IRA TAX TIPS FOR THE 2016 TAX YEAR

Taxpayers often have questions about Individual Retirement Arrangements, or IRAs. Common questions include: When can a person contribute, how does an IRA impact taxes, and what are other common rules.

The IRS offers the following tax tips on IRAs:

• Age Rules. Taxpayers must be under age 70½ at the end of the tax year to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

• Compensation Rules. A taxpayer must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If a taxpayer is married and files a joint tax return, only one spouse needs to have compensation in most cases.

• When to Contribute. Taxpayers may contribute to an IRA at any time during the year. To count for 2016, a person must contribute by the due date of their tax return. This does not include extensions. This means most people must contribute by April 18, 2017. Taxpayers who contribute between Jan. 1 and April 18 need to advise the plan sponsor of year they wish to apply the contribution (2016 or 2017).

• Contribution Limits. Generally, the most a taxpayer can contribute to their IRA for 2016 is the smaller of either their taxable compensation for the year or $5,500. If the taxpayer is 50 or older at the end of 2016, the maximum amount they may contribute increases to $6,500. If a person contributes more than these limits, an additional tax will apply. The additional tax is six percent of the excess amount contributed that is in their account at the end of the year.  

• Taxability Rules. Normally taxpayers don’t pay income tax on funds in a traditional IRA until they start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.
• Deductibility Rules. Taxpayers may be able to deduct some or all of their contributions to their traditional IRA. See IRS Publication 590-A.

• Saver’s Credit. A taxpayer who contributes to an IRA may also qualify for the Saver’s Credit. It can reduce a person’s taxes up to $2,000 if they file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. A taxpayer may file either Form 1040A or 1040 to claim the Saver’s Credit.
  
• Rollovers of Retirement Plan and IRA Distributions. When taxpayers roll over a retirement plan distribution, they generally don’t pay tax on it until they withdraw it from the new plan. If they don’t roll over their distribution, it will be taxable (other than qualified Roth distributions and any amounts already taxed). The payment may also be subject to additional tax unless the taxpayer is eligible for one of the exceptions to the 10% additional tax on early distributions.
  
• myRA. If a taxpayer’s employer does not offer a retirement plan, they may want to consider a myRA. This is a retirement savings plan offered by the U.S. Department of the Treasury. It's safe and affordable. Taxpayer’s may also direct deposit their entire refund or a portion of it into an existing myRA.

If you have been contacted by the IRS or have IRS tax problems, Get a free consultation from an experienced tax relief expert today (800)790-8574 or visit our www.advancetaxrelief.com

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TOP NINE ADOPTION TAX CREDITS TO CONSIDER - Advance Tax Relief (800)790-8574

Taxpayers who have adopted or tried to adopt a child in 2016 may qualify for a tax credit. Here are 9 important things about the adoption credit:

1. The Credit. The credit is nonrefundable, which may reduce taxes owed to zero. If the credit exceeds the tax owed, there is no refund of the additional amount. In addition, if an employer helped pay for the adoption through a written qualified adoption assistance program, that amount may reduce any taxes owed.                                                                                                                                                                                                                       
2. Maximum Benefit. The maximum adoption tax credit and exclusion for 2016 is $13,460 per child.
3. Credit Carryover. If the credit exceeds the tax owed, taxpayers can carry any unused credit forward. For example, the unused credit in 2016 can reduce taxes for 2017. Use this method for up to five years or until the credit is fully used, whichever comes first.
4. Eligible Child. An eligible child is an individual under age 18 or a person who is physically or mentally unable to care for themselves.
5. Qualified Expenses. Adoption expenses must be reasonable, necessary and directly related to the adoption of the child. Types of expenses may include adoption fees, court costs, attorney fees and travel.
6. Domestic or Foreign Adoptions. Taxpayers can usually claim the credit whether the adoption is domestic or foreign. However, there are different rules regarding the timing of expenses for each type of adoption.
7. Special Needs Child. A special rule may apply if the adoption is of an eligible U.S. child with special needs. Under this special rule, taxpayers can claim the tax credit, even if qualified adoption expenses were not paid.
8. No Double Benefit. In some instances both the tax credit and the exclusion may be claimed but not for the same expenses.
9. Income Limits. The credit and exclusion are subject to income limitations. These may reduce or eliminate the claimable amount..

We are tax relief experts specializing in IRS back tax help, Installment Agreements, tax lien help, wage garnishment release, IRS Offer in Compromises and a whole lot more. Get a free consultation from an experienced tax relief expert today (800)790-8574 or visit www.advancetaxrelief.com

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OWING THE IRS AND FEDERAL TAX LIENS - ADVANCE TAX RELIEF

Internal Revenue Service routinely files Federal Tax Liens against taxpayers who have unpaid tax obligations. 

A federal tax lien is a document filed with a county government (usually where the taxpayer lives or conducts business) notifying the general public that a taxpayer has an unpaid federal tax debt. Liens attach to the taxpayer’s property (both real property and personal property).

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If property is sold while a lien is in effect, the IRS will be paid out of the sales proceeds before the taxpayer is paid.

Once a lien is filed, it becomes a matter of public record. Liens record the full amount owed to the IRS at the time the lien is filed. This information is routinely picked up by the various credit reporting bureaus, and so federal tax liens will eventually show up on your credit report.

Liens Are Different from Levies

Some people use the words “lien” and “levy” interchangeably. A tax lien is a document filed by the IRS to protect the government’s ability to collect money. A levy is the forced collection of tax, for example by confiscating money directly out of a bank account or paycheck.

Preventing a Lien

Federal tax liens can be prevented from being filed in the first place by paying the tax in full and prior to any lien is filed by the IRS. Liens can also be prevented by setting up an installment agreement that meets the IRS requirements to avoid filing a lien.

The IRS will not file a federal tax lien if a taxpayer sets up either a guaranteed installment agreement or a streamlined installment agreement. These types of installment agreements require that the outstanding balance be $10,000 or less in the case of guaranteed installment agreements or $25,000 or less in the case of streamlined installment agreements.

If a taxpayer owes more than $25,000, a lien can be prevented if the taxpayer pays down the balance so that the balance is $25,000 or less and establishes a streamlined installment agreement.

Notifying Taxpayers that a Lien has been Filed

The IRS generally notifies taxpayers after a federal tax lien has already been filed. The IRS will send taxpayers a Notice of Federal Tax Lien after the IRS has already filed a lien with the county. Federal tax liens are effective beginning ten days after the IRS issues a written demand for payment of outstanding taxes.

Removing a Lien

The IRS will remove a federal tax lien if the lien was filed in error, if the outstanding balance is paid in full, if the outstanding balance is otherwise satisfied (for example through a successful offer in compromise), or if the lien becomes unenforceable (for example, because the lien has expired due to the ten-year statute of limitations).

There are two basic ways to remove a federal tax lien: withdrawal and release.

Withdrawing a federal tax lien means the IRS will rescind the lien, as if the lien was never filed in the first place. Lien withdrawals generally occur when the federal tax lien was filed in error (for example, if a lien was filed against the wrong person).

If a lien was filed in error, you should contact the IRS right away. An IRS agent will review your account history to verify that you don’t owe the outstanding tax, and will prepare the paperwork necessary to withdraw the lien. However, the IRS has instituted a fresh start program under which taxpayers may be eligible for lien withdrawal provided certain criteria are met.

Releasing a federal lien means that the lien no longer encumbers your property. Upon releasing a lien, county records will be updated to reflect that the lien has been released. However the fact that there was once a federal tax lien will remain on your credit report for up to ten years.

Liens are released within 30 days of full payment of the outstanding tax obligations or upon setting up a guaranteed or streamlined installment agreement. Less frequently, the IRS may release a federal tax lien if that will speed up the collection of tax or is in the best interests of the taxpayer and the government. Most federal tax liens are automatically released by the IRS after full payment of tax. The IRS should provide you with a copy of the lien release, which you can forward to the credit reporting bureaus to update your credit reports.

Under the IRS’s fresh start program, taxpayers may be eligible for lien withdrawal or release if their outstanding balance is under $25,000.

How a Federal Tax Lien Impacts Your Credit

Federal tax liens adversely impact the credit of taxpayers. Your credit score will likely suffer, and you may find yourself with less than ideal opportunities to obtain new credit or to refinance existing credit.

Tactics for Dealing with Liens

The best tactic is to prevent a tax lien from being filed in the first place. Consider bringing your outstanding balance under $25,000 and set up an installment agreement.

This could result in you being eligible for a streamlined installment agreement, and no federal tax lien will be filed. If a lien has already been filed, you might be eligible for lien withdrawal under the IRS’s fresh start program. You could bring your balance under $25,000 by transferring some or all of your tax to a credit card or home equity line, or by making payments to bring your balance under the $25,000 threshold.

After the IRS has filed a tax lien, your options are much more limited. You could bring your balance under $25,000 and set up a streamlined installment agreement in an attempt to take advantage of the fresh start program. You could also pay off the outstanding balance in full.

Liens are Not Updated on Your Credit Report

Unlike other credit and loan accounts, the IRS will not periodically update the balance on your federal tax lien. You can contact the IRS to obtain a letter showing the current payoff amount. However, that updated payoff amount will be sent only to the taxpayer.

Taxpayers needing assistance in dealing with tax liens and tax collections should seek the advice of Advance Tax Relief.

If you have been contacted by the IRS or have IRS tax problems, Get a free consultation from an experienced tax relief expert today (800)790-8574 or visit our www.advancetaxrelief.com

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HOW FAR BACK SHOULD I GO? UN-FILED TAX RETURNS!

You have not filed your tax returns with the IRS in years, and want to put that behind you and make amends with the IRS.

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But how many years of un-filed returns do you need to prepare to become compliant with the IRS?

It seems so overwhelming – where do you start?
5 years?
10 years?
20 years?

The good news is that the IRS does not require you to go back 20 years, or even 10 years, on your unfiled tax returns.

In most cases, the IRS requires you to go back and file your last six years of tax returns to get in their good graces. And then, to make arrangements to pay what is owed or settle.

The six year enforcement period for delinquent returns is found in IRS Policy Statement 5-133 and Internal Revenue Manual 1.2.14.1.18.

Part of the reason the IRS requires six years is manpower – the IRS cannot administer and staff the enforcement of unfiled tax returns going back as far as 10 or 20 years. And believe it or not, the IRS’s records rarely, if ever, go back that far. The IRS is looking to draw a line in the sand that is consistent with their internal resources, and at the same time secure a good faith effort at compliance from taxpayers to get current. And that line in the sand is six years.
Indeed, not filing your tax returns is most always a civil issue (not criminal) that simply requires (1) filing the last six years’ tax returns and (2) making arrangements with the IRS to repay what you owe.

If you do not have all the records to prepare the returns, the IRS will often have copies of your W2s, 1099s, etc. There are also methods to recreate your income and business expenses if your records are incomplete – one way, for example, is to determine your living expenses for any year you did not file. You likely earned at least what you spent, and that forms a basis to recreate your income for a good faith tax return filing.

And criminal nonfiling cases are the exception, not the rule. In most every case, the IRS simply wants you to voluntarily file the last six years returns, and then work with them on an agreement to pay or settle what you owe. Criminal cases usually involve a level of sophistication and planning on your part that would show an intent beyond the good faith reason why you probably did not file – poor recordkeeping, medical trauma, divorce, fear or procrastination.

You do not have to be held back by unfiled tax returns. The path to a fresh start is the last six years’ returns, and providing the IRS a plan of repayment. You do not have to be in a state of fear and inaction from the prospects of getting this behind you, and moving on. It can actually be more manageable than you may think.

We are tax relief experts specializing in IRS back tax help, Installment Agreements, tax lien help, wage garnishment release, IRS Offer in Compromises and a whole lot more. Get a free consultation from an experienced tax relief expert today (800)790-8574 or visit our www.advancetaxrelief.com

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Debt Cancellation May be Taxable - Advance Tax Relief

if a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Here are 10 tips about debt cancellation:

   Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be  able to exclude the canceled amount from their income. They must have used the loan to buy, build or substantially improve their main home to qualify. Their main home must also secure the mortgage.


   Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income. They may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt canceled in a foreclosure.

   Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage. This applies only if the taxpayer used proceeds from the refinancing to buy, build or substantially improve their main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.

   Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of canceled debts to be nontaxable.

   Form 1099-C. If a lender reduced or canceled at least $600 of a taxpayer’s debt, the taxpayer should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of canceled debt and other information.

   Form 982. If a taxpayer qualifies, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. They should file the form with their income tax return.

   IRS.gov Tool. Taxpayers should use the Interactive Tax Assistant tool - Do I Have Cancellation of Debt Income on My Personal Residence? - on IRS.gov to find out if their canceled mortgage debt is taxable.

   Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.

   IRS Free File.  IRS e-file is fastest, safest and easiest way to file. Taxpayers can use IRS Free File to e-file their tax return for free. If they earned $64,000 or less, they can use brand name tax software. The software does the math and completes the right forms for them. If they earned more than $64,000, they can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for those who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.

  More Information. For more on this topic see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity.

We are tax relief experts specializing in IRS back tax help, Installment Agreements, tax lien help, wage garnishment release, IRS Offer in Compromises and a whole lot more. Get a free consultation from an experienced tax relief expert today (800)790-8574 or visit our www.advancetaxrelief.com

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INNOCENT SPOUSE RELIEF - TAX HELP

By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse.) However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these amounts from either you or your spouse (or former spouse.)

You must meet all of the following conditions to qualify for innocent spouse relief.

• You filed a joint return which has an understatement of tax due to erroneous items, defined below, of your spouse (or former spouse).
• You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax. See Actual Knowledge or Reason to Know, defined below.
• Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax. See Indications of Unfairness for Innocent Spouse Relief, below.
• You and your spouse (or former spouse) have not transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.

Indications of Unfairness for Innocent Spouse Relief

The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understatement.

The following are examples of factors the IRS will consider.

• Whether you received a significant benefit (defined next), either directly or indirectly, from the understatement.
• Whether your spouse (or former spouse) deserted you.
• Whether you and your spouse have been divorced or separated.
• Whether you received a benefit on the return from the understatement.
•  

If you need help with IRS tax problems or need help with the innocent spouse relief process contact Advance Tax Relief today: (800)790-8574

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IRS CURRENTLY NON COLLECTIBLE - STATUS 53

There are times where you agree with the IRS that you owe taxes, but you can’t pay due to your current financial situation. If the IRS agrees that you can’t both pay your taxes and your reasonable living expenses, it may place your account in Currently Not Collectible (CNC) (hardship) status.

 While your account is in CNC status, the IRS will not generally engage in collection activity (for example, it won’t levy on your assets and income). However, the IRS will still charge interest and penalties to your account, and may keep your refunds and apply them to your debt. 

Before the IRS will place your account in CNC status, it may ask you to file any delinquent tax returns.

If you request CNC status, the IRS may ask you to provide financial information, including your income and expenses, and whether you can sell any assets or get a loan.

If your account is placed in CNC status, during the time it can collect the debt the IRS may review your income annually to see if your situation has improved .

Generally, the IRS can attempt to collect your taxes up to 10 years from the date they were assessed, though the 10-year period is suspended in certain cases. The time the suspension is in effect will extend the time the IRS has to collect the tax.

 “If you’re in serious tax debt, I recommend these guys completely, 100 percent. It’s not a scam, it’s not fake, it’s real. They will really take care of you.” - A. Ortiz

 If you need help with IRS tax problems or need help with the innocent spouse relief process contact Advance Tax Relief today: (800)790-8574

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