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Articles Posted in Tax Filing

While it’s common for individuals and businesses to owe money to the IRS, many of them have the means to pay their tax debts when they file every year. However, not everyone can do this, leaving debts owed to the Federal Government outstanding. If you fall into this category, there are some important things that you need to know, including the following:

1) You Still Need to File Your Current Tax Return

Even if you owe the IRS money from a previous year or two, you still need to file your current tax return on time. Not filing can lead to a number of penalties, and it may void any ongoing payment agreements that you have with the IRS. It’s always a good idea to make sure that you send in that return on time, even if that return results in you owing money to the IRS.

Let us begin with a simple question: who prepares your taxes? Many individuals and small businesses attempt to go it alone to cut costs, which can be problematic in a few different ways. Many times, you do not have sufficient time to prepare the documentation properly, so you opt for shortcuts that result in audited by the IRS. You might also make simple, unintentional mistakes because you are trying to balance your company’s financials and your daily business operations, leading to mistakes in your accounting. Though it will require an upfront expenditure, it will save you time, money, and future headaches.

Here are some of the many benefits that a tax professional can bring to the table for your business.

Making Estimated Payments to the IRS

Failing to file taxes, and more specifically, owing taxes for the year in which the return has yet to be filed, often leads to a number of different penalties assessed by the IRS. The Federal Government of the United States often grants both individuals and businesses a valid extension when requested, which allows them more time to file a tax return. However, when an extension is not requested, or one is requested, yet a tax return and moneys due are not submitted by the new deadline, serious problems can arise that are best dealt with by an accounting or legal professional.

What Constitutes a Failure to File?

To put it simply, a failure to file occurs when a tax return is not submitted to the IRS by the deadline set forth by them every year. This is usually April 15th, but it can be extended for six months. Companies and individuals can both request an IRS extension, which pushes back that filing deadline. While this gives them more time to compile documentation and pertinent return information. In some cases, that deadline is also missed, that becomes what is known as a failure to file, and penalties are assessed by the IRS according to the guidelines that they have put into place.

Life can get busy, and sometimes, things slip your mind, especially when you’re moving in eighteen different directions at the same time. However, when that “something” consists of your tax returns, you could be in quite a bit of trouble with both the state and the IRS. Even if you regularly pay taxes and should be receiving a refund every year, you still need to file your returns by the deadlines set forth by both the Federal Government and the government of the state in which you reside. Otherwise, you face having to pay steep penalties, having your refund check delayed, and other serious issues. If you owe back taxes, you could face even more severe financial ramifications, such as having liens placed on your property or having your bank accounts levied.

What to Do If You Haven’t Filed Your Taxes in Years

No matter the reason is as to why you haven’t filed your taxes, it’s important that you take the first step necessary to remedying the situation. Although you should always seek the help of a professional tax expert who can walk you through the situation and negotiate with the IRS or state on your behalf, there are some initial actions that you can take on your own.

Divorcing your spouse can be a complex undertaking and involves more than simply splitting up jointly owned bank accounts and properties. It also means ensuring that your taxes are completed and filed properly. A number of issues can pop up while completing taxes in the middle of a divorce, some of which may require you to file tax return(s) with your soon to be ex-spouse. In other cases, a change of marital status can result in having to file taxes quite differently than you are used to, leading to the high probability of making a mistake.

Filing Tax Returns Jointly

According to current IRS regulations, two spouses who are in the middle of a divorce, yet not officially divorced at the end of the tax year can file a joint tax return. Even if both individuals are no longer residing in the same location, as long as they are still legally married and no official divorce decree has been approved by the courts, that joint return is valid.

Many — perhaps most — businesses in the U.S. may anticipate substantially lower revenues during 2020 than in previous years because of the COVID-19 pandemic, and many may have losses this year. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March in order to provide stimuli to the economy, including loans, grants, tax credits, and other benefits. One section of the CARES Act makes changes to the provisions of the Internal Revenue Code (IRC) that deal with deductions of net operating losses (NOLs). The 2017 tax reform bill eliminated most NOL carrybacks, meaning that businesses could no longer deduct current losses from taxes paid in prior years. The CARES Act temporarily reinstates carryback loss deductions, potentially allowing businesses to claim refunds against taxes paid during the past several years.

What Is a Net Operating Loss?

A business has a NOL when its total allowable deductions is greater than its taxable income during a year. Obviously, if a business’ deductions are equal to their income during a tax year, their tax liability would be zero. The IRC allows businesses to use excess NOL amounts from prior years to lower their tax bills in other years. Without those provisions, any deductions that exceed total income would be lost at the end of the year.

How Are Net Operating Losses Deductible?

Prior to 2018, businesses could carry NOLs both forward and back, subject to limitations. A loss carryforward allows a business to reduce its tax bill in the future. Suppose a company has taxable income of $2 million during a particular year, and allowable deductions of $2.5 million during the same year. It would owe nothing in federal income tax, and would have a NOL of $500,000. The following year, suppose it has taxable income of $2.7 million, and $2.5 million in deductible expenses. The business can carry $200,000 of its NOL forward, reducing its net income for the year to zero. It can apply the remaining $300,000 in subsequent years.

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Almost anyone who has started a new job in the U.S. has filled out Form W-4, which tells employers how much money to withhold from paychecks for federal income tax. At the end of 2019, the IRS made significant changes to the form. While the revised form calls for more information from employees, it presents it in a way that may prove easier to understand and fill out. Here is what employees and employers should know about the new Form W-4.

What Is Form W-4?

“Withholding” generally refers to amounts deducted from employees’ gross wages for federal income tax. The amount of tax an employee will owe depends on multiple factors, including whether the employee will file singly or jointly, the number — if any — of dependents they have, and the amount of deductions they anticipate having. Employees use Form W-4 to notify the employer how much withholding to take from their paychecks.

What Is Different About the New W-4 Design?

If one were to compare the layout of the 2020 W-4 to the 2019 form, the first difference they might notice is the simpler layout of the new form. Instead of instructions packed tightly onto the first page in a tiny font, the new form begins with the fields that employees must complete. The instructions begin on the second page.

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As local and state governments continue to implement protective measures against the global coronavirus pandemic, businesses have had to adapt quickly. Many businesses have had to close indefinitely because of “shelter in place” orders that urge people to remain home except for essential functions. The IRS has extended the deadline for paying income taxes and filing returns. Other federal agencies have taken similar actions. A de facto ban on social gatherings in many parts of the country has almost certainly had an impact on businesses that sell alcohol, along with other businesses regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB). In late March 2020, this agency announced postponement of multiple filing and tax deadlines.

The Alcohol and Tobacco Tax and Trade Bureau

Like the IRS, the TTB is part of the U.S. Department of the Treasury. It was created when the Homeland Security Act of 2002 moved the law enforcement functions of the Bureau of Alcohol, Tobacco and Firearms (ATF) to the Department of Justice. The Treasury Department retained ATF’s regulatory and tax collection roles and transferred them to the newly created TTB. It has authority over the federal taxation of alcohol, tobacco, and firearms.

National Emergency

The Internal Revenue Code (IRC) gives the Secretary of the Treasury the authority to postpone payment and filing deadlines in the event of a “federally declared disaster.” The president made an emergency declaration on March 13, 2020.

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The world has had to learn a new vocabulary in recent weeks. In an effort to slow the spread of the coronavirus and the disease it causes, COVID-19, public health officials across the globe have urged people to practice “social distancing.” Non-essential businesses are closed, and thousands if not millions of people have quickly learned how to work remotely. In the midst of all of this, the federal government has offered some relief by delaying Tax Day for three months. Instead of income tax returns and payments being due on April 15, they will now be due on July 15.

Why April 15?

April 15 has been the due date for federal income taxes for a little less than seventy years. Income taxes themselves have only been an inevitable part of life nationwide for a bit more than a century.

The Sixteenth Amendment to the U.S. Constitution first authorized the federal government to levy an income tax in 1913. Eight years earlier, the Supreme Court had ruled that an income tax contained in a tariff bill was unconstitutional. Amending the Constitution overruled the court.
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