  • Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.

To qualify for “separation of liability relief” you must have filed a joint return and must meet one of the following requirements at the time you request relief:

1. You are divorced or legally separated from the spouse with whom you filed the joint return,
2. You are widowed or,
3. You have not been a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857 (PDF), Request for Innocent Spouse Relief

If, at the time you signed the joint return, you had actual knowledge of the item that gave rise to the understatement of tax, you may not qualify for separation of liability relief.

You may qualify for “equitable relief.” To qualify for equitable relief you must establish that, under all the facts and circumstances, it would be unfair to hold you liable for the understatement or underpayment of tax.

To seek qualify for innocent spouse relief, separation of liability relief, or equitable relief:

To seek innocent spouse relief, separation of liability relief, or equitable relief, you should submit to the IRS a completed Form 8857 (PDF), Request for Innocent Spouse Relief, or a written statement containing the same information required on Form 8857, which is signed under penalties of perjury.

If you request relief from joint and several liability, the IRS is required to notify the spouse with whom you filed the joint return of your request and allow him or her to provide information for consideration regarding your claim.

In applying to qualify for Innocent Spouse tax relief if you lived in a community property state

If you lived in a community property state and filed as “married filing separately” rather than “married filing jointly,” you might still qualify for relief.

Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Relief from joint and several liability should not be confused with an injured spouse claim. You are an “injured spouse” if you file a joint return and all or part of your share of the refund was, or will be, applied against the separate past-due federal tax, state tax, child support, or federal non-tax debt (such as a student loan) of your spouse with whom you filed the joint return.

If you are an injured spouse, you may be entitled to recoup your share of the refund.

Why use Hopkins CPA Firm P.C. to apply for Innocent spouse tax relief.

  • We partner with Former IRS Agents and Managers
  • Our partners have worked in the local, district and regional offices of the IRS.
  • We are true IRS tax experts for Innocent Spouse Tax Relief.
  • We partner with CPAs, former IRS Agents, Managers and Instructors.
  • We are one of the most trusted and experienced tax firms in the tax resolution industry.
  • We know the exact process of how to qualify for innocent spouse tax relief that can save you time and money.

Where to File to Apply for Innocent Spouse? (How to apply?)

If you are meeting with an IRS employee for an examination, examination appeal, or collection matter for the year you want relief, file the Form 8857 and the statement with that IRS employee.

If you are not working with an IRS employee, send the Form 8857 and the statement to the following address:

IRS – Stop 840-F
Innocent Spouse
PO Box 120053
Covington, KY 41012

Where to Mail Completed Form 8857 to Apply for Innocent Spouse Tax Relief

Processing of Forms 8857, Request for Innocent Spouse Relief, is centralized at the Cincinnati Centralized Innocent Spouse Operation (CCISO), located in Covington, Kentucky. Mail your completed Form 8857, Request for Innocent Spouse Relief, directly to:

Internal Revenue Service
Stop 840F
P.O. Box 120053
Covington, KY 41012

The length of time to process your request could increase if you mail your completed Form 8857 to any other office.

We partner with tax attorneys, tax lawyers, certified public accountants and former IRS agents, managers and tax instructors.

Our partner has over 206 years of professional tax experience and over 60 years of working directly for the Internal Revenue Service in the local, district, and regional tax offices of the Internal Revenue Service.

We are tax experts in applying for innocent spouse tax relief.

To have your best shot to have successes in this area it only makes sense to use former IRS agents and instructors who taught this program at the Internal Revenue Service.

FBAR Services

FBAR Filing / FBAR Representation / FBAR Reporting / FBAR Services

We partner with Certified Public Accountants, former IRS agents, managers and tax instructors.

We can help take the worry, anxiety and stress away from anyone dealing with FBAR issues.

While at the Internal Revenue Service we taught tax law.

Our partners are experts in FBAR Tax Representation, FBAR Filing and all related international tax services.

We can file past FBAR reports, workout tax settlements and  provide all in-house tax services regarding any of your tax or FBAR needs.

We can help take the worry, anxiety and stress away from anyone dealing with FBAR issues.

 

Who has to file a FBAR?

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

 

FBAR is a Government tool – Report of Foreign Bank and Financial Accounts (FBAR)

The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law.

The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

IRS has reported that since the inception of the FBAR Program the Federal Government has collected over $4.4 Billion.

At the end of this year they will be over 80 countries that have signed a tax treaty to turn over information to the US government regarding the financial interest of taxpayers in the United States thus more need for Fbar representation.

IRS is dedicating many more tax dollars and manpower because of the large stream of revenue this generates. Taxpayers should beware, the IRS is coming full force.

 

FBAR  Tax Representation and Tax Relief for IRS FBAR Problems

 

Hopkins CPA Firm P.C. is a professional tax firm specializing in tax services and relief for any IRS problems or tax situations pertaining to FBAR tax or Offshore Tax Issues. We are FBAR representation specialists.

The U.S. Government has been very active in Offshore Activity and has dedicated millions of dollars to the FBAR cases for revenue source it generates in the form of civil and criminal penalties. Because of this the IRS is training many new agents to become specialist in FBAR.  In addition, the Government has sought out the assistance of foreign countries in identifying expatriates who have interests in foreign financial accounts.

 

Who should File FBAR, Reporting and Filing

Report of Foreign Bank and Financial Accounts (FBAR)

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the ‘Who Must File an FBAR’ section below for additional criteria.

Current FBAR Guidance

FinCEN introduces new forms

On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website.

The system allows the filer to enter the calendar year reported, including past years, on the online FinCEN Form 114. It also offers an option to “explain a late filing,” or to select “Other” to enter up to 750-characters within a text box where the filer can provide a further explanation of the late filing or indicate whether the filing is made in conjunction with an IRS compliance program.

Anyone with $10,000 in one or more foreign financial accounts (determined by taking the maximum balance of each account at any time during the year, summing the maximums, and comparing the sum to $10,000) must file Form TD F 90-22.1 (the FBAR).

The form must be received on or before June 30th, so that means you need to take care of this now if this reporting requirement applies to you. There are no extensions available for the FBAR.

 

 

Exception to FBAR Reporting Requirements

 

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:

  •     Certain foreign financial accounts jointly owned by spouses;
  •     United States persons included in a consolidated FBAR;
  •     Correspondent/nostro accounts;
  •     Foreign financial accounts owned by a governmental entity;
  •     Foreign financial accounts owned by an international financial institution;
  •     IRA owners and beneficiaries;
  •     Participants in and beneficiaries of tax-qualified retirement plans;
  •     Certain individuals with signature authority over but no financial interest in a foreign financial account;
  •     Trust beneficiaries; and
  •      Foreign financial accounts maintained on a United States military banking facility.

Look to the form’s instructions to determine eligibility for an exception and to review exception requirements.

 

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income.

Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.

The FBAR is not filed with the filer’s federal income tax return.

The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR.

The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. While FinCEN strongly encourages individuals to electronically file FBARs, the form can be mailed to one of the two addresses below, provided that the mailing is received by June 30, 2013:

File by mailing the FBAR to:

United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621

If an express delivery service is required for a timely filed FBAR, address the parcel to:

IRS Enterprise Computing Center
ATTN: CTR Operations Mail room, 4th Floor
985 Michigan Avenue
Detroit, MI 48226

Delivery messenger service contact telephone number: (313) 234-1062.

Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013

On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR.

A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.

 

FBAR Penalties, procedures and applications.

The IRS has been delegated authority to assess FBAR civil penalties. There are civil penalties for negligence, pattern of negligence, non-willful, and willful violations. Each case is different and the results vary from cases to case.

IRS penalties are be asserted only to promote compliance with the FBAR reporting and record keeping requirements.

In exercising IRS discretion, tax examiners consider whether the issuance of a warning letter and the securing of delinquent FBARs, rather than the assertion of a penalty, will achieve the desired result of improving compliance in the future. We hope!

FBAR civil penalties have varying upper limits, but no floor.

The IRS audit examiner discretion is necessary because the total amount of penalties that can be applied under the statute can greatly exceed an amount that would be appropriate in view of the violation. You must hope the tax examiner is fair and uses good judgement.

IRS tax examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted.

Because FBAR penalties do not have a set amount, IRS has developed penalty mitigation guidelines to assist examiners in the exercise of their discretion in applying these penalties.

The FBAR mitigation guidelines are only intended as an aid for the examiner in determining an appropriate penalty amount.

The  IRS tax examiner must still consider whether a warning letter or a penalty amount that is less than what would be called for under the mitigation guidelines would be more appropriate given the facts and circumstances of a particular case.

FBAR penalties are determined per account, not per unfiled FBAR, for each person required to file.

IRS penalties apply for each year of each violation.All the more need for competent and experienced FBAR representation.

As noted above, however, examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted.

Call us at (361) 360-3855 professional consult for FBAR representation and FBAR filing.

Payroll Tax Problems

The IRS views failing to pay payroll taxes as the cardinal sin of tax delinquency because a large portion of the payroll taxes you pay is your employees’ withholdings. Not paying your company’s payroll taxes is tantamount to stealing your employees’ money in the eyes of the IRS.

As a result, penalties for failing to pay your payroll taxes and filing your payroll tax returns on time are much more severe than other types of penalties. They can drastically multiply the amount you owe in a very short time.

If you are behind on paying payroll taxes for your company, WATCH OUT!!! The IRS is extremely aggressive pursuing collection of this type of tax. They would rather seize your business assets, close you down, sell your assets at auction, and put you out of business than allow you to continue amassing additional payroll tax liabilities.

If you are behind on your payroll taxes, DO NOT meet with the IRS on your own. How you answer their initial questions can determine whether you stay in business or not. It is critical you hire a professional representative who knows how the IRS operates.

IRS Levies

Take a look at our IRS Levies page. Hopkins CPA Firm P.C. is a full service tax, accounting and business consulting firm.

 

Levies can really do a lot of damage and even ruin your life. A levy is the IRS’s way of getting your immediate attention. What they are saying is, we have tried to communicate with you but you have ignored us. Levies are used to seize your wages and whatever other assets you have. If you own it, they can take it. That includes checking accounts, autos, stocks, bonds, boats, paychecks, and even Social Security checks!

Imagine waking up one morning and finding all your bank accounts have been cleaned out. They will take every dime. If this amount did not cover what is owed, they’ll keep taking your money until you cover your tax liability. They know that levying your bank account will cause checks to bounce, alerting many people that you have tax problems. But they don’t care! Their sole objective is to collect the taxes owed. Period.

As bad as that is, a worse method is a wage levy (or garnishment). That’s when most of your pay check goes to the IRS, they don’t leave you enough to pay the bills, and most of your check goes to the IRS each and every week until the debt is paid.

If that doesn’t accomplish what they want, they’ll pull out all the stops. They’ll seize your assets, and sell them at auction. That includes everything you own; home, cars, boats, jewelry, motorcycles, insurance polices, retirement funds, anything of value.

We are often able to get those levies released and help you get out of this terrible situation. Our goal is to get you even with the IRS, with what you can afford, and let you start life anew.

IRS Seizures

Unlike the levy, which involves intangible assets such as your bank account, a seizure is the taking of physical assets, such as your home or car. Seizures usually happen in aggravated cases when someone ignores many requests by the IRS over a long period of time to pay their outstanding taxes.

A seizure should not be taken lightly. The IRS will ultimately pursue seizure of your physical assets. Don’t think they won’t. Many a newspaper or television show has reported citizens being forced out of their homes after it was sold at an IRS auction, often for as little as half its value.

When the IRS seizes your assets they want to quickly sell them at auction. They often get less than half your assets value, so they often seize everything you own including your home, cars, boats, jewelry, motorcycles, insurance polices, and even your retirement funds.

If you’ve received an IRS seizure notice, it’s time to act now

Offer In Compromise

Did you know that you can settle your debt with the IRS for less than the full amount you owe with their Offer in Compromise program? The program allows taxpayers to settle with the IRS on tax debt that has been incorrectly assessed or for liabilities they cannot afford to pay.

The IRS Code states: “We will accept an Offer in Compromise when it is unlikely that we can collect the full amount owed and the amount you offer reasonably reflects the collection potential…” (Internal Revenue Code section 7122).

Often it is possible to fully and completely eliminate the taxes you owe – including all penalties and interest – at an enormous discount. There is no preset bottom limit that the IRS will accept to settle your debt especially if your offer is done “right.”

If done correctly your debt may be settled for only 5-15% of what you presently owe. The key is to determine the least amount that the IRS will accept from you before you make the offer.

Get a free consultation on the solutions to your tax problems by clicking on the link on the bottom of this page.

IRS Audit Representation

When It Comes to Tax and Audit Representation, We’re in Your Corner

With the IRS auditing less than one percent of tax returns in recent years, you may be thinking it can’t happen to you. But you could be wrong. Especially if you have a lot of business expenses, your tax return is complicated, or you’re in a higher income bracket.

The good news is that nearly 75 percent of those audits are notices or letters sent by the IRS requesting additional information or clarification. The rest are actual field audits.

While you may be tempted to respond to a letter or notice from the IRS, it’s not always a good idea even if you have a firm grasp of tax law. Because as friendly as IRS auditors might seem, they represent the IRS — not you.

Make the Smart Choice

Sure, taxpayers can and do prevail during IRS audits, but without an experienced tax professional on your side, it’s less likely that it will happen…and you just might end up owing the IRS money instead of getting a refund.

When you hire us to represent you during an audit, here’s what we do for you:

  • Take care of all audit correspondence
  • Make sure you take the steps needed to minimize your tax liability
  • Handle all discussions with auditors to reduce the risk of additional liability
  • Appeal a decision, if necessary

Why Take a Chance?

The importance of being represented by a qualified tax professional during an IRS or State tax audit or tax dispute cannot be stressed enough.

If you’ve received a letter or notice from the IRS or are involved in a tax dispute with the IRS, call us today or submit the contact form below. We’re here to help.

If you’ve received an audit notice from the IRS, please click the link at the bottom of this page to receive a free consultation with our tax specialist.

Tax Preparation for Businesses

We Specialize in Business Tax Preparation

As a business owner, you’re busy developing new products or services and making sure your business runs smoothly. You probably don’t have time to reconcile your bank account or generate balance sheets to manage your cash flow, let alone read up on the latest tax laws to find out which tax breaks you can take advantage of.

When you first started out, and money was tight, the do-it-yourself method of accounting might have worked just fine. But now that you have employees, pay estimated taxes, and need to manage your cash flow better, it’s time to find a trusted advisor to partner with all year long–not just at tax time.

There’s no better time than now to discuss tax planning strategies that will help you build a foundation for future success.

Here is what we do for you:

  • State and federal income tax preparation and filing
  • Local and state sales tax compliance
  • State and federal payroll tax
  • Minimize tax liability through the use of proven tax planning strategies
  • Profit and loss statements
  • Mergers and Acquisitions
  • Entity selection and structure (S-Corp, C-Corp, LLC)

Make Sure You Never Miss a Deadline Again

The IRS, as well as state and local governments, imposes strict deadlines for business tax obligations. Missing these tax deadlines and failing to comply with payroll and sales taxes negatively impacts your bottom line and may result in fines for non-compliance.

As your trusted advisor, we make sure you stay on top of your tax obligations and avoid penalties and fees that reduce your profitability.

Experienced Tax and Accounting Professionals You Can Trust

To find out how our team of experienced tax and accounting professionals can help your small business achieve success call us today

Received IRS Letter or Notice

Former IRS agents and managers end your problem now. STOP IRS NOW! AFFORDABLE!

 

We partners with agents that have over 65 years of working directly for the Internal Revenue Service and the local, district, and regional tax offices of the IRS. We know the system inside and out.

If you received a letter, notice or tax bill from the IRS we can help. Stop the stress and resolve your IRS problem.

You will never have to speak to the IRS!  

Let Former IRS Agents, Managers and Tax Instructors take the worry out of this situation.

YOU MUST ACT ON A CERTIFIED LETTER OR NOTICE.

IRS Contacts Taxpayers by Letter or Notification 4 Different Ways:

  • By certified mail
  • By notice of federal tax levy or be filing of federal tax lien
  • By regular mail
  • By telephone

 

So What Is Your Next Step?

First of all, do not panic.

The IRS is just trying to resolve an open issue.

Most IRS letters, notices or bills come with a time frame of ten to thirty days to respond to the notification.

You should respond within the time period specified or the IRS will follow up and eventually use enforcement action. If you do not respond to the IRS’s attempts to reach you they will hit you with a Federal Tax Lien, a Wage Levy on your paycheck or a Tax Lien on your bank account.

Contact Hopkins CPA Firm and our professionals will handle the IRS for you and resolve your problem.

 

IRS only sends out tax levies after a series of 5 letters are sent to the taxpayer. These are sent about 5 weeks apart.

1. CP 14  –  This is the notice of balance due,

2.CP 501 – This is a Bill that you still owe tax,

3. CP503 – Important, Immediate Action Required

4. CP 504 Urgent Notice – We Intend to Levy  on Certain Assets, Please Respond Now

5. CP90/CP297/ IRS Letter 1058 – Final Notice of Intent to Levy of Your Right to a Hearing

6.CP 91 CP298  -Final Notice Before Levy on your Social Security Benefits

 

Contact By Certified Mail

When IRS contacts you by certified mail it is time to be serious about the next step. The IRS has tried to contact you before to resolve the issue and has been unsuccessful.

Certified letters from the IRS usually means they are ready to take enforcement action. Unless you reach them within the prescribed period of time the IRS will probably levy your wages or bank account and file a Federal Tax Lien.

It is time to call Hopkins CPA Firm. In most cases, within a thirty day period of time, the IRS will send a wage levy to your employer, and or a bank levy to your bank accounts.

Whether you sign for the IRS certified mail or not, the 30 day period starts on the date of the IRS letter.

Before you make any contact with the IRS you want to know your rights so you don’t make the situation worse than it already is. This requires a plan of action. Contact Hopkins CPA Firm as soon as possible and we will contact the IRS immediately to stop any collection activity.

 

The CADE2 computer is the issuer of IRS Letters and Notices

The Internal Revenue Service is spending millions and millions of dollars on their CADE2 computer.  This is the computer giant that belongs to Internal Revenue Service and all its systems are held within this massive computer.

All IRS notices, letters and bills that go to taxpayers are generated from the system.

All the information that this computer generates is handled systemically and not a human hand will ever touch a piece of paper you receive.

To stop the issuance’s of IRS notices and  IRS letters you must contact an Internal Revenue Agent who can directly make changes to the CADE2 computer.

Usually you will find this on a 1-800 number on your letter, notice or bill.

If you do not contact the Internal Revenue Service at some point in time enforcement action will begin.

It is critical you contact the Internal Revenue Service at the number shown on Letter or Notice to stop or correct the problem or situation.

The worst thing you can do is not respond to the IRS notice her letter because I can assure you you will not be happy with the consequences.

Our IRS agent partners can tell you that these letters are notices will not go away.

 

Just Received Certified Mail from the IRS

 

 

 

Contact By Notice of Federal Tax Levy or a Federal Tax Lien

Many people are unaware that IRS has sent notices and has been trying to contact them over a period of time. The first time they become aware of this process is when a Federal Tax Levy or a Federal Tax Lien has hit their bank account or their employer has received a wage levy notification. When you are at this step in the process it is time to retain a professional to resolve your case. You should not contact the IRS by yourself because the IRS will use any information to try and collect money.

Contact By Regular Mail

When the IRS contacts you by regular mail they are usually trying to advise you of an issue and would like to have it resolved. It is best to respond to the IRS, advising them whether or not you agree with what they say in the letter. If you agree and can pay the back taxes with the interest and penalties assessed than you should do so as soon as possible. If you agree and cannot pay the back taxes with interest and penalties call Hopkins CPA and we can negotiate with the IRS on you behalf to resolve this matter. If you disagree, be prepared to send the IRS the proper documentation to support your case. Hopkins CPA Firm can also help you settle a dispute with the IRS if you believe you are correct.

Contact By Telephone

Contact by telephone sounds scary but these can be the easiest issues to resolve. Unless this is a complicated issue you can usually take care of this process by yourself. However, if you owe back taxes, be careful when speaking with the IRS. Remember, the IRS is the most powerful collection agency in the world. If the call relates to back taxes owed from income or payroll taxes, contact Hopkins CPA Firm to handle this type of problem.

Arrow If IRS filed a substitute tax return for you, we can help!

Apply for Hardship Status

If you owe the IRS and can’t pay taxes due to hardship, call Hopkins CPA at (361) 360-3855 to see if you qualify for Hardship Status.

The Internal Revenue Service has a provision in the Internal Revenue Manuel Section 5.16.1.2 that allows for individuals or companies that are going through a current hardship to suspend their cases and put them in a currently noncollectable file.

Many people are completely unaware that IRS has a procedure called “hardship status”.

About 50% of taxpayers that have IRS tax problems do not have the ability to pay the tax because of their current financial circumstances. If you are going through a hardship in your life, call Hopkins CPA Firm today at (361) 360 3855 and we can help put your IRS problem behind you.

 

Conditions for a Hardship Status

IRS will place a case in Hardship Status if the information found on the form 433A or 433F Collection Information Statement finds that the taxpayer is unable to pay basic living expenses. In addition, the taxpayer will have little or no equity in their assets.

With more and more homeowners in foreclosure, people losing their jobs and all the other economic problems, IRS is now taking into consideration these factors and placing more cases in a noncollectable status.

Also, if the only source of income is social security and you have excessive medical bills, the government will be quick to act in granting a hardship.

 

Economic Hardship as defined by the Internal Revenue Service

 

Everyone has their own definition of what an economic hardship might be in their own situation. When you have an IRS problem, the Internal Revenue Service has it’s own definition of an economic hardship.

Below, is the standard that the IRS will use to determine ECONOMIC HARDSHIP.

The standard has been a problem area for practitioners and taxpayers over the years.

The IRS very rarely deviates from their Economic Hardship standard. This is from irs.gov made available to our client base.

SUMMARY OF ECONOMIC HARDSHIP

 

When the taxpayer’s liability can be collected in full, but collection of the federal tax would create an economic hardship, the IRS will consider all facts before taking collection action or enforcement action such as federal tax liens or federal tax levies.

The definition of economic hardship is derived from Treasury Regulations § 301.6343-1. An Economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses.

The determination of a reasonable amount for basic living expenses will be made by the Internal Revenue Service and will vary according to the unique circumstances of every individual taxpayer.

Unique circumstances, however, do not include the maintenance of an affluent or luxurious standard of living. The IRS in accordance with the United States Departmental of Labor have set up platforms to determine these hardship and living standards.

These standards are also being used by the United States Department of Justice in the normal course of U.S. bankruptcy proceedings.

Because economic hardship is defined as the inability to meet reasonable basic living expenses, it applies only to individuals (including sole proprietorship entities).

Compromise on economic hardship grounds is not available to corporations, partnerships, or other non-individual entities.

The taxpayer’s financial information and special circumstances must be examined and fully documented to determine if they qualify for an economic hardship.

Financial analysis includes reviewing basic living expenses as well as other considerations. The IRS may go back for the last 3 years, examine all canceled checks and will complete a full asset check.

They will examine credit reports and loan applications and sale of assets for the last 3 years. The IRS will also look to see if the taxpayer has placed assets beyond the IRS’ reach.

The taxpayer’s income and basic living expenses must be considered to determine if the claim for economic hardship should be accepted. Basic living expenses are those expenses that provide for health, welfare, and production of income of the taxpayer and the taxpayers family.

National and local standard expense amounts are designed to provide accuracy and consistency in determining taxpayers basic living expenses. These standards are guidelines and if it is determined that a standard amount is inadequate to provide for a specific taxpayers basic living expenses, allow for some change.

 

A check on our website can explain this more fully.

The IRS will require the taxpayer to provide reasonable substantiation and document the case file. A 433-A financial statement is required by Internal Revenue Service on all these cases.

In addition to the basic living expenses, other factors to consider that have impact upon the taxpayers financial condition include:
a.   The taxpayers age and employment status,
b.  Number, age, and health of the taxpayers dependents,
c.   Cost of living in the area the taxpayer resides, and
d.  Any extraordinary circumstances such as special education expenses or natural disaster.
e.  Medical situations that have effected the life of the taxpayer or others in his family.
f.  The education of the taxpayer is sometimes considered as well.
g.  This list is not all-inclusive. Other factors may be considered in making an economic hardship determination.

Factors that support an economic hardship determination may include:

The taxpayer is incapable of earning a living because of a long-term illness, medical condition or disability, and it is reasonably foreseeable that the financial resources will be exhausted providing for care and support during the course of the condition.

The taxpayer may have a set monthly income and no other means of support and the income is exhausted each month in providing for the care of dependents.

The taxpayer has assets, but is unable to borrow against the equity in those assets, and liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet basic living expenses.

Someone in the immediate family of the taxpayer has been hit with a catastrophe.
An act of God causing an unforeseen occurrence.

Remember, each situation is different and each and every case is based on its own merit. No two cases are ever the same.

 

How to apply for Hardship Status

The first thing you should do is call Hopkins CPA Firm to make sure you qualify. Be careful if you chose to contact the IRS directly as all information you provide will be used to attempt to collect the tax due. You could expose yourself to more problems than you bargained for. A professional at Hopkins CPA Firm can go over the required forms necessary to make sure you receive a Hardship Status if you qualify. These forms include the 433A or 433F Information Collection Statements along with full supporting documentation. Also, all your tax returns must be filed. The IRS will not review your case for Hardship Status until all returns are filed.

Why use Hopkins CPA Firm?

Hopkins CPA Firm is partnered with CPA’s, and former IRS agents who know how to navigate through the system. We will complete a thorough review of your case and be able to tell you how the IRS will deal with your case. Each case has unique features and there is no general rule on how to resolve your case. If successful, IRS will probably suspend your case for a period of 3 years, but penalties and interest will continue to accrue.

This Hardship Status is also known as the Noncollectable Status by the Internal Revenue Service. When your case is placed in this status IRS will not send out a Federal Tax Levy on your bank account or a tax levy on your wages. However, the IRS will still file a Federal Tax Lien on the back taxes. IRS does not want the public to be aware of the program and many times insist on a small payment so the agent looks like they are doing their job. However, if you qualify, the IRS has to place your case in Noncollectable Status.

Arrow Questions on Hardship Status – Feel free to email us at Info@HopkinsCPA.Tax!

Arrow If IRS filed a substitute tax return for you, we can help!

Expatriate Tax Services

Expatriate Tax Services – Representation, Tax Returns, Back Tax Settlements

Hopkins CPA Firm P.C. is a professional CPA firm, specializing in all facets of tax representation.

We and our parnter have many years of professional tax experience and of working directly for the Internal Revenue Service in the local, district and regional offices of the IRS. 

We know all the policies and procedures regarding Expatriate Tax Law and the rules and regulations that apply.

Our team partner with CPAs, Former IRS Agents and Managers. We are one of the most trusted and experienced professional tax firms.

Expatriate Tax Provisions

The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to US citizens who have renounced their citizenship and long-term residents (as defined in IRC 877(e)) who have ended their US resident status for federal tax purposes. Different rules apply according to the date which you expatriated.

Expatriate Tax Services & Help

• Unfiled income tax returns, expat tax returns
• Delinquent (FBAR) reports and penalty abatement
• Tax return preparation for expatriates and foreign nationals
• Assistance with complex social security rules for the self employed
• Amended tax returns and refund claims
• Tax planning and compliance for U.S. nationals working overseas
• IRS audit and appellate representation
• Statement of specified foreign financial assets (Form 8938)
• RRSP and RRIF (Form 8891)
• Information return by a shareholder of a passive investment company (Form 8621)
• Tax analysis for renunciation of US citizenship or resident alien status
• Maximize use of Foreign earned income exclusion and foreign tax credits
• Expatriation and repatriation counseling
• Estimated tax payment planning
• Employment Tax Issues
• IRS installment agreements
• Non-resident alien married to U.S. citizen

What do do if you have not filed an Income Tax Return

Among the various new requirements contained in IRC 877 and 877A, individuals that have renounced their U.S. citizenship or terminated their long-term resident status for tax purposes after June 3, 2004 are required to certify to the IRS that they have satisfied all federal tax requirements for the 5 years prior to expatriation.

If all federal tax requirements have not been satisfied for the 5 years prior to expatriation, even if the individual does not meet the monetary thresholds in IRC 877 or 877A, the individual will be subject to the IRC 877 and 877A expatriation tax provisions.

Individuals that have expatriated should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan.

All payment plans require continued compliance with all filing and payment responsibilities after the plan is approved.

What is an Expatriate?

In the broadest sense, an expatriate is any person living in a different country from where he or she is a citizen. In common usage, the term is often used in the context of professionals sent abroad by their companies, as opposed to locally hired staff.

The differentiation found in common usage usually comes down to socio-economic factors, so skilled professionals working in another country are described as expatriates, whereas a manual laborer who has moved to another country to earn more money might be labelled an ‘immigrant’. There is no set definition and usage does vary depending on context and individual preferences and prejudices.

IRS To start attacking Expats who have FBAR issues – What the GAO found

The Four Offshore Programs by the IRS collected over $5.5 Billion

As of December 2012, the Internal Revenue Service’s (IRS) four offshore programs have resulted in more than 39,000 disclosures by taxpayers and over $5.5 billion in revenues. The offshore programs attract taxpayers by offering a reduced risk of criminal prosecution and lower penalties than if the unreported income was discovered by one of IRS’s other enforcement programs.

 

The First OVDP Program

For the 2009 Offshore Voluntary Disclosure Program (OVDP), nearly all program participants received the standard offshore penalty–20 percent of the highest aggregate value of the accounts–meaning the account value was greater than $75,000 and taxpayers used the accounts (e.g., made deposits or withdrawals) during the period under review.

The Median Balance

The median account balance of the more than 10,000 cases closed so far from the 2009 OVDP was $570,000.

Participant cases with offshore penalties greater than $1 million represented about 6 percent of all 2009 OVDP cases, but accounted for almost half of all offshore penalties. Taxpayers from these cases disclosed a variety of reasons for having offshore accounts, and more than half of them had accounts at Swiss bank UBS.

Using 2009 OVDP data, IRS identified bank names and account locations that helped it pursue additional noncompliance. Based on a review of cases, GAO found examples of immigrants who stated in their 2009 OVDP applications that they were unaware of their offshore reporting requirements. IRS officials from the Offshore Compliance Initiative office said they have not targeted outreach efforts to new immigrants.

Using information from the 2009 OVDP, such as the characteristics of taxpayers who were not aware of their reporting requirements, to increase education and outreach to those populations could promote voluntary compliance.

IRS has detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest, and penalties that would otherwise be owed, but based on GAO reviews of IRS data, IRS may be missing attempts by other taxpayers attempting to do so.

GAO analyzed amended returns filed for tax year 2003 through tax year 2008, matched them to other information available to IRS about taxpayers’ possible offshore activities, and found many more potential quiet disclosures than IRS detected.

Moreover, IRS has not researched whether sharp increases in taxpayers reporting offshore accounts for the first time is due to efforts to circumvent monies owed, thereby missing opportunities to help ensure compliance.

From tax year 2007 through tax year 2010, IRS estimates that the number of taxpayers reporting foreign accounts nearly doubled to 516,000. Taxpayer attempts to circumvent taxes, interest, and penalties by not participating in an offshore program, but instead simply amending past returns or reporting on current returns previously unreported offshore accounts, result in lost revenues and undermine the programs’ effectiveness.

Expatriates – What to do if you haven’t filed an Income Tax Return

Among the various new requirements contained in IRC 877 and 877A, individuals that renounced their US citizenship or terminated their long-term resident status for tax purposes after June 3, 2004 are required to certify to the IRS that they have satisfied all federal tax requirements for the 5 years prior to expatriation.

If all federal tax requirements have not been satisfied for the 5 years prior to expatriation, even if the individual does not meet the monetary thresholds in IRC 877 or 877A, the individual will be subject to the IRC 877 and 877A expatriation tax provisions.

Individuals that have expatriated should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan.

All payment plans require continued compliance with all filing and payment responsibilities after the plan is approved.

IRS is sending notices to expatriates that have not complied with the Form 8854 requirements, including the imposition of the $10,000 penalty where appropriate.

US Citizen Abroad

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

When to File

If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension.

For a calendar year return, the automatic 2-month extension is to June 15.

If you are unable to file your return by the automatic 2-month extension date, you can request an additional extension to October 15 by filing Form 4868 before the automatic 2-month extension date. However, any tax due payments made after June 15 will be subject to both interest charges and failure to pay penalties.

Where to File

If you are a U.S. citizen or resident alien (Green Card Holder) and you live in a foreign country, mail your U.S. tax return to:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA

 

Estimated tax payments should be mailed with form 1040-ES to:

Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA

 

 

AGI Requirements

Taxpayers with an AGI (Adjusted Gross Income) of $57,000 or less can electronically file their tax return for free using freefile. Taxpayers with an AGI greater than $57,000 can either use the Free File Fillable Forms or efile by purchasing commercial software.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best for you, get help choosing a software provider.

 

Taxpayer Identification Number

Each taxpayer who files, or is claimed as a dependent on, a U.S. tax return will need a social security number (SSN) or individual taxpayer identification number (ITIN). To obtain a SSN, use form SS-5, Application for a Social Security Card. To get form SS-5, or to find out if you are eligible for a social security card, contact a Social Security Office or visit Social Security International Operations.

If you, or your spouse, are not eligible for a SSN, you can obtain an ITIN by filing form W-7 along with appropriate documentation.

Exchange Rates

You must express the amounts you report on your U.S. tax return in U.S. dollars. If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U.S. dollars.

Taxpayers generally use the yearly average exchange rate to report foreign-earned income that was received regularly throughout the year. However, if you had foreign transactions on specific days, you may also use the exchange rates for those days.

 

Exchange rates can be found at Foreign Currency and Currency Exchange Rates. Yearly average currency exchange rates for most countries can be found at Yearly Average Currency Exchange Rates.

Why use Hopkins CPA Firm P.C. for your Expat Tax Issues?

1. We partner with CPA’s, Former IRS Agents and Tax Managers.
2. When employed by the IRS, our partner taught Tax Law to new IRS Agents.
3. We have many years of professional tax experience and of direct Internal Revenue Service experience in the local, district and regional offices of the IRS.
5. Because of our vast experience at the IRS we know all the tax policies and tax procedures that govern FBAR.

Call Now to receive a proffesional consultation and solve your Expatriate Tax problems: 361-360-3855

Abatement of Penalty

Abatement of Penalty – Remove Your IRS Penalties and Interest Today

Most taxpayers believe it is easy to get abatement of IRS penalties and interest however you should be aware that it is a very lengthy process and there is no magic wand.

Reviewers at the Internal Revenue Service are very picky and do not easily accept the requests to abate penalties.

You must meet the exacting guidelines before they will consider an abatement of penalty. You have to remember it is a lot easier for them to deny the penalty abatement than to accept it because of the hoops they must go through in the process to get your tax abated.

To get your penalty request abated requires manager signature. therefore, all abatement of penalty cases must be fully documented, well thought out and have substantial documentation to prove a reasonable  cause abatement exists.

Our former IRS agents partner were charged with the job at the IRS of the abatement of penalties and interest on taxpayers who filed for reasonable cause under the abatement of penalty guidelines.

It only makes sense if you want an IRS abatement of penalties to call former IRS agents and managers who know the system and the inside techniques used by the Internal Revenue Service.

Our former IRS agents partner have abated thousands and thousands of dollars of taxpayer penalties and interest and know the exact system and techniques to have success.

We can remove or Abate IRS Penalties and Interest on your taxes if you qualify.

Our partners are experts in penalty abatement. Do not be ripped off by other companies who have no IRS experience.

The PROCESS  for Abatement of IRS Penalties

This is the “process” used by Hopkins CPA Firm P.C. to get penalties and interest abated and removed

We will discuss your individual case and determine how strong your case is before the process starts. We do not want anyone spinning their wheels. We make no false claims that every case is a winner.

Some cases simply do not fit the criteria used by the IRS. We will make an up front determination on the strength of the case and review the likelihood of success.

Once we interview and discuss our professional opinion with you, if we feel your claim has merit, we will proceed.

We will then have you do the following:

1. Thoroughly write your statement of facts or affidavit and put your documents together that fit the time line to support your claim.

2. Get statements from other people, employees or professionals to verify your  claim, that will speak volumes.

3. Forward to us your narrative for our review and we will make any corrections that may be needed to ensure success.

4.  File the abatement of penalty request communicate and negotiate with the Internal Revenue Service to settle your case.

5. If for some reason the abatement of penalty request was denied, file an appeal with the Internal Revenue Service to continue fighting for  abatement of the penalty.

The outline of your abatement of penalty statement should/must contain

  • The date that the act of non compliance had to be completed
  • The event that prevented you from being compliant
  • The date of the event that prevented you from being compliant
  • How soon after the event that prevented you from being compliant, did you become compliant
  • A complete history of the event
  • What happened and when did it happen
  • During that period of time, why was the compliance not met
  • What facts and circumstance prevented the non-compliance
  • Who else can verify the facts of this case
  • What documentation do you have to prove this
  • Does your timeline meet the time line of the penalties and interest
  • Make sure that you are compliant for the prior and subsequent tax years
  • Pick a reason from below and base your abatement request on the following.

Most of the reasons for abatement of penalties and interest that the IRS allows

Ordinary Business Care and Prudence

  1. Ordinary business care and prudence includes making provisions for business obligations to be met when reasonably foreseeable events occur. A taxpayer may establish reasonable cause by providing facts and circumstances showing that they exercised ordinary business care and prudence (taking that degree of care that a reasonably prudent person would exercise), but nevertheless were unable to comply with the law.
  1. In determining if the taxpayer exercised ordinary business care and prudence, review available information including the following:
    1. Taxpayer’s Reason. The taxpayer’s reason should address the penalty imposed. To show reasonable cause, the dates and explanations should clearly correspond with events on which the penalties are based. If the dates and explanations do not correspond to the events on which the penalties are based, request additional information from the taxpayer that may clarify the explanation.
    1. Compliance History. Check the preceding tax years (at least three) for payment patterns and the taxpayer’s overall compliance history. The same penalty, previously assessed or abated, may indicate that the taxpayer is not exercising ordinary business care. If this is the taxpayer’s first incident of non compliant behavior, weigh this factor with other reasons the taxpayer gives for reasonable cause, since a first-time failure to comply does not by itself establish reasonable cause.
    1. Length of Time. Consider the length of time between the event cited as a reason for the noncompliance and subsequent compliance. Consider: (1) when the act was required by law, (2) the period of time during which the taxpayer was unable to comply with the law due to circumstances beyond the taxpayer’s control, and (3) when the taxpayer complied with the law.
    1. Circumstances Beyond the Taxpayer’s Control. Consider whether or not the taxpayer could have anticipated the event that caused the noncompliance. Reasonable cause is generally established when the taxpayer exercises ordinary business care and prudence, but, due to circumstances beyond the taxpayer’s control, the taxpayer was unable to timely meet the tax obligation. The taxpayer’s obligation to meet the tax law requirements is ongoing. Ordinary business care and prudence requires that the taxpayer continue to attempt to meet the requirements, even though late.

Ignorance of the Law

  1. In some instances taxpayers may not be aware of specific obligations to file and/or pay taxes. The ordinary business care and prudence standard requires that taxpayers make reasonable efforts to determine their tax obligations
  1. Reasonable cause may be established if the taxpayer shows ignorance of the law in conjunction with other facts and circumstances. for example, consider:
    1. The taxpayer’s education,
    2. If the taxpayer has been subject to the tax,
    3. If the taxpayer has been penalized before,
    4. If there were recent changes in the tax forms or law which a taxpayer could not reasonably be expected to know, and/or
    5. The level of complexity of a tax or compliance issue.
  2. Reasonable cause should never be presumed, even in cases where ignorance of the law is claimed.
  3. The taxpayer may have reasonable cause for noncompliance if:
    1. A reasonable and good faith effort was made to comply with the law, or
    2. The taxpayer was unaware of a requirement and could not reasonably be expected to know of the requirement.

Mistake was made

  1. The taxpayer may try to establish reasonable cause by claiming that a mistake was made. Generally, this is not in keeping with the ordinary business care and prudence standard and does not provide a basis for reasonable cause.
  2. However, the reason for the mistake may be a supporting factor if additional facts and circumstances support the determination that the taxpayer exercised ordinary business care and prudence.

Forgetfulness

  1. The taxpayer may try to establish reasonable cause by claiming forgetfulness or an oversight by the taxpayer, or another party, caused the noncompliance. Generally, this is not in keeping with ordinary business care and prudence standard and does not provide a basis for reasonable cause.
    1. Relying on another person to perform a required act is generally not sufficient for establishing reasonable cause.
    2. It is the taxpayer’s responsibility to file a timely return and to make timely deposits or payments. This responsibility cannot be delegated.
  2. Information to consider when evaluating a request for an abatement or non-assertion of a penalty based on a mistake or a claim of ignorance of the law includes, but is not limited to:
    • When and how the taxpayer became aware of the mistake.
    • The extent to which the taxpayer corrected the mistake.
    • The relationship between the taxpayer and the subordinate (if the taxpayer delegated the duty).
    • If the taxpayer took timely steps to correct the failure after it was discovered.
    • The supporting documentation.

Death, Serious Illness, or Unavoidable Absence

  1. Death, serious illness, or unavoidable absence of the taxpayer may establish reasonable cause for filing, paying, or depositing late for the following:
    1. An individual: If there was a death, serious illness, or unavoidable absence of the taxpayer or a death or serious illness in the taxpayer’s immediate family (i.e. spouse, sibling, parents, grandparents, children). PRC 024 indicates the incident occurred to the individual or a member of that individual’s immediate family for filing, paying, or depositing.
    2. A corporation, estate, trust , etc.: If there was a death, serious illness, or other unavoidable absence of the taxpayer (person responsible), or a member of such taxpayer’s immediate family, and that taxpayer had sole authority to execute the return, make the deposit, or pay the tax .
  2. If someone other than the taxpayer, or the person responsible, is authorized to meet the obligation, consider the reasons why that person did not meet the obligation when evaluating the request for relief. In the case of a business, if only one person was authorized, determine whether this was in keeping with ordinary business care and prudence.
  3. Information to consider when evaluating a request for penalty relief based on reasonable cause due to death, serious illness, or unavoidable absence includes, but is not limited to, the following:
    1. The relationship of the taxpayer to the other parties involved.
    2. The date of death.
    3. The dates, duration, and severity of illness.
    4. The dates and reasons for absence.
    5. How the event prevented compliance.
    6. If other business obligations were impaired, and
    7. If tax duties were attended to promptly when the illness passed, or within a reasonable period of time after a death or absence.

Unable to obtain  Tax Records

  1. Explanations relating to the inability to obtain the necessary records may constitute reasonable cause in some instances, but may not in others.
  2. Consider the facts and circumstances relevant to each case and evaluate the request for penalty relief.
  3. If the taxpayer was unable to obtain records necessary to comply with a tax obligation, the taxpayer may or may not be able to establish reasonable cause. Reasonable cause may be established if the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond the taxpayer’s control they were unable to comply.
  4. Information to consider when evaluating such a request includes, but is not limited to, an explanation as to:
    • Why the records were needed to comply.
    • Why the records were unavailable and what steps were taken to secure the records.
    • When and how the taxpayer became aware that they did not have the necessary records.
    • If other means were explored to secure needed information.
    • Why the taxpayer did not estimate the information.
    • If the taxpayer contacted the IRS for instructions on what to do about missing information.
    • If the taxpayer promptly complied once the missing information was received
    • This is directly for  the penalty handbook from the IRS

Undue Hardship

An undue hardship may support the granting of an extension of time for paying a tax or deficiency. The IRS provides that an undue hardship must be more than an inconvenience to the taxpayer. The taxpayer must show that they would sustain a substantial financial loss if forced to pay a tax or deficiency on the due date.

  1. The extension of time to pay does not provide the taxpayer with an extension of time to file. Nor does the extension of time to pay relieve the taxpayer of any appropriate penalties.
  2. Undue hardship generally does not affect a person’s ability to file and therefore would not provide a basis for penalty relief in a failure to file situation. However, each request must be considered on a case-by-case basis. Undue hardship may establish reasonable cause for failure to file on magnetic media, under Treas. Reg. 301.6724–1.
  3. Undue hardship may also support relief from the addition to tax for failure to pay tax if the explanation for the noncompliance supports such a determination. However, the mere inability to pay does not ordinarily provide the basis for granting penalty relief. Under Treas. Reg. 301.6651–1(c), the taxpayer must also show that they exercised ordinary business care and prudence in providing for the payment of the tax liability.
    1. The taxpayer may claim that enough funds were on hand but, as a result of unanticipated events, the taxpayer was unable to pay the taxes.
    2. Consider an individual taxpayer’s inability to pay a factor when considering penalty relief if the taxpayer shows that, had the payment been made on the payment due date, undue hardship  would have resulted. In the case where a taxpayer files bankruptcy, consider inability to pay a factor if the insolvency occurred before the tax payment date.
  4. If a payroll was met, taxes were withheld and should be available for deposit. Employers must reserve money withheld from employees’ wages in trust until deposited. The employer should not use the money for any other purpose. Undue hardship does not support relief from the IRC section 6672, Failure to Collect and Pay Over Tax, or attempt to Evade or Defeat Tax (Trust Fund Recovery Program).
  5. Information to consider when evaluating a request for penalty relief includes, but is not limited to, the following:
    1. When did the taxpayer know they could not pay?
    2. Why was the taxpayer unable to pay?
    3. Did the taxpayer explore other means to secure the necessary funds?
    4. What did the taxpayer supply in the way of supporting documentation, such as copies of bank statements?
    5. Did the taxpayer pay when the funds became available?

Advice from third parties

This section discusses three basic types of advice:

  1. Written advice provided by IRS
  2. Oral advice provided by IRS
  3. Advice provided by a tax professional

Information to consider when evaluating a request for abatement or non-assertion of a penalty due to reliance on advice includes, but is not limited to, the following:

  1. Was the advice in response to a specific request and was the advice received related to the facts contained in that request?
  2. Did the taxpayer reasonably rely on the advice?

The following instances address some situations where penalty relief may not be appropriate even though the taxpayer relied on written advice from the IRS regarding an item on a filed return.

  1. The taxpayer did not reasonably rely on the advice regarding an item included on a return if the advice was received after the date the return was filed;

A taxpayer may be considered to have reasonably relied on advice received after the return was filed if they then filed an amended return that conformed with such written advice

  1. A taxpayer may not be considered to have reasonably relied on written advice unrelated to an item included on a return, such as advice on the payment of estimated taxes, if the advice is received after the estimated tax payment was due.

Did the taxpayer provide the IRS or the tax professional with adequate and accurate information?

  1. The taxpayer is entitled to penalty relief for the period during which they relied on the advice. The period continues until the taxpayer is placed on notice that the advice is no longer correct or no longer represents the Service’s position.
  2. The taxpayer is placed on notice as the result of any of the following events that present a contrary position and occur after the issuance of the written advice:
    1. Written correspondence from the IRS that its advice is no longer correct or no longer represents the IRS’s position;
    2. Enactment of legislation or ratification of a tax treaty;
    3. A U.S. Supreme Court decision;
    4. The issuance of temporary or final regulations; or
    5. The publication of a revenue ruling, revenue procedure, or other statement in the Internal Revenue Bulletin.

Generally, Form 843, Claim for Refund and Request for Abatement, is required to be filed to request penalty abatement based on erroneous advice.. However, if Form 843 is not filed and the information provided demonstrates that abatement of the penalty is warranted, the penalty should be abated, whether or not a Form 843 is provided.

Written Advice from the IRS

The IRS is required by IRC section 6404(f) and Treas. Reg. 301.6404–3 to abate any portion of any penalty attributable to erroneous written advice furnished by an officer or employee of the IRS acting in their official capacity.

  1. If the taxpayer does not meet the criteria for penalty relief under IRC section 6404(f), the taxpayer may qualify for other penalty relief. For instance, taxpayers who fail to meet all of the above criteria may still qualify for relief under reasonable cause if the IRS determines that the taxpayer exercised ordinary business care and prudence in relying on the IRS’s written advice.

Oral Advice from IRS

The IRS may provide penalty relief based on a taxpayer’s reliance on erroneous oral advice from the IRS. The IRS is required by IRC section 6404(f) and Treas. Reg. 301.6404–3 to abate any portion of any penalty attributable to erroneously written advice furnished by an employee acting in their official capacity. Administratively, the IRS has extended this relief to include erroneous oral advice when appropriate.

  1. In addition to considering the criteria provided in Treas. Reg. 301.6404–3, consider the following:
    1. Did the taxpayer exercise ordinary business care and prudence in relying on that advice?
    2. Was there a clear relationship between the taxpayer’s situation, the advice provided, and the penalty assessed?
    3. What is the taxpayer’s prior tax history and prior experience with the tax requirements?
    4. Did the IRS provide correct information by other means (such as tax forms and publications)?
    5. What type of supporting documentation is available?

The following are types of supporting documentation:

  1. A notation of the taxpayer’s question to the IRS,
  2. Documentation regarding the advice provided by the IRS,
  3. Information regarding the office and method by which the advice was obtained,
  4. The date the advice was provided, and
  5. The name of the employee who provided the information.

Penalties abated as the result of reliance on erroneous oral advice provided by the IRS should be identified by using PRC 031.

Advice from a Tax Advisor

Reliance on the advice of a tax advisor generally relates to the reasonable cause exception in IRC section 6664 for the accuracy-related penalty under IRC section 6662. (See IRM 20.1.5, Return Related Penalties, and Treas. Reg. 1.6664–4(c))

  1. However, in very limited instances, reliance on the advice of a tax advisor may provide relief from other penalties when the tax advisor provides advice on a substantive tax issue. See example below:

The employer researched all available IRS publications on the subject of contract labor, provided clear and convincing documentation as to the duties of the workers to the tax advisor, and requested an opinion from the tax advisor as to whether the workers were “contract labor” or employees. As a result, the tax advisor advised the employer that the workers were ” contract labor”. However, the IRS later determined that the workers were “employees” and not “contract labor “.

Penalty relief based on reliance on the advice of a tax advisor is limited to issues generally considered technical or complicated. The taxpayer’s responsibility to file, pay, or deposit taxes cannot be excused by reliance on the advice of a tax advisor.

Fire, Casualty, Natural Disaster, or Other Disturbance

Relief from a penalty may be requested if there was a failure to timely comply with a requirement to file a return or pay a tax as the result of a fire, casualty, natural disaster, or other disturbance.

  1. Relief from a penalty because the taxpayer suffered from a fire, casualty, natural disaster, or other disturbance should be identified . It could be that as a result of the fire the taxpayer was unable to access their records  or as the result of an accident, the responsible party was hospitalized and unable to file the return or pay the tax.
  2. Fire, casualty, natural disaster, or other disturbance are factors to consider. One of these circumstances by itself does not necessarily provide penalty relief.
  3. Penalty relief may be appropriate if the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond the taxpayer’s control they were unable to comply with the law.
  4. Factors to consider include:
    1. Timing.
    2. Effect on the taxpayer’s business.
    3. Steps taken to attempt to comply.
    4. If the taxpayer complied when it became possible.

The determination to grant relief from each penalty must be based on the facts and circumstances surrounding each individual case.

Official Disaster Area

When a significant disaster occurs affecting a wide area of taxpayers, the IRS often issues special instructions to facilitate evaluating the request for penalty relief.

  1. Because these are one-time instructions, they will not be incorporated in this IRM. Territories, Campuses, and Customer Service sites will be kept informed of any special instructions affecting their areas.
  2. Penalty Relief granted because the taxpayer was located in an Official Disaster Area.

Service Error

An IRS error can be any error made by the IRS in computing or assessing tax, crediting accounts, etc.

  1. General Service Error (systemically generated).
  2. When an analyst from any area of the IRS identifies a computer programming applicationthat caused a penalty to be assessed in error, that analyst should work with an analyst from Service wide Penalties to:
    1. Contact Modernization & Information Technology Services to resolve the inadequate computer application, and

Other Service Error. Some examples are:

  1. A math error when manually computing a penalty,
  2. An extension of time to file that did not post to the Master File, or
  3. Any other error, when it can be shown that; (1) the taxpayer did in fact comply with the law, and (2) the IRS did not initially recognize that fact.

Under the new Fresh Start Program by the IRS they have extended Abatement of Penalty Relief

The Internal Revenue Service  announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed.

Under the new Fresh Start provisions, part of a broader effort started at the IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties.

In addition, the IRS is doubling the dollar threshold for taxpayers eligible for Installment Agreements to help more people qualify for the program.

New Abatement Penalty Relief

The IRS plans for new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals.

The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

  • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.
  • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

This penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household.

This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline.

However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly encourages taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, also with a 25 percent cap.

For the very best chance to get an Abatement of Penalties and Interest, call Hopkins CPA Frim P.C. today at (361) 360-3855.