http://www.tidytax.com/blog Tax tips & advice from the nations leading tax resolution company. Sat, 18 May 2013 11:51:28 +0000 en hourly 1 http://wordpress.org/?v=3.5 http://www.tidytax.com/blog/partnership-failure-to-file-penalty/ http://www.tidytax.com/blog/partnership-failure-to-file-penalty/#comments Sat, 18 May 2013 11:44:41 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2379 A partnership that fails to file a completed return on time, including extensions, is subject to a penalty for their violation of IRC Sec. 6698. The penalty will equal $195 per partner, per month or part of a month (up to 12 months) that the return is late. Partnership Failure to File Penalty This can become very expensive if there is a large amount of partners within the partnership. If there are 100 partners, the penalty would be $1,500 per … Read more →]]> http://www.tidytax.com/blog/partnership-failure-to-file-penalty/feed/ 0 http://www.tidytax.com/blog/transactions-lacking-economic-substance-form-8275/ http://www.tidytax.com/blog/transactions-lacking-economic-substance-form-8275/#comments Fri, 17 May 2013 11:26:15 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2370 If the IRS determines that a transaction lacks economic substance, the underpayment of tax attributable to the disallowance of tax benefits will be subject to a 20% penalty. The penalty will increase to 40% if the taxpayer does not adequately disclose the relevant facts affecting the tax treatment on their return or on a statement attached to the return. Amending the Return An amendment made to a return is not taken into account if it is filed after the taxpayer … Read more →]]> http://www.tidytax.com/blog/transactions-lacking-economic-substance-form-8275/feed/ 0 http://www.tidytax.com/blog/correspondence-audit-request-for-conference/ http://www.tidytax.com/blog/correspondence-audit-request-for-conference/#comments Thu, 16 May 2013 11:00:49 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2363 A correspondence audit is an audit conducted by an IRS Service Center and involves issues that can be resolved either by mail or over the phone. In some cases, the taxpayer may wish to request a conference to discuss issues that they are having trouble communicating in writing or over the phone. Requesting a Conference It is simple to request a conference with the IRS to discuss a correspondence audit; however, it becomes more complicated if details are left out … Read more →]]> http://www.tidytax.com/blog/correspondence-audit-request-for-conference/feed/ 0 http://www.tidytax.com/blog/failure-to-file-penalty-computation/ http://www.tidytax.com/blog/failure-to-file-penalty-computation/#comments Wed, 15 May 2013 11:00:15 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2356 Paul has filed his 2011 Form 1040 on July 20, 2012. There was no extension filed for this return and therefore it is considered late. The tax return shows a net tax liability of $4,000; however, the IRS assessed an additional tax of $1,000 based on Paul’s failure to report certain interest and dividend income that he received. During 2011, Paul withheld and made estimated tax payments of $1,500. Amount to be Shown on the Return The amount of tax … Read more →]]> http://www.tidytax.com/blog/failure-to-file-penalty-computation/feed/ 0 http://www.tidytax.com/blog/delinquent-return-refund-hold-program/ http://www.tidytax.com/blog/delinquent-return-refund-hold-program/#comments Tue, 14 May 2013 11:00:06 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2349 The IRS started a program called the Delinquent Return Hold Program to search for and withhold the refunds that belong to non-filing taxpayers until their delinquent tax returns are filed. Delinquent Return Refund Hold Program Under the Delinquent Return Refund Hold Program, the IRS holds refunds and credits when a taxpayer files a current year tax return but has at least one unfiled tax return within the prior five year period. The purpose of the program is to get the … Read more →]]> http://www.tidytax.com/blog/delinquent-return-refund-hold-program/feed/ 0 http://www.tidytax.com/blog/irs-power-of-attorney-signature-requirement-form-2848/ http://www.tidytax.com/blog/irs-power-of-attorney-signature-requirement-form-2848/#comments Mon, 13 May 2013 11:00:27 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2342 When filing a Power of Attorney with the IRS it is important to understand the signature requirement because it is different depending on the type of taxpayer. POA Signature Requirement For individuals, all that is required is their signature to appoint a representative of their choice. However, for rules for other taxpayers are more complicated: 1. As of March 1, 2012, a husband and wife that file a joint tax return must each file a separate Power of Attorney on … Read more →]]> http://www.tidytax.com/blog/irs-power-of-attorney-signature-requirement-form-2848/feed/ 0 http://www.tidytax.com/blog/irs-innocent-spouse-relief-does-not-abate-tax/ http://www.tidytax.com/blog/irs-innocent-spouse-relief-does-not-abate-tax/#comments Sun, 12 May 2013 11:56:35 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2336 When a taxpayer applies for innocent spouse relief, they are not actually applying to have the tax liability abated; rather, they are applying to have the tax liability reduced to zero to prevent the IRS from pursuing collection activities against them. Innocent Spouse Relief This is an important distinction because the IRS has the ability to reverse the grant for relief if it is determined that the relief was inappropriately issued to the taxpayer. Because the liability has not been … Read more →]]> http://www.tidytax.com/blog/irs-innocent-spouse-relief-does-not-abate-tax/feed/ 0 http://www.tidytax.com/blog/irs-penalties-for-inability-to-obtain-records/ http://www.tidytax.com/blog/irs-penalties-for-inability-to-obtain-records/#comments Sat, 11 May 2013 11:04:46 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2328 In the event that a taxpayer is unable to obtain records to comply with tax obligations, they may or may not be subject to penalties. This will depend on whether the taxpayer can establish reasonable cause for not being able to obtain those records. Reasonable cause may be established if the taxpayer exercised ordinary business care and prudence, but due to circumstances beyond his or her control, was unable to comply with the tax obligation. Establishing Reasonable Cause When establishing … Read more →]]> http://www.tidytax.com/blog/irs-penalties-for-inability-to-obtain-records/feed/ 0 http://www.tidytax.com/blog/civil-penalty-for-tax-fraud/ http://www.tidytax.com/blog/civil-penalty-for-tax-fraud/#comments Fri, 10 May 2013 11:10:13 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2322 Section 6663 covers the information dealing with the civil fraud penalty and how it is administered. The penalty is equal to 75% of the underpayment of tax that is directly or indirectly due to fraud. The burden of proof rests with the IRS on proving that the underpayment was due to fraudulent activity. Defining Underpayment In this situation, underpayment means the difference between the correct tax liability and the amount of tax reported on the return plus the amount of … Read more →]]> http://www.tidytax.com/blog/civil-penalty-for-tax-fraud/feed/ 0 http://www.tidytax.com/blog/rejected-offer-in-compromise/ http://www.tidytax.com/blog/rejected-offer-in-compromise/#comments Thu, 09 May 2013 11:06:00 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2316 When the IRS rejects an Offer in Compromise proposal, they will generally send prompt notice to the applicant explaining the reasons why the Offer in Compromise has been rejected. All cash payments that were made to the IRS when the Offer in Compromise was submitted will not be refunded to the taxpayer. This is important for any taxpayer to remember, it can be very frustrating to have thousands of dollars not be refunded when your offer is rejected. Submitting New … Read more →]]> http://www.tidytax.com/blog/rejected-offer-in-compromise/feed/ 0 http://www.tidytax.com/blog/statute-of-limitations-on-tax-returns/ http://www.tidytax.com/blog/statute-of-limitations-on-tax-returns/#comments Mon, 29 Apr 2013 17:48:43 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2310 There are a variety of different statutes of limitations that apply to a variety of different situations. Below is a list of these situations and the proper statute of limitations that will apply. Statute of Limitations on Tax Returns 1. Assessment and collection of taxes on returns not filed on or before their proper due date – Statute of limitations expires three years after the return is properly filed with the IRS. 2. Assessment and collection of taxes on tax … Read more →]]> http://www.tidytax.com/blog/statute-of-limitations-on-tax-returns/feed/ 0 http://www.tidytax.com/blog/material-advisor-an-form-8918/ http://www.tidytax.com/blog/material-advisor-an-form-8918/#comments Sun, 28 Apr 2013 11:32:42 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2303 A material advisor in regard to a tax shelter is any person who: 1. Has provided any material aid or advice in order to help with the organizing, promoting, selling, implementing, insuring, or carrying out any reasonable transaction and 2. Derives gross income in excess of a threshold amount determined by the IRS for the assistance or advice. All material advisors are required to register with the IRS and receive a reportable transaction number. The advisor must provide this number … Read more →]]> http://www.tidytax.com/blog/material-advisor-an-form-8918/feed/ 0 http://www.tidytax.com/blog/tefra-partnership-exception/ http://www.tidytax.com/blog/tefra-partnership-exception/#comments Wed, 10 Apr 2013 11:39:22 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2296 The TEFRA rules do not apply to certain entities called small partnerships. These small partnerships have two requirements that must be met for the exception to disallow TEFRA rules. These requirements include: 1. The partnership must have 10 or less partners. 2. All partners are natural persons who are U.S. citizens or resident aliens, C corporations, or estates of deceased partners. These two requirements are generally viewed as mandatory and must be present to waiver the TEFRA rules. Thus, a … Read more →]]> http://www.tidytax.com/blog/tefra-partnership-exception/feed/ 0 http://www.tidytax.com/blog/irs-imputed-interest-on-corporate-loan-transactions/ http://www.tidytax.com/blog/irs-imputed-interest-on-corporate-loan-transactions/#comments Sun, 07 Apr 2013 11:11:57 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2289 If a formal or informal loan has taken place between a corporation and the owner, a Revenue Agent will be able to see if an appropriate interest rate has been paid under IRC Sec. 7872. Recently, the applicable federal rate for loans has fallow to very low levels. This can be beneficial to taxpayers who can now replace existing higher interest loans with new lower rate loans or convert demand loans to term loans to lock in lower rates. As … Read more →]]> http://www.tidytax.com/blog/irs-imputed-interest-on-corporate-loan-transactions/feed/ 0 http://www.tidytax.com/blog/quick-refund-of-corporate-estimated-taxes-form-4466/ http://www.tidytax.com/blog/quick-refund-of-corporate-estimated-taxes-form-4466/#comments Sat, 06 Apr 2013 11:38:46 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2281 A corporation that has an overpayment of its estimated tax for the year can file Form 4466 (Corporation Application for Quick Refund of Overpayment of Estimated Income Tax) to get a quick refund from the IRS. For purposes of a quick refund, an overpayment equals the excess of the corporation’s estimated tax payments over its expected final tax liability for the year. Form 4466 Form 4466 must be filed in paper form after the close of the tax year. The … Read more →]]> http://www.tidytax.com/blog/quick-refund-of-corporate-estimated-taxes-form-4466/feed/ 0 http://www.tidytax.com/blog/executor-tax-liability-discharge-form-5495/ http://www.tidytax.com/blog/executor-tax-liability-discharge-form-5495/#comments Wed, 03 Apr 2013 11:03:50 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2275 The executor or administrator for a decedent can request a release from personal liability for the decedent’s income and gift taxes by filing Form 5495 (Request for Discharge from Personal Liability Under Internal Revenue Code Section 2204 or 6905). This request must be in writing and must be filed after the income or gift tax return has been filed with the IRS. After the tax return has been filed, the IRS has nine months to notify the executor of the … Read more →]]> http://www.tidytax.com/blog/executor-tax-liability-discharge-form-5495/feed/ 0 http://www.tidytax.com/blog/irs-appeal-settlement-authority/ http://www.tidytax.com/blog/irs-appeal-settlement-authority/#comments Tue, 02 Apr 2013 11:28:29 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2268 Appeal settlement authority is very broad but the Appeals Officer’s intent is to settle the case without litigation. For this reason, settlement through the Appeals Officer cannot be automatic and must go through a certain process. This process involves convincing the Appeals Officer that there is significant uncertainty regarding the facts of a case or the application of the law to the case. IRS Appeal Settlement Authority Most of an Appeals Officer’s authority is derived from settling issues based on … Read more →]]> http://www.tidytax.com/blog/irs-appeal-settlement-authority/feed/ 0 http://www.tidytax.com/blog/third-party-summons/ http://www.tidytax.com/blog/third-party-summons/#comments Mon, 01 Apr 2013 11:20:20 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2261 Whenever a summons is issued to a third party in regard to a issue about a taxpayer, the taxpayer has the ability to file a suit in court to prevent the third party from complying with the summons. The reason a taxpayer may wish to do this is to prevent the third party from sharing information with that IRS that it does not want disclosed. If the taxpayer chooses to file a suit in court, the statute of limitations on … Read more →]]> http://www.tidytax.com/blog/third-party-summons/feed/ 0 http://www.tidytax.com/blog/extension-of-limitations-period-due-to-hobby-loss-form-5213/ http://www.tidytax.com/blog/extension-of-limitations-period-due-to-hobby-loss-form-5213/#comments Sun, 31 Mar 2013 17:11:00 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2257 Determining whether an activity is engaged in for profit can be very subjective and therefore the IRS offers a safe harbor which allows flexibility that normally would not be permitted. This safe harbor basically establishes a presumption that the activity is a for-profit endeavor. If the taxpayer wishes to meet the safe harbor, they must show that there activity generated a profit in at least three of the five years ending with the tax year in question. Once the safe … Read more →]]> http://www.tidytax.com/blog/extension-of-limitations-period-due-to-hobby-loss-form-5213/feed/ 0 http://www.tidytax.com/blog/return-of-case-to-examination-division/ http://www.tidytax.com/blog/return-of-case-to-examination-division/#comments Fri, 29 Mar 2013 17:41:24 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2253 A telephone conference is designed to resolve factual disputes and settle the case, any new evidence (whether deliberately withheld from the examiner or found on its own since the examination was completed) may cause the Appeals Officer to return the case to the Examination Division for further development. Return of Case to Examination Division IRM 8.2.1.9.3 provides guidance for the handling of new information that arises during an appeal. In a case where the information was deliberately withheld from the … Read more →]]> http://www.tidytax.com/blog/return-of-case-to-examination-division/feed/ 0 http://www.tidytax.com/blog/form-872-consent-to-extend-the-time-to-assess-tax/ http://www.tidytax.com/blog/form-872-consent-to-extend-the-time-to-assess-tax/#comments Thu, 28 Mar 2013 11:36:13 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2084 When it comes to consent forms for extending the statute of limitations for time to assess tax there are three basic types, the fixed period consent, the open ended consent, and the restricted consent. Form 872 Form 872 (Consent to Extend the Time to Assess Tax) is used to extend the statute of limitations on assessment to a specific future date. This form is used in most situations and is considered the most basic form for extending the statute of … Read more →]]> http://www.tidytax.com/blog/form-872-consent-to-extend-the-time-to-assess-tax/feed/ 0 http://www.tidytax.com/blog/protective-claim-for-refund-form-907/ http://www.tidytax.com/blog/protective-claim-for-refund-form-907/#comments Wed, 27 Mar 2013 11:28:41 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2076 A taxpayer can file a claim for refund only if the request is made in a timely fashion and the taxpayer provides the IRS with grounds for the claim and facts to inform the IRS of the basis for the claim. In the event the taxpayer does not have complete information or recovery of the claim depends on the occurrence of a future event, a protective claim for refund can be filed to toll the applicable limitations period for filing … Read more →]]> http://www.tidytax.com/blog/protective-claim-for-refund-form-907/feed/ 0 http://www.tidytax.com/blog/s-corporation-basis/ http://www.tidytax.com/blog/s-corporation-basis/#comments Tue, 26 Mar 2013 11:52:03 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2070 S corporations have been growing in popularity over the years, and for this reason the IRS has been keeping a close eye on taxpayers that use their S corporation to take advantage of their benefits. According to the National Research Program study, an estimated 68% of S corporation returns filed for years 2003 and 2004 misreported at least one item affecting net income. Of noncompliant S corporations, 80% underreported net income by understating income and/or overstating deductions. Calculating Basis Lack … Read more →]]> http://www.tidytax.com/blog/s-corporation-basis/feed/ 0 http://www.tidytax.com/blog/estate-tax-extension/ http://www.tidytax.com/blog/estate-tax-extension/#comments Mon, 25 Mar 2013 11:45:58 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2059 In order for a taxpayer to obtain an extension of time to pay estate taxes, they must request to do so under one of three IRS Code Sections. It is important to apply for an extension with the IRS as soon as possible. If you postpone the ability to file for an extension, you will add more penalties that could have been avoided. The IRS will also begin collection efforts against the estate if you are not careful. The three … Read more →]]> http://www.tidytax.com/blog/estate-tax-extension/feed/ 0 http://www.tidytax.com/blog/employment-taxes-overpayment-error-form-941/ http://www.tidytax.com/blog/employment-taxes-overpayment-error-form-941/#comments Sun, 24 Mar 2013 11:22:23 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2049 In the event an error involves overpaid FICA taxes from a previous quarter in the same calendar year or a pervious calendar year, or over collected federal income tax from a previous quarter in the same calendar year there are a few steps that need to be taken to fix the error. Filing Form 941 The first thing that needs to be done is file a Form 941 (Employer’s Quarterly Federal Tax Return) for the quarter in which the error … Read more →]]> http://www.tidytax.com/blog/employment-taxes-overpayment-error-form-941/feed/ 0 http://www.tidytax.com/blog/applicable-federal-rate-for-interest-on-irs-payments/ http://www.tidytax.com/blog/applicable-federal-rate-for-interest-on-irs-payments/#comments Sat, 23 Mar 2013 16:53:07 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2045 If you are ever in a situation where you make an underpayment or overpayment to the IRS, it is important that you understand how you interest will be determined. Interest on underpayments accrues at the underpayment rate, while interest on overpayments accrues at the overpayment rate. Applicable Federal Rate Both rates are based on the federal short term rate, this rate is based on the short term applicable federal rate (AFR) which is compounded daily and rounded to the nearest … Read more →]]> http://www.tidytax.com/blog/applicable-federal-rate-for-interest-on-irs-payments/feed/ 0 http://www.tidytax.com/blog/no-change-audit-form-4549/ http://www.tidytax.com/blog/no-change-audit-form-4549/#comments Fri, 22 Mar 2013 11:49:39 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2037 If a return has been audited but the agent has determined that the return should be accepted as filed, the agent will prepare and issue a revenue agent’s report (Form 4549) with the phrase “No Change – Subject to Area Director’s Approval” written in the adjustments area. Once the report is sent to the case processing support unit, they will subsequently issue a no-change letter. Once the taxpayer receives a no-change letter, the case is considered by the IRS to … Read more →]]> http://www.tidytax.com/blog/no-change-audit-form-4549/feed/ 0 http://www.tidytax.com/blog/unreasonably-delaying-an-irs-audit/ http://www.tidytax.com/blog/unreasonably-delaying-an-irs-audit/#comments Thu, 14 Mar 2013 11:31:35 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2028 When the representative of a taxpayer has unreasonably delayed an IRS examination by failing to provide requested information on a taxpayer to the IRS, the agent working the case can request permission to contact the taxpayer directly. If permission is granted to the agent by the IRS, the agent can contact the taxpayer directly and request the information needed. The agent will also inform the taxpayer that the practitioner hired by the taxpayer has delayed the examination unreasonably.]]> http://www.tidytax.com/blog/unreasonably-delaying-an-irs-audit/feed/ 0 http://www.tidytax.com/blog/repetitive-irs-examinations/ http://www.tidytax.com/blog/repetitive-irs-examinations/#comments Wed, 13 Mar 2013 16:47:07 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2025 The IRS is not allowed to conduct repetitive IRS examinations against a taxpayer unless substantial audit adjustments are found. The IRS is allowed to audit the taxpayer for the same issue or issues in either of the two preceding tax years but if no substantial change in amount of the liability resulted, the auditor can close the case without adjustment. This basically means, the IRS is allowed to conduct repetitive examinations only in situations where an audit involving either of … Read more →]]> http://www.tidytax.com/blog/repetitive-irs-examinations/feed/ 0 http://www.tidytax.com/blog/consent-to-extend-statute-of-limitations/ http://www.tidytax.com/blog/consent-to-extend-statute-of-limitations/#comments Tue, 12 Mar 2013 16:41:53 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2021 When it comes to extending the statute of limitations on assessment, the IRS tries to keep the requests for consent to an absolute minimum. Usually what will happen is the IRS will come to the taxpayer and request that he allow the IRS to extend the statute of limitations on their assessment. This extension is usually due to a time constraint that the IRS has in examining and processing the case file before the statute of limitations expires. In order … Read more →]]> http://www.tidytax.com/blog/consent-to-extend-statute-of-limitations/feed/ 0 http://www.tidytax.com/blog/irs-statute-of-limitations-disclosure-of-foreign-transfers/ http://www.tidytax.com/blog/irs-statute-of-limitations-disclosure-of-foreign-transfers/#comments Sat, 09 Mar 2013 11:23:47 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2013 The normal three year statute of limitations period will not begin to run until the information that is requested from the taxpayer in regard to the following foreign transfers has been furnished to the IRS: 1. An election by a passive foreign investment company shareholder to have the passive foreign investment company treated as a qualified electing fund. 2. An annual report required by a U.S. person that is a passive foreign investment company shareholder. 3. A return of a … Read more →]]> http://www.tidytax.com/blog/irs-statute-of-limitations-disclosure-of-foreign-transfers/feed/ 0 http://www.tidytax.com/blog/reporting-omitted-gifts-form-709/ http://www.tidytax.com/blog/reporting-omitted-gifts-form-709/#comments Fri, 08 Mar 2013 18:38:30 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2009 If a tax return is filed for a taxpayer and that return inadvertently omitted a girl, an amended gift tax return for the year in which the gift was made should be filed with the same Service Processing Center where the prior gift tax return was filed. Form 709 On the top of the first page of the amended tax return, the words “Amended Form 709 for Gift(s) made in calendar year that the gift was made” should appear to … Read more →]]> http://www.tidytax.com/blog/reporting-omitted-gifts-form-709/feed/ 0 http://www.tidytax.com/blog/epcrs-employee-plans-compliance-resolution-system/ http://www.tidytax.com/blog/epcrs-employee-plans-compliance-resolution-system/#comments Thu, 07 Mar 2013 11:23:03 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=2002 The IRS established the Employee Plans Compliance Resolution System or EPCRS to help qualified retirement plan sponsors correct technical and administrative problems with their plans thereby retaining tax favorable status. This basically gives business the opportunity to stay in compliance with the IRS in regard to their qualified retirement plan and not have to run into unnecessary penalties. EPCRS Components There are three components of EPCRS, these include: 1. The Self Correction Program or SCP – This permits plan sponsors … Read more →]]> http://www.tidytax.com/blog/epcrs-employee-plans-compliance-resolution-system/feed/ 0 http://www.tidytax.com/blog/constructive-dividend-irs/ http://www.tidytax.com/blog/constructive-dividend-irs/#comments Wed, 06 Mar 2013 11:17:03 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1996 In some situations, a corporation may enter into a transaction that is not typically considered a dividend, but may be considered a dividend by the IRS. Constructive dividends do not need to be formally declared by the corporation or designated as a dividend. All that is required according to the IRS is that a shareholder received some benefit from the corporation that was not paid for or reported on a Form W-2 or 1099. Since any benefit that was given … Read more →]]> http://www.tidytax.com/blog/constructive-dividend-irs/feed/ 0 http://www.tidytax.com/blog/irs-audit-reconsideration-letter/ http://www.tidytax.com/blog/irs-audit-reconsideration-letter/#comments Tue, 05 Mar 2013 11:11:22 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1988 The IRS gives taxpayers the opportunity to apply for reconsideration of an audit decision that they do not agree with. This process is generally considered to be an informal process and therefore does not interfere with normal appeals procedures. In order for a taxpayer to be able to apply for reconsideration of their audit decision, their return must have been filed accordingly. If the taxpayer has not filed a return, reconsideration will not be given to the taxpayer until they … Read more →]]> http://www.tidytax.com/blog/irs-audit-reconsideration-letter/feed/ 0 http://www.tidytax.com/blog/checklist-for-preparing-form-1045/ http://www.tidytax.com/blog/checklist-for-preparing-form-1045/#comments Mon, 04 Mar 2013 11:43:19 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1977 If you ever need to prepare a Form 1045 (Application for Tentative Refund) you will need to make sure that you have gone through a checklist to ensure all the information is in order. Below we will list everything you need to complete a Form 1045 from start to finish. Checklist for Preparing Form 1045 1. Will Form 1045 be filed within the 12 months following the year in which the net operating loss (NOL) or excess credit occurred? If … Read more →]]> http://www.tidytax.com/blog/checklist-for-preparing-form-1045/feed/ 0 http://www.tidytax.com/blog/irs-master-files/ http://www.tidytax.com/blog/irs-master-files/#comments Sun, 03 Mar 2013 11:50:30 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1970 An IRS master file is basically where tax return information is stored within the IRS database. After the tax return information is received, it is then entered into the master file for storage. There are several types of categories that the IRS uses within the master file. The two main categories are the Individual Master File or IMF and the Business Master File or BMF. The IMF stores individual income tax filer information on a magnetic tape record which is … Read more →]]> http://www.tidytax.com/blog/irs-master-files/feed/ 0 http://www.tidytax.com/blog/revising-an-accepted-offer-in-compromise-form-656/ http://www.tidytax.com/blog/revising-an-accepted-offer-in-compromise-form-656/#comments Sat, 02 Mar 2013 11:59:38 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1962 Sometimes a taxpayer whose Offer in Compromise has already been accepted by the IRS needs to submit a revision to the original agreement. This can occur in a variety of situations, one that is common however, is a taxpayer inability to pay the balance on a tax return that is filed in years following the acceptance of the Offer in Compromise. If the taxpayer was unable to pay and therefore neglected to submit a revision, the IRS would classify the … Read more →]]> http://www.tidytax.com/blog/revising-an-accepted-offer-in-compromise-form-656/feed/ 0 http://www.tidytax.com/blog/receiving-tax-refund-through-representative-form-2848/ http://www.tidytax.com/blog/receiving-tax-refund-through-representative-form-2848/#comments Fri, 01 Mar 2013 11:49:33 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1953 The IRS will allow an authorized representative to receive a refund check on behalf of a taxpayer, however, they will not allow the check to be in the name of the authorized representative. This is to try and stop fraudulent tax professionals from taking advantage of taxpayers by scamming them out of their refund check. Power of Attorney Form 2848 In order for the authorized representative to be able to have a refund check sent to them, the taxpayer needs … Read more →]]> http://www.tidytax.com/blog/receiving-tax-refund-through-representative-form-2848/feed/ 0 http://www.tidytax.com/blog/irs-legal-source-authority-for-an-appeal/ http://www.tidytax.com/blog/irs-legal-source-authority-for-an-appeal/#comments Thu, 28 Feb 2013 18:23:41 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1949 When it comes time to make an appeal, a taxpayer may notice that there are many types of legal information in regard to their specific problem. This can make it difficult to determine which legal sources hold the most weight. These sources include Internal Revenue Code, regulations, revenue procedures, case law and so on. IRS Hierarchy of Authority Below we will list in order from highest to lowest authority when it comes to legal authority in regard to IRS appeals: … Read more →]]> http://www.tidytax.com/blog/irs-legal-source-authority-for-an-appeal/feed/ 0 http://www.tidytax.com/blog/taxpayer-owes-tax-debt-prior-to-marriage/ http://www.tidytax.com/blog/taxpayer-owes-tax-debt-prior-to-marriage/#comments Wed, 27 Feb 2013 11:29:42 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1943 When two taxpayers decide to marry and one of them owes taxes to the IRS, special planning needs to take place in order to protect the spouse not liable for any tax liability. Since state law determines what the IRS can and cannot do, advice cannot be given in terms of every situations. It is important to consult with an attorney in your state to find out the laws governing your marriage. Prenuptial Agreement for Tax Debt In most cases … Read more →]]> http://www.tidytax.com/blog/taxpayer-owes-tax-debt-prior-to-marriage/feed/ 0 http://www.tidytax.com/blog/irs-benefits-an-detriments-under-chapter-7-bankruptcy/ http://www.tidytax.com/blog/irs-benefits-an-detriments-under-chapter-7-bankruptcy/#comments Tue, 26 Feb 2013 11:11:40 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1933 You have may have wondered what the advantages and disadvantages are in regard to filing for Chapter 7 bankruptcy and how it affects collection from the IRS. Below is a list of both the benefits and the detriments that are involved after filing for Chapter 7 bankruptcy. IRS Benefits under Chapter 7 Bankruptcy 1. After filing for Chapter 7 bankruptcy there will be an automatic stay on all collection activities which stops the IRS from pursing any type of collection … Read more →]]> http://www.tidytax.com/blog/irs-benefits-an-detriments-under-chapter-7-bankruptcy/feed/ 0 http://www.tidytax.com/blog/reportable-transaction-disclosure-statement-form-8886/ http://www.tidytax.com/blog/reportable-transaction-disclosure-statement-form-8886/#comments Mon, 25 Feb 2013 11:43:06 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1926 When a taxpayer is a participant in a reportable transaction Form 8886 (Reportable Transaction Disclosure Statement) needs to be attached to each return including amended returns and tentative refund claims. For each separate reportable transaction that the taxpayer is a participant to, needs to have its own separate Form 8886. Reportable Transaction Documents Transaction records need to be kept by the taxpayer until the expiration of the statute of limitations applicable to the final tax year for which the disclosure … Read more →]]> http://www.tidytax.com/blog/reportable-transaction-disclosure-statement-form-8886/feed/ 0 http://www.tidytax.com/blog/irs-collection-efforts-after-discharge-in-bankruptcy/ http://www.tidytax.com/blog/irs-collection-efforts-after-discharge-in-bankruptcy/#comments Sat, 23 Feb 2013 11:00:40 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1917 If a taxpayers debt is discharged in bankruptcy the IRS can no longer attempt to collect the tax from the debtor. There are exceptions to this rule that anyone seeking protection from the IRS in bankruptcy should be aware of. Prepetition Tax Lien Although the IRS is unable to pursue the taxpayer for future income or assets once they have been discharged in bankruptcy, the IRS can still pursue the taxpayer if they had filed a tax lien against them … Read more →]]> http://www.tidytax.com/blog/irs-collection-efforts-after-discharge-in-bankruptcy/feed/ 0 http://www.tidytax.com/blog/when-to-submit-an-offer-compromise/ http://www.tidytax.com/blog/when-to-submit-an-offer-compromise/#comments Fri, 22 Feb 2013 11:31:09 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1911 An Offer in Compromise can be submitted at any time as long as it is not solely used as a tactic to slow down the collection process. This means that a taxpayer can submit an Offer in Compromise during the examination process, at appeals, after a case is in Tax Court, and in another other stage of the collection process. The earlier the better though, when you submit an Offer in Compromise collection activity is forced to cease until after … Read more →]]> http://www.tidytax.com/blog/when-to-submit-an-offer-compromise/feed/ 0 http://www.tidytax.com/blog/voluntary-overpayment-of-tax/ http://www.tidytax.com/blog/voluntary-overpayment-of-tax/#comments Thu, 21 Feb 2013 11:09:16 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1905 When someone makes a payment of tax and they are under no legal obligation to do so, that person has made a voluntary payment that is generally nonrefundable. An example of this is if a shareholder of a corporation attempted to file a refund for tax paid by the corporation, the shareholder would be denied that right for the refund. Wrongful Voluntary Overpayment of Tax There have been cases however when a taxpayer sued for a refund in regard to … Read more →]]> http://www.tidytax.com/blog/voluntary-overpayment-of-tax/feed/ 0 http://www.tidytax.com/blog/irs-engineer-specialist/ http://www.tidytax.com/blog/irs-engineer-specialist/#comments Wed, 20 Feb 2013 11:13:23 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1897 In certain situations the IRS may need a special type of employee to come in when there are special types of problems within a business return audit. An IRS engineer specialist is usually brought in when help is needed to resolve issues involving basis, depreciation, amortization, fair market value of assets, expenditure discrepancies, research and development issues, and other types of similar issues. Once the IRS requests an engineer specialist to review a return and make a decision, anything that … Read more →]]> http://www.tidytax.com/blog/irs-engineer-specialist/feed/ 0 http://www.tidytax.com/blog/reviewing-tax-return-prior-to-irs-audit/ http://www.tidytax.com/blog/reviewing-tax-return-prior-to-irs-audit/#comments Tue, 19 Feb 2013 22:11:23 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1894 If you have been notified by the IRS that your tax return is going to be audited, it is important to review your tax return prior to the first meeting with the auditor. This is an opportunity for the taxpayer to establish questions and answers to issues that may be present within the return. It also gives the taxpayer a chance to change anything related to the return before the audit takes place. Filing an Amended Tax Return In the … Read more →]]> http://www.tidytax.com/blog/reviewing-tax-return-prior-to-irs-audit/feed/ 0 http://www.tidytax.com/blog/irs-gross-profit-test/ http://www.tidytax.com/blog/irs-gross-profit-test/#comments Mon, 18 Feb 2013 17:07:08 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1889 In the case of auditing a business, the Revenue Agent may be interested in verifying gross receipts, inventories, and purchases. The IRS will do this in the event that inventories are a material income producing factor. This Revenue Agent will gather information from the business and apply a gross profit test to establish a ratio for the business. Once a ratio has been determined through using the gross profit test, the Revenue Agent will go back to prior years of … Read more →]]> http://www.tidytax.com/blog/irs-gross-profit-test/feed/ 0 http://www.tidytax.com/blog/turbotax-error-defense/ http://www.tidytax.com/blog/turbotax-error-defense/#comments Sun, 17 Feb 2013 11:12:15 +0000 Barbara Cruz http://www.tidytax.com/blog/?p=1883 The Tax Court has determined that relying on commercial tax software to prepare a tax return is not a viable defense against any negligence penalty. Therefore, if a taxpayer is negligent on their tax return, they cannot simple blame commercial tax software for their own errors. TurboTax Error Defense The Tax Court has ruled that tax software is only as good as the information that is being inputted into it. A taxpayer is fully responsible for any material misstatements that … Read more →]]> http://www.tidytax.com/blog/turbotax-error-defense/feed/ 0