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Special Edition: All You Need To Know About Paying Your Taxes New Filing Deadline: April17 IRS, Telemundo Host Tax Information Program Want Help From Tax Recovery Specialists? Check Capital Solutions, Inc.
| The IRS announced that taxpayers nationwide will have until Tuesday, April 17, 2007 to file their 2006 returns and pay any taxes due. Taxpayers will have the extra time because April 15 falls on Sunday in 2007, and the following day, Monday, April 16, is Emancipation Day—a legal holiday in the District of Columbia. The April 17 deadline will apply to any of the following: - 2006 federal individual income tax returns, whether filed electronically or on paper. - Requests for an automatic six-month tax-filing extension, whether submitted electronically or on a paper Form 4868. - Tax year 2006 balance due payments, whether made electronically (direct debit or credit card) or by check. - Tax-year 2006 contributions to a Roth or traditional IRA. - Individual estimated tax payments for the first quarter of 2007, whether made electronically or by check. - Individual refund claims for tax year 2003, where the regular three-year statute of limitations is expiring. Other tax-filing and payment requirements affected by this change are described in IRS Publication 509, Tax Calendars for 2007, available at the IRS web site at http://www.irs.gov/publications/p509/index.html . Additional information is available in IRS News Release # IR-2007-15.
DO YOU HAVE QUESTIONS ABOUT TAX PAYMENTS? HERE ARE YOUR ANSWERS Payment Issues Receiving IRS Tax Bills
If a taxpayer cannot make payment in full upon receipt of an IRS bill, the IRS may request a Collection Information Statement (CIS) to compare individual or business monthly income with expenses and to assist in determining a payment plan. What if the Bill Is Wrong? Taxpayers who believe that an IRS bill or notice is wrong should contact the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 1-800-829-1040, or visiting a local IRS office. To correct the problem, a copy of the bill along with copies of any records, tax returns, and canceled checks, etc., should be gathered to help explain why the bill is wrong. A response by letter should explain why the bill is wrong and include copies of all documents to explain the situation. Original documents should not be submitted. If the IRS confirms the error, an adjustment will be made to the taxpayer’s account and, if necessary, a corrected bill sent. The High Cost of Nonpayment It’s always best to file tax returns—and pay taxes due—on time. There can be great cost associated with nonfiling and nonpayment. The IRS recognizes, however, that many people drop out of the tax system because of personal problems, including serious illness, a death in the family, or loss of financial records in a natural disaster. Depending on the situation, informing the IRS why returns have not been filed could result in a waiver of penalties. When Do Penalties and Interest Apply? Penalties and interest do not apply in years in which a taxpayer is entitled to a refund. About a third of those who file returns for past years discover they have a refund coming. Penalties and interest apply to years in which money is owed. The interest charged on late payments changes quarterly. During the last several years the interest rate has ranged from a high of 9 percent to a low of 4 percent. The penalty for filing late is generally 5 percent per month, or part of a month, up to 25 percent of the amount of the tax shown due on the return. The penalty for paying late is 1/2 of 1 percent per month, up to 25 percent of the unpaid amount due. Interest and Penalties IRS interest and penalties do not stop with an installment agreement/payment plan. You can save money by paying the full amount you owe, or as much as possible, as quickly as possible. Penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. Remember, the interest rate on a loan or credit card may be lower that the combination of penalties and interest imposed by the Internal Revenue Code. For example: If you owe $10,000 in taxes and you are considering entering into an Installment Agreement for 36 months, your payments could be as high as $339 per month including interest at the current rate of 5% and failure to pay penalty up to 1% each month. In this situation, you could save $2,247 by paying all of the taxes now rather than entering into an Installment Agreement. An Installment Agreement would cost a total of $12,204 in payments. Effective January 1, 2007, the new installment agreement user fee is $105 and $52 for agreements where payments are deducted directly from your bank account. Taxpayers with income at or below established levels, based on the Department of Health and Human Services poverty guidelines, can apply and be qualified to pay a reduced user fee of $43 for establishing new agreements including agreements where payments are deducted directly from your bank account. Also, consider that the 5% interest rate is based on rates as of May 2004, which could increase, so the taxpayer could end up paying even more. A Notice of Federal Tax Lien may also be filed against your property to secure the government’s interest against other creditors while the Installment Agreement is in effect. A more favorable solution to resolve the debt would be to obtain a loan from a bank or other financial institution, or pay taxes using a charge card. As demonstrated in the chart below, borrowing $10,000 over 36 months at various interest rates would result in less costly payment amounts than an Installment Agreement:
A Notice of Federal Tax Lien would also be avoided, thereby maintaining your credit standing—and the Installment Agreement fee would not apply. Enforced Collection and Liens If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If effort is still not made to pay the bill, or make other payment arrangements, the IRS could also take more serious enforced collection action, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing.
Ways To Pay Taxes Tax payments can be made by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. Electronic Payment Options for Individuals and Businesses Electronic payment options are convenient, safe, and secure. Taxpayers can authorize an electronic funds withdrawal, use a credit card, or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System (EFTPS). Electronic payment options give taxpayers an alternative to paying taxes by check or money order. Payments can be made 24 hours a day, 7 days a week. The electronic funds withdrawal and EFTPS options are free! Payments by credit card can be made through one of two official vendors: Official Payments Corporation at 1-800-2PAYTAX (1-800-272-9829) or www.officialpayments.com, Link2Gov at 1-888-PAY1040 (1-888-729-1040) or www.pay1040.com. Electronic funds transfers directly from a bank account can be made by enrolling in the Electronic Federal Tax Payment System (EFTPS). www.eftps.gov or call 1-800-555-4477 Publication 966, The Secure Way to Pay Your Federal Taxes Payments by check, money order, or cashier’s check, should: Be made payable to United States Treasury (or U.S. Treasury) Include the social security number or employer identification number, tax period, and related tax form number Be mailed to the address listed on the notice or instructions Cash payments can only be made in person at a local IRS office. Do not send cash through the mail.
Any refund due must be claimed within 3 years of the tax return’s due date. The same deadline appliles to any right to claim a tax credit, such as the Earned Income Credit (EIC). Self-employed individuals who do not file tax returns will not receive credits toward Social Security retirement or disability benefits. What If I Owe More Than I Can Pay? The IRS has streamlined its policies to offer alternative account resolutions if a taxpayer cannot pay in full with the return: The IRS will help to set up an installment agreement when the situation warrants to allow taxpayers to pay the tax debt over time. The IRS will consider whether an offer in compromise is an appropriate solution. What If I Don't File Voluntarily? IRS employees will prepare returns themselves when taxpayers do not file, and these returns might not give the taxpayer all allowed credit for deductions and exemptions. Bills will be sent to those taxpayers for the tax due, plus penalties and interest. The IRS is taking enforcement steps for repeat offenders. People who repeatedly don't comply with the law are subject to additional enforcement measures. How Can I Avoid Owing Money on Next Year's Return? To help avoid this situation, the IRS can advise taxpayers how to ask an employer to withhold enough tax. For any income that is not subject to withholding, the IRS can provide information necessary to make quarterly payments to cover any amount to be owed. To make payments electronically, see Ways to Pay Taxes or go to www.eftps.gov. Changes in financial circumstances, including divorce, sale of assets, etc., could have an impact on taxes and require adjustments to withholding. Will I Go to Jail? The IRS helps to get people back into the system as part of its long-term plan to improve voluntary tax compliance. However, flagrant cases involving criminal violations of tax laws will continue to be investigated.
IRS, Telemundo Host Tax Information Program The IRS is joining national television network Telemundo in a special one-hour tax program for Spanish-speaking “Los Impuestos y Usted” will focus on a variety of tax issues, including the Earned Income Tax Credit (EITC) for low-income taxpayers, electronic filing (IRS e-file), Free File, and tips on how to choose a tax preparer. In addition, the program will explain the changes to the tax laws such as split refunds and the federal telephone excise tax. IRS experts also will discuss taxpayers’ rights and how to obtain help with tax questions. Mónica Noguera, host of many of Telemundo’s special programs, will present the IRS program, which features in-studio interviews with IRS tax experts. | ||||||||||||||||||||||||||||||||||||||||
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