So you owe taxes and you haven’t filed yet, is there any advantage in waiting or should you file as soon as possible? If your current financial situation is precariously stressed, should you wait until you obtain the necessary funds to pay any taxes due?
Taxpayers that have failed to file tax returns for some extended period of time should file them immediately. Even if taxpayers have filed for an extension, time is of the essence to avoid costly penalties assessed by the IRS. When taxpayers do not file by the April 15th deadline, the IRS assesses failure to file (FTF) and failure to pay (FTP) penalties.
The Internal Revenue Service, the states, and the tax industry are working together in an unprecedented partnership to protect taxpayers’ federal and state tax accounts from identity thieves. The “Taxes. Security. Together” awareness campaign is an effort to better inform taxpayers about the need to protect personal, tax and financial data home and online.
The IRS, state tax agencies, and the tax industry also hosted a National Tax Security Awareness Week Dec. 5 to Dec. 8, 2016. In addition, it launched a Protect your Clients; Protect Yourself campaign to raise awareness among tax professionals that they too are increasingly the targets of criminals.
It’s tax filing season and criminals are in full force trying to implement fraudulent schemes and take advantage of the multitudes of personal data and information floating around the internet, mail, and phone lines. Taxpayers should be aware of the following tips to ensure that they do not become the victims of these various internet and telemarketing scams, since the financial ramifications may be devastating.
Taxpayers should remember that the IRS will NEVER:
- Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed a notice of an amount due.
Many provisions of the Internal Revenue Code are complicated. Proper interpretation of the rules and regulations contained in these provisions requires the assistance of an experienced and knowledgeable tax professional. The fifth part of the series about the most confusing provisions of the Internal Revenue Code addresses earned income tax credits.
Why Is It Confusing?
- Complicated definitions and rules
- Multitudes of required calculations
In 2004, Congress made this credit for low-income taxpayers slightly less confusing by adopting a uniform definition of a qualifying child. But even the tests (relationship, age, residency, and joint return) to be a qualifying child under the EITC may be confusing and cumbersome for many taxpayers.
The original purpose for the enactment of the estate tax in 1916 was to be a temporary tax used to pay off the war bonds of WWI. One hundred years later and it’s still around. However, Donald Trump has pledged to repeal the estate tax, although presidential candidates promising to repeal the estate tax is standard campaign rhetoric in every election. However, this time around, with the incoming Trump Administration, it may be more than just talk.
How aggressive is the IRS in enforcing and collecting Trust Fund Recovery Penalties? A case from the U.S. Tax Court case illustrates the aggressive nature of the IRS when using the trust fund recovery penalty (TFRP) to collect trust fund taxes. Business enterprises must be careful to ensure that they do not incur Trust Fund Recovery Penalties for any failure to remit federal payroll and trust fund taxes when due.
Many provisions of the Internal Revenue Code are complicated. Proper interpretation of the rules and regulations contained in these provisions requires the assistance of an experienced and knowledgeable tax professional. The fourth part of our series about the most confusing provisions of the Internal Revenue Code addresses education tax incentives.
Why Is It Confusing?
- There are a large list of incentives from which to choose
- New stricter requirements to establish eligibility for some incentives
- Determining eligibility is a complicated, arduous, lengthy process
- Difficulty in determining the correct and appropriate benefit
The U.S. has a progressive income tax system. Therefore, the rate of tax increases as taxable income increases. The purpose of imposing progressive taxes is to reduce the tax incidence of people with a lower ability to pay taxes, as these taxes shift increasingly to those with a higher ability-to-pay. Thus, the bulk of tax revenue is in high-income households.
Statistics just released by the IRS show that the top 1% of households received more than 20% of adjusted gross income in 2014 while paying almost 40% of income taxes. Less than 4% of income tax is paid by the bottom 50% of households. Federal tax rates in 2015 varied from 10% to 39.6%.
President Trump’s 2005 Tax Return – What It Tells Us
Yesterday, Tuesday March 14, 2017, while most of the New England area was buried in snow, MSNBC published President Trump’s 2005 income tax return – or at least the first two pages of it. What does the return tell us and what does it not?
The Basics – We know he had a positive income in the amount of $152,737,866 and $103,201,242 in tax write-offs. He paid a total of $38,435,451 in taxes for the year.
It remains to be seen the specific tax plan that Donald Trump will implement as President of the United States. The effects of Donald Trump’s tax plan will depend on taxpayers’ income and tax planning. Some think that Trump’s plan will significantly reduce income and corporate taxes, and eliminate the estate tax. It seems the plan’s largest effect on individual taxpayers will be to reduce the top tax bracket 6.6 percentage points from 39.6 percent to 33 percent.