Rebella Accountancy | 507 E. First Street, Suite A | Tustin, CA 92780 | Phone: 714-619-0667 | Fax: 714-544-0236

       

 

 

Monica Rebella, CPA/IAR - President

Rebella Accountancy

 

Call our Testimonial Hotline & give us your feedback at:

 

800-609-9006 extension 1222

 


 

Other Articles

Click here to review


Feature Articles

- Sweeping new IRS 'repair regulations' impact most businesses
- Congress begins work on payroll tax extension as White House unveils new proposals
- IRS launches third version of voluntary offshore disclosure program
- The Saver's Credit: An underused retirement savings benefit
- Using fringe benefits as an income substitute during the economic downturn

How Do I?

- Claim a charitable contribution of property?
- obtain an appraisal for a noncash charitable contribution
- Compute gain in a like-kind exchange when some cash is received
- How do I? Deduct a contribution of clothing or a household item under the new rules?

Frequently Asked Questions

- When do I need to file IRS Form 8938, Statement of Specified Foreign Financial Assets?
- When is the best time of year to contribute to an IRA?
- How does a 60-day loan from an IRA work?
- What if I owe taxes and can't pay the full amount?
- How does the new sales tax deduction for vehicle purchases work?
- How much proof is enough, when contributing used clothing to charity?

 

 

 

Failure to File or Pay Penalties: Eight Facts


The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns.

When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ˝ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect

Three Ways to Pay Your Federal Income Tax

If you cannot pay the full amount of taxes you owe, don’t panic. You should still file your return and pay as much as you can by the April 17 deadline to avoid penalties and interest.

You should also contact the IRS to ask about payment options. Here are three alternative payment options you may want to consider and a tip on penalty relief under the IRS Fresh Start Initiative:

1. Pay by credit or debit card You can use all major cards (American Express, Discover, MasterCard or Visa) to pay your federal taxes. For information on paying your taxes electronically, including by credit or debit card, go to www.irs.gov/e-pay or see the list of service providers below. There is no IRS fee for credit or debit card payments. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

WorldPay US, Inc.:
To pay by credit or debit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com

Official Payments Corporation:
To pay by credit or debit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed

Link2Gov Corporation:
To pay by credit or debit card: 888-PAY-1040 (888-729-1040), www.pay1040.com

2. Additional time to pay.  Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time. There is no fee for this short extension of time to pay.

3. Penalty relief.  To assist those most in need, a six-month grace period on the late-payment penalty is available to certain wage earners and self-employed individuals. An approved request for a six-month extension of time to pay will result in relief from the late-payment penalty for tax year 2011 if:

your income is within certain limits and other conditions are met;
your request is received by April 17, 2012; and
your 2011 tax, interest and any other penalties are paid in full by Oct. 15, 2012.

To find out if you are eligible and to apply for the extension and penalty relief, complete and mail Form 1127-A, Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship.

4. Installment agreement.  You can apply for an IRS installment agreement using the Online Payment Agreement (OPA) application on IRS.gov. This web-based application allows taxpayers who owe $50,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement, eliminates the need for personal interaction with IRS and reduces paper processing.

You may also complete and submit a Form 9465, or Form 9465-FS, Installment Agreement Request, make your request in writing, or call 800-829-1040. For balances of more than $50,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. You may be able to avoid the filing of a notice of federal tax lien by setting up a direct debit installment payment plan. For more complete information see Tax Topic 202, Tax Payment Options and the Fresh Start page on www.IRS.gov.

For more information about filing and paying your taxes, visit www.IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).)

( taken from IRS Tax Tip 2012-68 )

Click Here To Learn Why When Your Bring Your 2011-2012 Taxes To Us And You’re Entered Into a Drawing For a 50-Inch Large Screen TV!

   

5 Tips for Taxpayers Who Can't Pay Their Taxes on Time

If you owe tax with your federal tax return, but can't afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum. Here are five tips:

1. File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. For electronic and credit card options for paying see IRS.gov. You may also mail a check payable to the United States Treasury

2. Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code.

3. Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include: • Using the Online Payment Agreement application and • Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

4. Request an extension of time to pay. For tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

5. If you receive a bill from the IRS, please contact us immediately to discuss these and other payment options. Ignoring the bill will only compound your problem and could lead to IRS collection action. If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can. For more information on the IRS collection process go to or see IRSVideos.gov/OweTaxes.).  ( taken from IRS Tax Tip 2012-64 )

click here to listen to this video update on:

click here to listen to this video update on:

   

I read an article in SmartMoney magazine recently that I wanted to pass along to you titled: 5 Little-Known Tax Deductions by Bill Bischoff where he talks about it being possible to write off some expenses that were paid for by someone else such as:

  1. Medicare Insurance and Long-Term Care Premiums
  2. Medical Expenses Paid by Someone Else
  3. Real Estate Taxes Paid by Someone Else
  4. Home Mortgage Points Paid by Someone Else
  5. Fees to Charge Taxes to Your Credit Card


      Click here to read the article online.

   

 



Tax Records You Can Throw Away This Spring

Spring is a lovely time to toss out that growing mountain of financial papers & tax documents that clutters your home & office. Here's what you need to keep & what you can pitch without fearing the fury of the IRS.

Let's begin with your "safe zone," the IRS statute of limitations. This limits the number of years in the work of which the IRS can audit your tax returns. One time that period has expired, the IRS is legally prohibited from asking you questions about those returns.

The idea behind it is that after a period of years, records are lost or misplaced & memory is not as correct as they would hope. There is a necessity for finality. After the statute of limitations has expired, the IRS cannot go after you for additional taxes and you cannot go after the IRS for additional refunds.

The Three-Year Rule

For assessment of additional taxes, the statute of limitation runs usually 3 years from the date you file your return. If you are looking for an additional refund, the limitations period is usually the later of 3 years from the date you filed the original return or 2 years from the date you paid the tax. There's some exceptions:

If you have claimed a loss from a valueless security, the limitation period is extended to seven years.

In case you don't document all of your income & the unreported amount is over 25% of the gross income actually shown on your return, the limitation period is six years.

In case you file a "fraudulent" return, or don't file at all, the limitations period doesn't apply. In fact, the IRS can get you at any time.

If you are deciding what records you need or require to keep, you need to ask what your chances are of an audit. A tax audit is an IRS verification of items of income & deductions on your return. So you ought to keep records to support those items until the statute of limitations runs out.


Assuming that you have got filed on time & paid what you ought to, you only must keep your tax records for years, but some records must be kept longer than that.

Keep in mind, the three-year rule relates to the information on your tax return. But, a number of that information may relate to transactions over years elderly.

Here's a checklist of the documents you ought to hold on to:

Capital gains & losses. Your gain is reduced by your basis - your cost (including all commissions) and, with mutual funds, any reinvested dividends & capital gains. But you may have bought that stock 5 years ago & you have been reinvesting those dividends & capital gains over the last decade. Plus don't forget those stock splits.

You do not ever need to throw these records away until after you sell the securities. Plus then if you are audited, you'll must show those numbers. Therefore, you'll need to keep those records for at least 3years after you file the return reporting their sales.

Expenses on your home. Cost records for your house & any improvements ought to be kept until the home is sold. It is nice practice, although most owners won't face any tax issues. That is because profit of less than $250,000 on your home ($500,000 on a joint return) is not subject to taxes under tax legislation enacted in 1997.

If the profit is over $250,000/$500,000, or in case you don't qualify for the full gain exclusion, then you are going to need those records for another years after that return is filed. Most owners probably won't face that issue thanks to the 1997 tax law, but of coursework, it is better to be safe than sorry.

Business records. Business records can become a nightmare. Non-residential actual estate is now depreciated over 39 years. You could be audited on the depreciation up to 3 years after you file the return for the 39th year. That is a long time to hold on to receipts, but you may need to validate those numbers.

Employment, bank, & brokerage statements. Keep all of your W-2s, 1099s, brokerage, & bank statements to show income until 3 years after you file. Plus don't even think about dumping checks, receipts, mileage logs, tax diaries, & other documentation that substantiate your expenses.

Tax returns. Keep copies of your tax returns also. You cannot depend on the IRS to actually have a replica of your past returns. As a general rule, you ought to keep tax records for 6 years. The bottom line is you have got to keep these records until they can no longer affect your tax return, plus the 3-year statute of limitations.

Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they are wrong, you'll need your W-2 or copies of your Schedule C (if self-employed) to show the right amount. Do not dispose of those records until after you have validated those contributions.

Contact us by phone or e-mail in case you have any questions about what records you need to keep this spring.


To read this & my other articles online go to www.MyDentalCPA.com and click on the Newsletter section.

 


 

As always you can call me at 714-619-0667 if you have any questions about investing, retirement or any other tax & accounting related issues. 

 

Regards, Monica Rebella, CPA/IAR

President, Rebella Accountancy

 
Disclaimer:  The opinions contained herein are not intended to be investment advice or a solicitation to buy or sell any securities. With any investment you should carefully consider the investment objectives, potential risks, management fees, and charges and expenses before investing.  Past performance is not a guarantee of future results. The investment return and principle value of any investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

To see more Business Owner Clients talk about Monica, click here!

 

 

Monica Rebella, CPA/IAR | President - Rebella Accountancy | Certified Public Accountants
507 E. First Street, Suite A | Tustin, CA 92780 | Phone: 714-619-0667 | Fax: 714-544-0236
Email: mrebella@rebellacpa.com | www.RebellaCPA.com | www.MyDentalCPA.com