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IRS Appeal: When You Need to File an Appeal

There are many times when taxpayers will not agree with the decisions the IRS makes regarding their tax repayments or other factors. There is a solution when this occurs. The IRS appeals process is not simplistic, but it can be the best route to take when you believe the decision is not accurate or is otherwise unfair.

When to Use It

You can use the IRS appeals process in numerous instances. Many use it to dispute a tax return issue. You can appeal many additional things, including the following:

• You can appeal collections actions the agencies is taking, including installment agreements, seizures of property or assets, levies and liens.
• You can use it to dispute penalties and interest on your tax bill, such as for submitting your taxes late.
• You can use it to re-issue a rejected compromise to settle your tax debt.

Virtually any decision can be appealed to some point. Sometimes, the fastest way to do so is to simply head to the IRS office available to you locally and ask for a meeting with the supervisor of the examiner who made the decision you wish to dispute. In other cases, you may need to go through a district office called a local Appeals Office to file a claim.

The process involves you proving your case, which is why it is important to use a tax professional to help you through the IRS appeals process. Do have all information related to your claim available. You can also use all previous IRS decisions published to prove your case. You do not have to have legal representation at the Appeals Office. However, it is a wise decision to have a tax professional, such as a certified public accountant or tax attorney by your side.

Tax Season: A Quick Checklist to Get You Started

Preparing for the tax season is something you should do now. The sooner you take the time to get organized and make key decisions, the less likely you are to run into problems when April 15th rolls around. The following checklist will help you to get started. Make this an ongoing process and it will be easier than you think.

• Save and organize all receipts for purchases made, including auto, business, eating out, etc. Organize them by category and then separate those that could be deductions or credits.
• Keep all paycheck stubs to ensure your W2 information is accurate at the end of the year.
• Organize all bills and other expenses related to your business. The only reason to keep utility bills for tax preparation purposes is if you own a home business.
• Locate and organize all investment records, including any statements received throughout the year.
• Keep all asset purchase records separate from bills and ensure you know what tax deductions or credits are available for those types of investments.
• Consider hiring a tax professional now. While you may not be planning to file for a few months, potentially, if you hire a tax professional before the end of the year, this professional could potentially help you to reduce your tax bill.
• Determine if your withholdings are accurate and the best for your financial situation.
• Determine if you can put more money into your savings and retirement accounts to save money on your taxes.
• Put together a tracking system for the rest of this year and next that allows you to track expenses.
• Even if you use a tax professional, do purchase tax software and use it to manage your tax bill throughout the year. This process ensures you have a running estimate of taxes you will need to pay.

When you take these steps now, you will better protect yourself from a shock down the road or a rogue receipt that is incredibly important. It could make a substantial difference in your taxes.

IRS Recently Announced a Voluntary Classification Settlement Program for Worker Misclassification as a Contractor

Misclassification of an employee as an independent contractor can be detrimental to any business. The IRS requires that businesses report income paid to employees properly to ensure proper collection of taxes and Social Security payments. However, defining who is an employee and who is an independent contractor can be difficult even in the best situations.

The IRS has announced a new program that may provide some help. The program is called the Voluntary Classification Settlement Program. This is an optional program. It gives taxpayers a unique opportunity to reclassify their workers as employees. This is done for future tax periods for employment tax purposes. What makes this program interesting is that it provides partial relief from federal employment taxes for eligible taxpayers. The taxpayers must agree, though, prospectively to treat those that work for them as employees. There are eligibility requirements to enroll in this program.

Why is it important? Misclassification of workers is a serious problem for taxpayers. If you have no basis for treating a worker as an independent contractor rather than an employee, you could be held liable for employment taxes for that individual. In that case, any relief provisions will not apply. The Voluntary Classification Settlement Program provides an opportunity to obtain some relief from the costs associated with employee taxes. To obtain the latest requirements for this program, fill out IRS Form 8952, Application for Voluntary Classification Settlement Program. You will then need to enter into a formal agreement through the program with the IRS.

By doing this it can provide many employers with a safety net necessary to avoid costly employment taxes. However, it does not provide blanket protection. If your workers should be classified as employees under the IRS laws, you cannot avoid the requirement for paying employee taxes.

Reasonable Compensation for an S Corporation Officer

According to Form 1120S United States Income Tax Return for an S Corporation, individuals paying an officer of that corporation must do so through a salary. As such, the IRS states that the salary amount should be considered reasonable compensation. While the tax code itself does not outline what reasonable is defined as, the US's regional courts have created some guidelines for S Corporations to follow in this regard.

Numerous factors may play a role in determining what reasonable compensation is. While it still is left up to the discretion of the S Corporation, the following are some guidelines to use, according to various courts.

• The training and experience of the officer

• The responsibilities and duties of the officer

• The dividend history of the S Corporation

• The amount of time and effort devoted to the business by the officer

• Compensation agreements put forth

• Payments to non-shareholder employees

• Comparable wages from other similar S Corporations

• A formula developed to help determine what the officer should receive as compensation

• The timing and the manner of bonuses paid out to key people within the S Corporation

Keep in mind the following statement from the IRS regarding compensation given to an S Corporation officer. "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation." While this still leaves some room open for the discretion of the corporation, it also places potential limitations on what is considered reasonable.

I received a letter from the IRS, now what?

When you receive the "letter" from the IRS, you must not panic and you must not ignore it.

You may ask, "Why me"?

Let’s look at some reasons the IRS may question you:

Income – The IRS knows every 1099 you’ve received for interest, dividends, non-employee compensation and other sources of income. Their computers check that all 1099 income is properly included on your tax return. If their system can’t “match up” the amounts they think you should report, you will most likely get an IRS letter.

Deductions – Every year the IRS uses a computer program to calculate what is “normal” deduction based on a sample thousands of tax returns with different levels of income. Then IRS uses a computer program that assigns a numeric score to every individual income tax return after it is processed. Charitable deductions and unreimbursed employee expenses are just some of the deductions that will be scored. The higher the score, the higher the probability that an IRS examination will result in a change to your tax liability.

Reporting Patterns – Taxpayers with a Schedule C (self-employed) business come under closer scrutiny. The IRS expects you are in business to make a profit; they’ll want to know more if you’re showing losses several years in a row.

Random Selection – Sometimes there is no reason; you’re just picked.

The best defense to avoid the IRS is to have your tax return prepared correctly. But if you do get a letter, don’t panic. Remember you are entitled to representation, and to all legitimate deductions.

As soon as you receive the “letter”, let a tax professional such as Gary M. Kaplan, C.P.A., P.A. take control of the situation and find resolution.

You can receive your FREE consultation by calling 1 (866) 643-3560

or by visiting http://www.gkaplancpa.com/free-consultation-form/

Top 5 Tips for the Upcoming Tax Season

The next tax season is coming and are you prepared? I felt that it would be beneficial for everyone to post my top 5 tips for the upcoming tax season.

• Tip #1: Gather all your appropriate documents. You will need to start gathering the appropriate documents for any deductions you plan to claim on your tax return. This includes any receipts, property tax records, car registration, etc.

• Tip #2: Keep an eye out for W-2 and 1099 documents from your employer.

• Tip #3: Double-check your social security number, and other information on your tax return. You can delay your tax refund if the information is not filled out correctly.

• Tip #4: Setup Direct Deposit to have your tax refund directly deposited into your bank account. This will eliminate some of the time to receive your tax refund.

• Tip #5: Use a tax professional like Gary M. Kaplan, C.P.A., P.A.. You will benefit from the piece of mind and ensuring that the most accurate return has been filed.

Let Gary M. Kaplan, C.P.A., P.A. prepare all of your taxes at our extremely competitive rate! Receive your FREE consultation now by calling 1 (866) 643-3560 or go to FREE Consultation Form, fill out the form and we will contact you.