What to Do if You Didn’t File Your Taxes

Okay, so you let this year’s April 17 tax filing deadline pass you by. Where do you go from here?

The following advice is from the IRS:

* Do not panic, but file as soon as you can. If you owe money to the IRS, the faster you file your return, the less your penalties and interest will be. If mailing in your return is your only option, don’t worry about it-just do it. The faster the IRS receives it, the better.

* E-file is nevertheless your number one choice. IRS e-filing is available for many taxpayers until the extension deadline of Oct. 15.

* Free File is still obtainable at www.irs.gov/freefile. Taxpayers who earn $57,000 or less will be eligible to file for free through Free File. Taxpayers whose income is more than $57,000 and who feel confident filing their own taxes should take this route. There is no online support for this program, but it does all of the basic math calculations you may need.

* Pay as much as you can afford to when filing, and then apply for an installment agreement for the difference.

* Installment Agreements are available on request with File Form 9465, Installment Agreement Request or by applying online using the IRS Online Payment Agreement Application available at www.irs.gov.

* Filing as soon as possible will keep you penalties and interest at a minimum. Although the IRS cannot completely waive interest charges, they will think about reductions in these penalties if a valid case is made for the reasons behind late filing. Information about penalties and interest can be found at Avoiding Penalties and the Tax Gap on the IRS website.

* You might have a refund waiting. The quicker you file, the faster you will receive your refund. Despite your earnings being below the standard filing requirement, you may very-well be warranted to a refund of taxes that were previously withheld from your earnings, quarterly estimated payments or other special credits. You will not be charged any penalties or interest for filing late, but if your return is not filed within three years you could forfeit your right to the refund.

Who Pays Taxes? Understanding the Breakdown.

Certain multimillionaires do pay a reduced effective income-tax rate compared to some middle-income taxpayers; taking a portion of your earnings via long-term capital gains instead of a paycheck is merely one reason that happens. But the top 20% of income earners paid 70% of federal taxes in 2007, according to the most recent data obtainable from the Congressional Budget Office. That class also drew in 60% of overall pretax income, per the CBO.

Meanwhile, 46% of taxpayers do not pay out any federal income tax, but they often pay a large piece of their income to levies at the federal, state and local level. Those include payroll taxes for Social Security and Medicare; state and local sales taxes on groceries, clothing and additional purchases; and federal and state excise taxes on things such as gas, cigarettes, alcohol and airline tickets.

The payroll tax for Medicare is paid by every employed individual, but the Social Security tax isn’t levied on income over $110,100 (in 2012). Therefore individuals with larger six-figure incomes pay a lower portion of their income to Social Security taxes than those making less money.

Wealthy people carry a larger allocation of corporate income taxes, which are eventually sustained by individuals. “All taxes have to be paid by somebody at some point,” says Steve Wamhoff, legislative director at Citizens for Tax Justice. “The corporate tax is paid by the owners of corporate stock and business assets.” In 2011, federal corporate income taxes consumed nearly 7.7% of the top 1% of income earners, in comparison to a 0.4% portion for taxpayers in the lowest fifth of the income bracket, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.

But partially because taxpayers acquire money in various ways, the top 1% of earners receive a scaled-down share of their income that goes to payroll taxes. Then there are state and local taxes to add in. Individuals in the lowest 20% of the income bracket paid about 17% of their income to federal, state and local taxes in 2011, versus about a 30% effective rate for the top earners, according to an estimate from the Institute on Taxation and Economic Policy.

But the portion of total taxes paid roughly matches the portion of total income for each of the income groups. Sales taxes can have an outsize effect on lower-income people. “After they buy basic necessities, they typically won’t have a lot of money left over to save or invest,” says Mr. Wamhoff. A wealthier family is “more likely to have a portion of their income that they can put to savings or investments that will never be subject to sales taxes.”

And for the 46% who don’t pay federal income tax?

Roberton Williams, a senior fellow at the Tax Policy Center, says 23% of U.S. taxpayers do not earn sufficient money to owe that tax once they take their individual exemption and standard deduction. Another 23% qualify for tax breaks that bring their tab to zero or produce a refund.

“They start off with relatively low income to begin with,” Mr. Williams says, “and therefore have low tax liability before claiming any breaks.”

More affluent individuals encounter a tax rate as excessive as 35% on earnings, “but they get the biggest tax breaks,” he says. “They start off with such a high tax that the biggest tax breaks don’t bring them down to zero. They’re benefiting hugely from tax breaks—much more than the poor people—but because they start off at the high level, their tax bills stay positive.”

That being said, 1,470 millionaires were amongst those who paid no federal income tax in 2009, the most recent data shows.

Apple Legally Avoids Billions in Taxes

A recent report states that Apple Inc. uses subsidiaries in the Netherlands, Ireland and additional low-tax countries as part of a method that allows the technology empire to save billions of dollars’ worth of global tax yearly.

On Sunday, the New York Times laid out the legal strategies used by Apple to prevent paying billions of dollars to the IRS.

One strategy outlined in the report: although the business is based in California, Apple has established a limited office in Reno, Nev. that collects and invests its profits. The corporate tax rate in Nevada is zero. In California, it’s 8.84 percent.

Although quite a few significant organizations attempt to decrease what they owe in taxes, technology companies like Apple, Google Inc., Microsoft Corp. and others are given significantly more options to do so.

The reason behind this is that some of their revenue comes from digital merchandise or commissions on patents, which makes it easier for them to move profits to tax-friendly states or countries, according to the New York Times.

The 71 tech companies in the S&P 500, including Apple, Google, Yahoo Inc. and Dell Inc., confirmed paying out global cash taxes over the past two years at an average rate that is one-third less than other S&P 500 companies, the Times reported.

Apple has legally distributed around 70 percent of its earnings overseas, where tax rates are a lot lower than in the U.S., according to company records.

The New York Times cited a study by former Treasury Department economist Martin A. Sullivan estimating that Apple’s federal tax bill would have been $2.4 billion higher last year without the use of its strategic methods.

The newspaper claims that Apple paid $3.3 billion in cash taxes worldwide on $34.2 billion in earnings last year. That’s a tax rate of 9.8 percent.

In a statement, Apple told the Times that it is in agreeance with all accounting rules and tax laws, and stated that its American business produced roughly $5 billion in federal and state income taxes in the first half of fiscal 2012.

Wall Street analysts forecast that Apple could earn up to $46.9 billion in its current fiscal year, according to FactSet.

Some Tax Preparers Falsify Clients’ Earnings to Turn a Larger Profit

Every year the Internal Revenue Service obtains tax returns that indicate a lot more income than was truly earned, sometimes showing double the actual earnings. That seems peculiar at first glance – why would anybody indicate they earned more than they actually did?

The answer is that Congress has made a motivation for the poorest of working people to report more than what they really made. Doing so can add up to more than $3,000 for poor working parents due to a form of negative income tax known as the Earned Income Tax Credit that distributes government money to impoverished working people.

Yet it is not the impoverished who are falsifying their returns. The issue is with devious income tax preparers, IRS Taxpayer Advocate, Nina E. Olson, and others have said. Creating fake income allows dishonest tax preparers to charge higher fees and helps draw in new clients as people hear about others receiving huge returns.

Last month the Justice Department sued to put out of business what it described as a countrywide amass of tax fraud mills that reported falsified incomes and usually did not even bother to tell people it was filing tax returns for them.

The IRS and the Justice Department recognized an issue with tax preparers inflating incomes a long time ago. Unethical tax preparers exist in big and small firms alike. Failing to come down hard on the abusers provides a big setback for honest tax preparers, whose clients don’t know about the complexities of tax and simply hire the firms that promise the biggest refund.

DISHONEST TAX PREPARERS

The issue of exaggerated incomes is not with dishonest poor people, but with deceptive tax preparers.

Nancy Abramowitz, director of the American University Washington College of Law’s tax clinic for the impoverished, said she has never heard of any individuals who had exaggerated their own income to receive a larger tax credit. “It’s always unscrupulous preparers,” she said.

Since companies confirm salary, tax preparers commonly balloon incomes by making a fake Schedule C, the tax form used by several small businesses because it is not verified unless you are facing a tax audit.

When hiring any company that provides financial services, it is important to do your research and make sure you are in the hands of qualified and trustworthy individuals. If anything seems “too good to be true”, it usually is. If you are facing IRS problems, don’t hesitate to call the knowledgeable staff at JG Tax Group. Our goal is to provide you with expert help in order to help secure your financial future.

Now that Tax Season is Over, Get Ahead of the Game

Now that tax season has passed why not get ahead on next year’s taxes?

One of the reasons that the season is so aggravating is because countless individuals end up leaving their material unorganized all year. In addition, most don’t keep a handle on what deductions and credits they qualify for. Consequently, at the end of the year, people are disorganized and oftentimes confused. If you want to decrease your tax burden year round, and keep your tax files organized, it’s feasible to do so if you take a few minutes to set up an organized system that you stay consistent with.

Establish a Filing System

The right filing method can aid you in maintaining everything collectively so that you aren’t searching for it come tax season. A file folder designated for tax receipts, and placed in an obvious area, can be the ideal container for your receipts from charities as well as your business charges. Once the receipts come in, instantly file them away. Also, as your material arrives from other places (such as your W-2 and interest statements) file them as well.

Do Not Lose Your Deductions and Credits

During the year, keep track of deductions and credits. Think in advance as to what you may be able to claim. Contemplate items that might be tax deductions, including those for healthcare and for business travel. If you know that you’ll be using your car for business, keep a record of it.

If you sell investments, make sure you keep records and other important information so that you know what you owe in capital gains taxes. Do your very best to be thorough throughout the year. If you keep an account book in a handy place, it will be simpler to document accurate records that you can effortlessly refer back to whenever you want.

If you have special finance software, it can be even less complicated to be thorough of your tax data. Many programs assist you to mark tax deductible items. Oftentimes, you can make notations associated with what you can use for taxes, and how the data is used when it comes to your tax bill. At the end of the year, all you need to do is create reports. This can assist you in adding up your costs rapidly and painlessly, and you can put that amount into your taxes or utilize it help you generate a Profit & Loss declaration for your business.

Stick With It

Once you have the methods in place to make it seamless for you to document your tax info, it’s reasonably easy to keep up with it throughout the year. Take a few seconds to organize your receipts and other documents accordingly. It doesn’t take much effort to note important transactions by hand or in your personal finance software. When you follow through with your taxes year round, you will encounter less stress when it’s time to file your tax return and likely have the correct records for the IRS.

Blow to IRS in Supreme Court Ruling

The IRS waited too long – more than three years – to challenge taxpayers’ filings that used a “Son of BOSS” tax shelter, the court ruled yesterday. The ruling could help a number of taxpayers who used the shelter and cost the government nearly 1 billion dollars in revenue, lawyers said.

Son of BOSS was a phrase Treasury department officials invented to explain an assortment of tax shelters that tried to eliminate taxes on capital gains from the sale of a business or other valuable assets, for example, by falsely inflating the cost of something in order to make the profit seem smaller. The Son of BOSS strategy was promoted in several forms by advisers at certain accounting and law firms starting in the late 1990s. Thousands of taxpayers likely used the strategy long before the Treasury and Congress took measures to prevent its tax advantages, beginning in 2000.

While the IRS and Treasury were regulating Son of BOSS shelters starting in 2000, personal negotiations were tough to spot, and the IRS got a lot of its data through drawn-out investigations of promoters. Once the IRS eventually audited individual taxpayers, the three-year statute of limitations for assessing back taxes had often expired, lawyers said.

The IRS argued in several cases that a six-year statute of limitations should exist. The six-year statute generally exists in cases where the taxpayer has failed to report income.
Several taxpayers eventually settled their cases through agreements that permitted them to pay back taxes and delete penalties. Other taxpayers chose to fight in court. They contended that the six-year statute of limitations was unfair, because Son of BOSS didn’t involve omission of income. In yesterday’s 5-4 decision, the Supreme Court agreed, saying the IRS overstepped its boundaries by the six-year statute of limitations.

The case involved a 1999 sale of a Salisbury, N.C., heating oil and concrete business, Home Concrete & Supply LLC. The exchange totaled almost $10.6 million, according to court records. The tax shelter allowed the partnership that owned the oil business to report a return of only $69,000 from the sale.The company was advised on the tax shelter by Jenkens & Gilchrist LP, a Texas law firm that has since closed after an IRS investigation delete. The two individuals who used the shelter, Robert L. Pierce and Stephen R. Chandler, were excited by the outcome, according to their lawyer. The two had been fighting the IRS for a long time and had hired tax professionals to help them. They even produced favorable opinion letters from lawyers.

The Supreme Court’s decision reinforces the typical three-year statute of limitations for IRS assessments and undermines that of other courts’ rejections of regulations that were aimed to help the government pursue Son of BOSS cases. This case was a victory for taxpayers. The IRS has once again been limited to the ways in which it can assert its power over U.S. citizens. If you’re facing tax problems, don’t hesitate to call the professionals at JG Tax Group. Our knowledge and experience will guide you into a secure future with the IRS.

Record Number of Americans Renounce Citizenship due to Taxes

Last year, almost 1800 individuals renounced their U.S. Citizenship or handed in their green cards. That's a record number since the IRS started publishing an inventory of people who renounced in 1998. It's also almost eight times more than the number of residents who renounced in 2008, and more than the total for 2007, 2008 and 2009 put together. Many say they parted ways with America for tax reasons.

The US is one of the few countries in the world that taxes citizens on earnings made while they're living abroad. And just as stateside North Americans must file each April - this year, the cut-off point was Tuesday - an estimated 6.3 million U.S. Subjects living abroad brace for what they describe as an even tougher process of reporting their revenue and foreign accounts to the IRS. For them, the deadline is June.

The National Taxpayer Advocate's Office, part of the IRS, released a dispatch in December that details the difficulties of filing taxes from overseas. It cites serious paperwork, an absence of online filing options and a dearth of local and foreign-language resources.

For those wishing to legally escape the filing necessities, the only way is to formally renounce their U.S. Citizenship. Last year, IRS records show that at least 1788 individuals did, and that's likely an under estimation. The IRS publishes in the Fed Register the names of people who give up their citizenship and some who renounced say they have not seen their name on the list yet.

The State Department declared that its records differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1100 each year, related an official.

The decision by the IRS to make public the names is referred to by lawyers as "name and shame." That's because people who renounce are seen as willing to give up their citizenship primarily for financial reasons.

There's also an "exit tax" for the very rich that choose to leave. During the last 25 years, numerous millionaires and billionaires have renounced their citizenship. Among them : Ted Arison, the late founding figure behind Carnival Cruises, and Michael Dingman, a former Ford Motor Company director.

OLD, NEW REGULATIONS 

There are 2 filing necessities that have an effect on USA citizens abroad : the Report of Foreign Bank and Money Accounts - it's been around since 1970 but now carries penalties for noncompliance - and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.

The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas accounts to file an extra form divulging them. That includes any accounts in which the U.S. Citizen has a finance interest. That might include a common account with a better half or child, accounts for corporations in which the American owns more than fifty percent of the value of shares of stock, or any trust or estate that benefits that person.

The tax compliance act - the more modern law - asks foreign finance institutions such as banks, hedge funds, and personal stock funds to supply the IRS with info on U.S. Clients.

The U.S. and five other European Union states recently announced their intent to allow institutions to report the info through their own executives, instead of right to the IRS. Institutions that don't comply will be subjected to a 30 % withholding tax on certain U.S.-sourced payments and proceeds of property sales beginning in the 2013 tax year - for example, dividends on investments in U.S. Firms.

Some immigrants say they were blind to the first regulation for years and even decades. In 2008, the IRS received only 218,840 such filings. American nationality law grants citizenship to nearly everybody born in the U.S. or born abroad to Americans, regardless of what kind of time they have spent in the U.S. Many may not know the limits of their U.S. ties.

In 2004, the stakes for noncompliance rose. Neglecting to file meant potential fines and legal charges. Northern Americans abroad can be punished for noncompliance even if they owed no tax - and IRS info shows that many citizens abroad don’t.

Income up to $95,100 isn't taxed under a rule called the Foreign Earned Earnings Exclusion. In 2009, the earnings cap was $91,400, and 88 % of all taxpayers siting the foreign earned income exclusion owed nothing. Since 2008, the IRS has offered 1 or 2 voluntary-disclosure grace periods during which expatriates can file back taxes without facing legal charges - but with the likelihood of shouldering penalties.

Marylouise Serrato, head of American Subjects Abroad, a non-profitable organization based in Geneva, announces that many people feel frightened about reporting rules that they didn't know existed. Their disenchantment, she asserts, is pushing some to renounce.

"Americans abroad are scared. We've had people pay tens of thousands in fines. We have had people pay huge amounts of back taxes," she says. "Up to this point, we have not heard about anybody renouncing, or if they went and did, they didn't talk about it," announces Serrato, who asserts her group doesn't advocate renunciation.

"Now," she is saying, "we're seeing a lot of people talk openly about it and come to us for information."

Congress is taking note. "While I absolutely support measures that reduce crime and address offshore havens, the U.S. Should not have policies that place unjustified burdens on legitimate North Americans abroad," announces Representative Carolyn Maloney, D-N.Y, and the chair of the Congressional Americans Abroad Caucus.

In Europe, American women say they feel pressure to renounce even from their husbands.

"American women married to non-Americans are only just now finding out that they have to disclose years and years of income and accounts," says Lucy Stensland Laederich, a leader of the women's club who lives in Bordeaux, France.

Laederich has been acting as the group's liaison with politicians and bureaucrats in Washington, D.C., and attended a meeting to discuss expatriate tax issues with Maloney and Treasury Department officials on Tuesday.

"When they decide to come clean and report everything," she says, "they have to go ask their husbands for all of their bank information, retirement funds, and investment accounts, everything."

Some of their husbands, Laederich says, refuse to hand over information to the IRS. That leaves the women in difficult predicaments.

"Your options are to ignore the IRS and stick your head in the sand; take your name off of all the accounts and live in a completely cash economy; divorce; or renounce U.S. citizenship," Laederich says. "We've seen all of these things happen."

DIVORCE OR DISCLOSE

Genette Eysselinck, a friend of Laederich's, renounced early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path.

"It created a lot of tension around here," she says. "Divorce seemed a little extreme, so I asked myself, 'What am I gaining as an American?' And the cons outweighed the pros."

Eysselinck was born in Fort Bragg, North Carolina, and says she grew up on military bases all over the world. Her father, she says, was an Air Force pilot. Eysselinck has lived abroad for decades and no longer has any close connections in the United States.

She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process "gut wrenching."

"I grew up in a military family where patriotic feeling was very strong" Eysselinck says. "I'm amazed at how terrible I felt renouncing. But it was the only way to get them off my back. It's very distressing and time consuming to keep up with all the paperwork. But if it's this bad when I'm 64, how bad will it be when I'm 74?"

Don't let your tax problems overwhelm you to the point of taking such extreme measures in order to escape them. Contact JG Tax Group today and talk to our knowledgeable professionals about finding an affordable solution to your IRS problems.

How to Survive a Tax Audit

Be Ready and Forthcoming

Be proactive by documenting comprehensive tax records that can prove all deductions, credits and exemptions. The IRS' can go back seven years. To eradicate the paper litter, make your records digital delete and then shred the originals. First and foremost, resist the desire to cheat on your taxes. An honest return may not stop an audit, but it is less complicated to defend.

Understand that Audits can Happen to Anybody

You may have no idea what triggered your audit, but knowing it can happen to anyone will keep you well prepared. The most common trigger is not reporting something on your tax return that was reported to the IRS' by a third party. The IRS looks for certain triggers where they know reports are being filed dishonestly. These include earned income, education and child tax credits. Other things that can trigger an audit are big deductions, mathematical errors and under-stated income.

Get Representation

Even if you file your own taxes, you are entitled to representation by a trustworthy company. Despite the price, the professional fees will most likely be less than the interest or penalties expected from the IRS. Not all tax resolution firms have experience working with the IRS, so taxpayers are encouraged to do their research.

Don't be Bullheaded

It may be tempting to try to make the field agent's life as frustrating as they've made yours, but this approach will usually backfire.

Demonstrate your Right to Appeal

Remember that even the IRS is fallible. You do not have to accept delete the IRS conclusions delete. You can hire professional help that will negotiate and solve your IRS problems. Within the IRS, notices can be negotiated.


The Importance of Preparation

Although nobody jumps for joy at the possibility of an audit, there is nothing to be gained by sweating it out. You can reduce the headache of the process by getting organized, getting help where you need it and knowing your taxpayer rights