Back to top

Blog

 

Oct 12 2015
Late Filing & Payment Penalties

Posted in General

April 15th (March 15th Corporations) was the deadline to file income tax returns or October 15th if an extension of time to file income tax return was timely filed (September 15th Corporations). The lntenal Revenue Service assesses late filing penalties and interest for late filing of returns and or late payments of income tax.

Individuals & Corporations — Failure to Pay - The failure to pay penalty is .5% for each month (or part of a month) the payment is late. For example, if you were six months late the penalty would be 3%. The maximum penalty for failure to file is 25%. This is based on .5% times maximum penalty period of 50 months. If a taxpayer has 90% of tax paid by the original due date of a retum they will not be charged a penalty but will be charged interest on the remaining balance

Failure to File - A failure to file penalty is based on tax owed. Therefore, if a taxpayer has no tax due, no penalty will be imposed on a late filing of a tax return. If a taxpayer has a tax due, the penalty is 5% per month (or partial month) up to a maximum of 25%. The minimum penalty for filing more than 60 days late is the smaller of $100 or 100% of the tax required to be paid on the return.

Failure to File & Failure Pay — If a taxpayer has a late return as well as a late payment, the failure to file penalty is 4.5% per month so that the combined penalty remains at 5% per month for the first five months. After the first five months the failure to pay penalty continues at .5% per month for 45 additional months. Thus, the combined penalties can reach a total of 47.5% if a taxpayer is 50 or more months late in filing and paying income tax due.

Interest on Underpayments of Tax — In addition to failure to pay penalties the Internal Revenue Code also charges interest. The underpayment interest rate is the federal short-term rate, rounded to the nearest full percent, plus three percentage points. The rate is adjusted quarterly. The current rate for the calendar quarter beginning April 1, 2007 is 8% for individuals and most corporations. Large corporate underpayments are taxed at the federal short-term rate plus five percentage points which (is 10%) for the current quarter.

S Corporations - If an S corporation does not provide a K-1 to a shareholder when due or gives incorrect information or missing information, they will be charged a $50 penalty for each K—1 for which a failure occurs. If information is intentionally disregarded the penalty will increase to $100 per K-1

Partnerships — Partnership income is passed through and taxed on the partner‘s personal income tax return. Since a partnership does not get assessed tax directly, the penalty is not based on tax due. Instead, it is based on the number of partners in a partnership and how late the partnership is filing the return. The penalty is $50 for each month or part of a month (maximum five months) the failure continues, multiplied by the total number of partners in the partnership during any part of the tax year for which the return is filed. For partnerships with many partners this penalty can be quite steep. For example, if a partnership was two months late in hling and had 50 partners, the penalty would be $5,000 (two months x $50 = $100 x 50 or $5,000). Relief may be available for partnerships with fewer than 10 partners where the income was timely reported by all the partners.

Inability to Pay Income Tax When Due — A taxpayer can file 9465 to request the IRS to enter into an installment agreement. An installment agreement does not, however, stop interest from being charged at the current rate on the unpaid balance. The late payment penalty will be 25% instead of .5% per month. The IRS charges a fee of $105 for entering into an installment agreement.

A corporate taxpayer expecting an NOL carry back can file form 1138 which is an extension of time for payment of tax. it needs to be filed after the beginning of the tax year the NOL is expected but before the due date for paying the previous year's income tax.

 

Last Updated by Admin on 2015-10-12 22:08:26.0

(0 Comment(s))

Oct 12 2015
Record Retention Requirements

Posted in General

Dear Client,

In response to many requests of what tax records should be kept and how long, we have prepared the following list for your reference based on Federal Laws.

Income tax returns and supporting documents - Keep at least 4 years and preferable 7 if space is not critical. Once this period has elapsed, the documents can be discarded, but the returns themselves, which do not take much space,

should be retained indefinitely.

Residential property records - All escrow statements (purchase and sale) plus receipts for improvements should be kept for at least 4 years after the property is sold (including refinance papers).

Purchase receipts for stock, bonds, mutual funds - These should also be kept for at least 4 years after the asset is sold: This would include record of dividends, splits and reinvested dividends. "

Depreciation records For any rental real estate or depreciable business property you own, keep records of the property’s cost, date acquired, and schedule of depreciation claimed in previous years. This record should be kept

until 4 years after the property is disposed of.

Retirement plan contributions — Records of non—deductible lRA deposits, employer plan stock purchased, rollovers, and Keogh plan deposits should be kept until 4 years after the plan assets have been withdrawn.

 

 Personal records - Important papers such as estate and gift returns, divorce and property settlement, deeds, title insurance policies, and all trust documents should be kept in a permanent file, or perhaps safe deposit box.

Miscellaneous papers - All other documents to include bank statements, canceled checks, credit card statements, deposits slips, charitable contribution receipts, and medical bills can be discarded after 7 years.

Last Updated by Admin on 2015-10-12 21:58:48.0

(0 Comment(s))

Aug 13 2015
What if you are audited, by The Employment Development Department?

Posted in General

We have had Clients audited recently and here are some of the questions they asked.

 

  1. How many hours are you open?

 

  1. Provide a schedule of who is operating the store during business hours.

 

  1. Are they the owner, family members or employees?

 

  1. Show me your payroll records and Time Sheets.

 

  1. Do you have Workman Compensation Insurance? 

   

Why are they asking these questions?

 

Questions # 1, 2

    Is everyone on payroll that should be?  

 

Question # 3

    If the store is a Sole Proprietor, everyone except the Store owner and his wife must be on payroll. 

   If the store is a Partnership, everyone except the partners and their wife’s should be on payroll.

   If the store is a Corporation, everyone should be on payroll.

 

Question # 4

    This is to see if all hours are accounted for and if everyone who should be on payroll is on payroll.

 

Question # 5

    Workman Compensation Insurance is mandatory in the State of California for all business with employees.

 

   Not having the correct answers to all of these questions can result in additional payroll taxes and penalties. 

             

Last Updated by Admin on 2015-08-13 13:56:41.0

(0 Comment(s))

July 31 2012
Welcome to Our Blog!

Posted in General

This is the home of our new blog. Check back often for updates!

Last Updated by Admin on 2012-07-31 13:43:12.0

(0 Comment(s))

 

News

TAS office closure updates

Some Taxpayer Advocate Service offices are temporarily closed due to the effects of Hurricane Maria. The Puerto Rico office will remain closed for business through Friday, Septemb...

Installment Agreements (IAs): Adopting National Taxpayer Advocate Recommendations Could Assist the IRS to Ensure Taxpayers Enter IAs They Can Afford

Previously, I discussed my concerns about installment agreements (IAs) and the study TAS Research conducted on IAs. Today I will discuss the recommendations I have made to the IRS to a...

TAS office closures affected by Hurricane Irma

Some Taxpayer Advocate Service offices were temporarily closed due to the effects of Hurricane Irma. As of Monday, September 18, 2017, all TAS offices in Florida are currently open for business. He...

Installment Agreements (IAs): TAS Study Finds Taxpayers Enter IAs They Cannot Afford

In this and next week’s blog, I will discuss my recent Most Serious Problem on Installment Agreements (IAs) and the corresponding Research Study that was published in my 2016 Annual Repor...

The IRS’s Position in Mescalero Apache Tribe v. Commissioner Raises Concerns About the IRS’s Commitment to Taxpayer Rights

About this time every year, my wonderful staff of attorney-advisors presents me with early drafts of the discussion of the ten most litigated issues in federal courts that are ultimately published ...

Success Story: TAS helps taxpayer meet closing deadline

Every year the Taxpayer Advocate Service (TAS) helps thousands of people with tax problems. This story is only one of many examples of how TAS helps resolve taxpayer issues. All personal details ar...

Federal Payment Levy Program: The New IRS Automated Levies on Military Retirement Payments May Be Harming Veterans Experiencing Economic Hardship (Part II)

In last week’s blog, I described the Federal Payment Levy Program (FPLP) and outlined my general concerns about the IRS’s implementation of the “Low Income Filter&...

Federal Payment Levy Program: The New IRS Automated Levies on Military Retirement Payments May Be Harming Veterans Experiencing Economic Hardship

Over the years, I and my staff have written and advocated extensively about our concerns with the IRS’s implementation of the Federal Payment Levy Program (FPLP). My concerns are amplifie...

Private Debt Collection Program - What You Need to Know

  The Internal Revenue Service recently implemented a new private debt collection program and will assign certain overdue federal tax debts to private collection agencies (PCAs). Posted ...

Correctible Error Authority Part 2: Why Correctible Error Authority Creates More Problems Than It Resolves

In my last blog, I discussed my concerns about the IRS’s current use of math and clerical error authority under IRC §§ 6213 (b) and (g). This week, I’ll take a...