Are you eligible for Penalty Relief?

Each year the IRS assesses millions of penalties against taxpayers. Most taxpayers are unaware that the IRS also abates many of those same penalties.

Below is helpful information taken directly from the IRS website in regards to Penalty Relief.

You may qualify for relief from penalties if you made an effort to comply with the requirements of the law, but were unable to meet your tax obligations, due to circumstances beyond your control.


Penalties eligible for penalty relief include:

• Failing to file a tax return
• Failing to pay on time
• Failing to deposit certain taxes as required
• Other penalties as applicable.

 

The following types of penalty relief are offered by the IRS:

Reasonable Cause

The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Sound reasons, if established, include:

• Fire, casualty, natural disaster or other disturbances
• Inability to obtain records
• Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
• Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.

Most reasonable cause explanations require that you provide documentation to support your claim, such as:

• Hospital or court records or a letter from a physician to establish illness or incapacitation, with specific start and end dates
• Documentation of natural disasters or other events that prevented compliance

 

Administrative Waiver and First Time Penalty Abatement

You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:

• You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
• You filed all currently required returns or filed an extension of time to file.
• You have paid, or arranged to pay, any tax due.

The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service's first time penalty abatement policy.

Other administrative relief: If you received incorrect oral advice from the IRS, you may qualify for administrative relief.

 

Statutory Exception

If you received incorrect written advice from the IRS, you may qualify for a statutory exception. If you feel you were assessed a penalty as the result of erroneous written advice you received from IRS, the following items may be needed when requesting penalty relief:

• Your written request for advice.
• The erroneous written advice you relied on that was furnished to you by the IRS.
• The report, if any, of tax adjustments identifying the penalty or addition to tax, and the item(s) relating to the erroneous advice.
  

Generally, Form 843, Claim for Refund and Request for Abatement should be filed to request penalty relief based on incorrect written advice from IRS. 

For more information regarding Penalty Relief - please contact Ken Anaya at: (844) KAA-4TAX or (844) 522-4829

Taxes Filed - What To Do Next!

So, you have finally filed your taxes, your anxiously awaiting your return or in some unfortunate situations, trying to figure out how to pay back what you owe the IRS. Remember, that what you do after you file your taxes is just as important as what you do before you file.

 

Refund: If you received a refund, consider what you will spend it on. Will you save for the following year, pay off unnecessary debt or will you finally take that desperately needed vacation?

 

Do you owe? Make plans now to start paying off any IRS debt, don't build up any additional interest if at all possible. The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start.

You can also set-up an Online Payment Agreement with the IRS if you owe $50,000 or less in combined tax, penalties, and interest, and filed all required returns. You may also qualify for a short-term agreement if your balance is under $100,000. Once you have set-up a payment arrangement - the IRS will give you the ability to Pay online through a bank account or debit/credit card.

Start Collecting and Saving: Collect things during the year that you’ll need to file for next years taxes. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good record keeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.

If you have questions throughout the year - its okay to contact your accountant or tax advisor. They are there to help even before issues arise, so take advantage of their knowledge and expertise, so you know what to prepare for now. This includes understanding what new changes in your life will mean for your filing status. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

Going Green Could Reduce Your Taxes

By definition, a “green home” is an environmentally sustainable building, designed, constructed and operated to minimize the total environmental impacts it also focuses on the efficient use of energy, water, and building materials. A green vehicle, or clean vehicle, or eco-friendly vehicle is a road motor vehicle that produces less harmful impacts to the environment than comparable conventional internal combustion engine vehicles running on gasoline or diesel, or one that uses certain alternative fuels. The following information was taken directly from the IRS website and provides helpful tips on how going green can help you become more financially responsible, create a smaller carbon footprint, and improve your home's resale value.

 

When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. The Internal Revenue Service wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009 Residential Energy Property Credit. This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. 

This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. Residential Energy Efficient Property Credit. This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment, geothermal heat pumps and wind turbines installed on or in connection with their home located in the United States and qualified fuel cell property installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.

 

• Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.

• Plug-in Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.

• Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.

• Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Did you purchase a New Home in 2016?

If you bought a home last year, you will find a tax write-off buried under all the paperwork accumulated from the slew of documents your escrow company provided. You are able to deduct mortgage points paid by the seller. It is best to bring your final escrow documents when having your taxes prepared. I know that being able to write off an expense someone else has paid for sounds too good to be true. But it is true, so bring this paperwork when having your taxes prepared. 

Talk with your Tax preparer Ken A Anaya about this deduction.