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Tax

Miami Accounting CPA List of 9 Top Tax Scams

Miami Accounting CPA issues a list of 9 Top Tax Scams on how to reduce tax liability 

Miami Accounting firms and taxpayers are to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to fraud.

The list of 9 Top Tax Scams, compiled by Miami Accounting Tax Services each year, lists a variety of common scams taxpayers can encounter on how to reduce tax liability and other matters. But many of these schemes peak during Miami Accounting filing season as people are in the process of Income Tax Preparation in Miami.

“Miami Accounting Taxpayers should be careful and avoid falling into a trap with the Miami Accounting CPA today issued a list of 9 Top Tax Scam,” said Miami Accounting VieraCPA. “Scam artists (including some Miami Accounting Tax Preparers) will tempt people in-person, on-line and by e-mail with misleading promises about how to reduce tax liability and false refunds. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.
Hiding Income Offshore

Miami Accounting CPA’s are very cautious of individuals who have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and Income Tax Preparation in Miami Accounting Firms suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution, according to Miami Accounting CPA Gustavo A Viera.

Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the Miami Accounting Firms warned clients IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from upfront payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can do their Income Tax Preparation in Miami with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Miami Accounting Tax Service Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, Miami Accounting Tax Service scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions when doing your Income Tax Preparation in Miami.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to Miami Accounting Services who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. Miami Accounting CPA’s have a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Categories
Tax

How to Reduce Tax Liability

How to reduce tax liability

Income tax preparers know costs and expenses are crucial part of Income tax planning, and one of the most difficult. How to reduce tax liability is contingent on what deductions you can claim.

How to reduce tax liability as allowable deductions as incurred and paid. These are not mutually exclusive.  Income tax preparers when trying to answer the age old question “How to reduce tax liability” and during the Income tax planning phase must consider what was spent for the purpose business deduction, and most importantly, what was not spent but incurred. How to reduce tax liability questions must be asked and answered during the Income tax planning period.

How to reduce tax liability via Income tax planning

To be allowable, it must not be excluded by regulations (see beneath).

The decision maker ought to often consider every single product of cost independently.

Income tax preparers Expenditures Check List

These are:

a) Funds expenditure

b) Repayments of cash on financial loans taken out for company reasons

c) Depreciation of capital assets

d) Sums utilized, or supposed to be employed, in setting up or growing a organization

e) Losses incurred prior to the start of the evaluation period

f)   Costs incurred in providing organization enjoyment.

These are the unofficial guidelines recommended by Income tax preparers during Income tax planning on how to reduce tax liability. It is totally important that you communicate to your Income tax preparers just before you allow or disallow any enterprise bills.

As lengthy as the ailments in the first paragraph are fulfilled, these are the day-to-day bills of a business you can deduct:

Accountancy costs

Marketing

Cleansing of organization premises

Big difference between opening and closing stock (on accounts)

Workers wages just before any deductions are made, including any wages payable to the domestic companion

Employer’s contributions to employees’ pension scheme

Employer’s (secondary) Class 1 SS contributions

Heating and lighting

Hire or rental costs (but not any cash or purchase elements)

Curiosity payable under a credit sale, a consumer credit score arrangement or a retain the services of obtain arrangement (but not the cash aspect of payments)

Authorized expenses connected with the enterprise

Payment in variety for perform carried out for the enterprise – the financial worth is allowable

Rent and Rates

Stationery

Stock purchases

Sundries, sometimes known as miscellaneous things, which are modest in relation to complete allowable costs provided that the decision make is content that no non-allowable expenses, for case in point for company enjoyment, are incorporated

Telephone, telex, fax etc (Only the proportion that is used for enterprise, i.e. if you use your telephone thirty% for company, 70% for private, then you can declare 30% of the costs as an allowable expense)

Transportation excluding any home-to-operate costs

VAT allowable (two)

Clearly, expenditures is a large area of tax far too huge to cover in a solitary web site publish, so if you need to know much more about expenditures, just take us up on our Cost-free one Hour Consultation.

Categories
Tax

The IRS is very aggressive on delinquent payroll tax liability

The IRS is Very Aggressive on Delinquent Payroll Tax Liability

The IRS is very aggressive in their collection attempts for past due payroll tax liability. The penalties assessed on delinquent payroll tax liability or filings can dramatically increase the total amount owed in a matter of months. We believe that it is critical to have a CPA, Attorney, or Enrolled Agent represent taxpayers in how to reduce your payroll tax liability in these types of situations. How you answer the first five questions asked by the IRS may determine whether you stay in business or are liquidated by the IRS. You should avoid meeting with any IRS representatives regarding past due payroll tax liability or any tax until you have met with an accountant to discuss your options.

IRS Payroll Tax Liability Liens

The IRS can make your life miserable by filing federal tax liens so you need a CPA who knows how to reduce your payroll tax liability. Past due payroll taxes often trigger Federal Tax Liens which are public record that indicate you have a payroll tax liability. They are filed with the County Clerk in the county from which you or your business operates. Because they are public records they will show up on your credit report. This often makes it difficult for a taxpayer to obtain any financing on an automobile or a home. Federal Tax Liens also can tie up your personal property and real estate. Once a Federal Tax Lien is filed against your property you cannot sell or transfer the property without a clear title. Often taxpayers find themselves in a Catch-22 where they have property that they would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan. Consult a CPA on how to reduce tax liability and remove the tax liens.

IRS Payroll Tax Liability Levy

An IRS levy is the actual action taken by the IRS to past due payroll taxes. For example, the IRS can issue a bank levy to obtain your cash in savings and checking accounts. Or the IRS can levy your wages or accounts receivable to satisfy the payroll tax liability. The person, company, or institution that is served the levy must comply or face their own IRS problems. The additional paperwork this person, company or institution is faced with to comply with the levy, usually causes the taxpayer’s relationship to suffer with the person being levied. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS or a CPA on how to reduce payroll tax liability.

When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. The bank is required to remove whatever amount is available in your account that day (up to the amount of the past due payroll taxes) and send it to the IRS in 21 days unless notified otherwise by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Account Levy for the payroll tax liability.

An IRS Wage Levy is different. Wage levies are filed with your employer and remain in effect until the IRS notifies the employer that the wage levy has been released. Most wage levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t have enough money to live on.

IRS  Payroll Tax Liability Audit

The IRS can audit you by mail, in their offices, or in your office or home. The location of your audit is a good indication of the severity of the audit. Typically, correspondence audits are for missing documents in your tax return that IRS computers have attempted to find. These usually include W-2’s and 1099 income items or interest expense items. This type of audit can be handled through the mail with the correct documentation. The IRS office audit is usually with a Tax Examiner who will request numerous documents and explanations of various deductions. This type of audit may also require you to produce all bank records for a period of time so that the IRS can check for unreported income. The IRS audit schedule for your home or office should be taken more seriously due to the fact that the IRS Auditor is a Revenue Agent. Revenue Agents receive more training and auditing techniques than a typical Tax Examiner. All IRS audits should be taken seriously because they often lead to other tax years and other tax deductions not originally stated in the audit letter. Consult an Accountant immediately on how to reduce tax liability in case of an audit.

IRS Payroll Tax Liability Seizures

The IRS has extension powers when it comes to Seizure of Assets to pay past due payroll taxes. These powers allow them to seize personal and business assets to pay off outstanding payroll tax liability. This occurs when taxpayers have been avoiding the IRS. The IRS attempts to collect amounts owed with a seizure as the ultimate act of their collection efforts. Consult an Accountant immediately on how to reduce tax liability and avoid any asset seizures.

Unfiled Payroll Tax Returns

Many taxpayers fail to file required returns and find themselves with past due payroll taxes for many reasons. The taxpayer must be aware that failure to file tax returns may be construed as a criminal act by the IRS. This type of criminal act is punishable by one year in jail for each year not filed. Needless to say, it’s one thing to have a payroll tax liability but another thing to potentially lose your freedom for failure to file past due payroll taxes. The IRS may file “SFR” (Substitute For Return) Tax Returns for you. This is the IRS’s version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions which you may be entitled to such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc. Regardless of what you have heard, you have the right to file your original tax return, no matter how late it’s filed.

IRS Penalties

The IRS penalizes millions of taxpayers each year. They have so many penalties that it’s hard to understand which penalty they are hitting you with.

The most common penalties are: Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time. To make matters worse the IRS charges you interest on penalties.

Many taxpayers often find out about IRS problems many years after they have occurred. This causes the amount owed to the IRS to be substantially greater due to penalties and interest.

Some IRS penalties can be as high as 75%-100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, however the extra penalties make it impossible to pay off the entire balance.

Consult a CPA immediately on how to reduce tax liability and avoid all these serious issues.

Categories
Tax

How to Reduce Tax Liability with New IRS Penalty Relief and Installment Agreements

How to Reduce Tax Liability with New IRS Penalty Relief and Installment Agreements

Reduce tax liability — The Internal Revenue Service today announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers to reduce tax liability by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people.

Under the new Fresh Start provisions on how to reduce tax liability, part of a broader effort started at the IRS in 2008 which aided taxpayers to reduce tax liability, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible to reduce tax liability with Installment Agreements to help more people qualify for the program.

“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman. ”This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers to reduce tax liability.”

Reduce tax liability with Penalty Relief

The IRS announced plans for new penalty relief on how to reduce tax liability for the unemployed on failure-to-pay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

To assist those most in need to reduce tax liability, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals in order to reduce tax liability. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

How to reduce tax liability using the penalty relief will be available to two categories of taxpayers:

•             Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.

•             Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

Reduce tax liability using penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. Reduce tax liability penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to seek the 2011 How to reduce tax liability penalty relief. The new form is available on IRS.gov.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief on reducing tax liability taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly encourages taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, also with a 25 percent cap.

Reduce tax liability with Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes.

The IRS announced today that, effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. This is a significant reduction in taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments.

Taxpayers can set up an installment agreement with the IRS by going to the On-line Payment Agreement (OPA) page on IRS.gov and following the instructions.

These changes supplement a number of efforts to help struggling taxpayers, including the “Fresh Start” program announced last year. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.

“Our goal is to help people meet their obligations and get back on their feet financially,” Shulman said.

Input from the Internal Revenue Service Advisory Council and the IRS National Taxpayer Advocate’s office contributed to the formulation of Fresh Start.

Offers in Compromise

Under the first round of Fresh Start, the IRS expanded a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations.

For example, the IRS has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on IRS Collection and Other Information

A series of eight short videos are available to familiarize taxpayers and practitioners with the IRS collection process. The series “Owe Taxes? Understanding IRS Collection Efforts”, is available on the IRS website, www.irs.gov.