Hobby or Business? Four Tax Tips to Consider (ADVANCE TAX RELIEF)

Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing -- no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.

 

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Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are four tax tips to consider:

1.      Is it a Business or a Hobby?  A key feature of a business is that people do it to make a profit. People engage in a hobby for sport or recreation, not to make a profit. Consider nine factorswhen determining whether an activity is a hobby. Make sure to base the determination on all the facts and circumstances. For more about ‘not-for-profit’ rules, see Publication 535, Business Expenses.

2.      Allowable Hobby Deductions.  Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3.      Limits on Hobby Expenses.  Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

4.      How to Deduct Hobby Expenses.  Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

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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IRS Audit Representation Help – Advance Tax Relief LLC

What is Tax Audit Representation?

Tax audit representation, also called audit defense, is a service in which a tax or legal professional stands in on behalf of a taxpayer (an individual or legal entity) during an IRS or state income tax audit.

During an income tax audit or examination, the IRS and all states allow a taxpayer to have an authorized representative. The representative must have permission to practice before the IRS or state, and specific credentials are required. The types of representatives who are allowed to represent taxpayers before the IRS in income tax audits include attorneys, CPAs, and enrolled agents.

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An audit representative develops the strategy used to defend the taxpayer’s position. He or she assists the taxpayer in preparing all documents requested by the taxing authority and typically attends all meetings and handles correspondence on behalf of the taxpayer.

What To Do If You Get Audited

Unfortunately, some unlucky people wind up getting audited.

Seventy percent of audits are just a letter asking for more information about your tax returns, and you’re asked to mail back forms proving your income or deductions. In other cases you’ll get an invitation to meet with an agent to discuss your tax forms, a scenario that sends many taxpayers into a panic.

Well there’s no need to panic, but there are certain steps you should take.

Don’t ignore the letter

Ignoring the IRS is the worst possible thing you can do. The situation won’t go away.

While you should write back as soon as possible, you or your audit representative can ask for more time to gather the paperwork and forms. A two week extension is not an unreasonable request of your IRS agent.

Decide whether you need representation

Most of the time the letter you get in the mail is just a simple request for information – the IRS just wants you to mail in your 1099 form, for instance, or they want to see receipts for the business meals you deducted. In that case, just sending in the requested paperwork is usually sufficient, and you don’t need to get your lawyer or accountant involved.

If you can’t find the information they’re looking for, you’ll probably want to call Advance Tax Relief for advise you on your next move. And if you’ve been called in to meet with an agent, you should almost certainly bring in outside help from a qualified tax attorney or accountant. At Advance Tax Relief, we can help you from start to finish.

You’ll need to grant power of attorney to your audit representative – Advance Tax Relief, to let us handle everything while you stay home.

You might think that bringing in a professional firm that deals with audit representation will annoy the agent or make him or her think you’re guilty – it will do quite the opposite, actually. Your IRS agent will generally prefer to deal with an experienced tax attorney or agent from Advance Tax Relief because they will prepare the requested information in a way that’s easy for the agent to read, and will do so in a dispassionate and professional way.

Tell them what they want to know (and nothing more)

Only about 2% of audits are random; the rest of the time, the IRS has very specific questions it wants answered, and will request forms and receipts accordingly.

That means two things: Send or bring all the forms you’re asked to bring, and answer all the questions to the best of your ability.

That second point is important. Whereas keeping your mouth shut is usually best when you’re getting interviewed by the police, in an audit you’re usually best served by stating your case and answering all of the agent’s questions. After all, if the IRS is calling you in to talk about how much income you reported, it’s probably because the agency believes you’re underreporting. The audit is your opportunity to convince the IRS otherwise.

With that said, it’s possible to over-share. This is not the opportunity to brag about how much money you made last year.

Negotiate and appeal

Once the audit is done, the agent will assess any taxes and penalties you owe. However, the assessment can always be appealed. The IRS may be willing to cut you a deal that will make you happy because they don’t want the case to drag on. This is another time where it pays to have good audit representation form an attorney experienced with tax negotiation. A good tax attorney will be skilled at escalating the case to make a settlement easier.

The IRS’ lawyers are ready to negotiate and will often settle cases before going to court.

Get Audit Representation from Advance Tax Relief

If you have received that dreaded letter notifying you that your return has been selected for an audit, do not fear! We have represented many clients in both personal and business tax audits. Even if you do not believe that you have done anything wrong or are unsure of why you are being audited, we don’t recommend that you attempt to represent yourself.

We will provide you the experience and professionalism when dealing with your IRS or State audit. For a personal audit it is important to understand that returns are usually selected for statistical reasons. By contacting us we are able to become a buffer between you and the IRS and/or State. If you have a business audit, it is important to understand your rights. Before you allow them to take computers, records, even enter your place of business, stop and understand your rights.

By contacting Advance Tax Relief, we may be able to go into the audit office for you and we will have your case prepared and positioned to give you the protection you deserve. We know your rights and you have nothing to fear. If paperwork is missing we will help you put together all the documentary evidence you will need to come out of your tax audit successfully. Also most audits can be made via correspondence audits, so that there isn’t necessarily a need to appear. This allows us to handle a case across the nation regardless of your location.

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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Tax Mediation - ADVANCE TAX RELIEF

If You Owe Federal Income Taxes but Cannot Pay

How do you negotiate with the IRS? If the thought sends chills down your spine, relax. There are licensed professionals out there that specialize in helping you resolve your tax dilemmas. Depending on your financial circumstances and how much you owe, you may be able to make payments over time, or pay a reduced amount, either in a lump sum or in installments. In some cases you won’t have to pay taxes at all, at least for now. In some cases, you can have your back tax obligations permanently forgiven. Advance Tax Relief has helped over 1600 taxpayers nationwide saving them over 2.5 million in back taxes and interest.



Partial Payment Settlement Agreement

If you wish to negotiate a partial payment settlement agreement, you will need to submit Form 9465 along with form 433-F and a letter explaining why you are wish to be granted a reduction in your total tax obligation. Of course, you will have to provide financial substantiation, and you may want to consider having this package reviewed prior to submission. If your request is granted, you will make installment payments just as you would with a regular installment payment arrangement

Offer in Compromise

When you see or hear those ads promising to settle your tax bill for “pennies on the dollar,” the program those ads refer to is the Offer in Compromise. There are three categories under which the IRS accepts Offer in Compromise requests:
Doubt as to Liability: The amount of tax assessed is incorrect
Doubt as to Collectability: This is the category most often used. The person filing under this category must demonstrate that he or she will likely never be able to pay the full tax obligation due to financial hardship or some other compelling reason.

Effective Tax Administration: Requests for relief under this category do not dispute the amount of the tax. Rather, the claim is that collecting the tax would create an injustice. Elderly or disabled taxpayers often use this category.
Traditionally, an Offer in Compromise involved tedious paperwork and long waits while the IRS processed requests. However, in 2011, the Fresh Start program was instituted which will provide additional relief and a more streamlined process under certain conditions.. To request an Offer in Compromise, file Form 656: Offer in Compromise and Form 656-A: Income Certification for Offer in Compromise Application Fee and Payment. Offer in Compromises have a very low acceptance rate, and you may want to consider hiring a professional to help your chances of success if you feel that you may qualify.

Tax Penalty Abatement

If you are able to pay your full tax obligation, but just want a break on the penalties that have been tacked on, the Tax Penalty Abatement program may provide relief. You must provide a compelling reason for requesting a tax penalty abatement, such as a death in your immediate family, long term unemployment or significant property damage or loss due to a natural disaster. You can request a tax penalty abatement by writing a letter explaining your circumstances, by requesting an in-person interview with a tax professional or by filing IRS Form 843 Claim for Refund and Request for Abatement.

Currently Not Collectible Status or Financial Hardship

If you simply cannot pay what you owe to the IRS, you may request that your account be placed in Currently Not Collectible or Financial Hardship status. You will need to provide detailed financial information through Form 433A Collection Information Statement for Wage Earners and Self-Employed Individuals. If your request is granted, you will still owe taxes to the IRS, but collection efforts will be temporarily halted.Your circumstances will be re-evaluated under certain conditions and your stay of collection could be lifted.

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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UN-FILED TAX RETURNS? ADVANCE TAX RELIEF CAN HELP

We find that taxpayers do not file tax returns for one or more years for various reasons and the problem can become overwhelming. Missing all or a portion of their records, personal hardship and/or neglect are one of many reasons people fall behind in filing their taxes. Fortunately, there are ways to approach the problem of unfiled returns.

The IRS maintains a file going back numerous years of all W2′s, 1099′s and 1098′s (mortgage interest paid) filed in the name of individual taxpayers. Advance Tax Relief can determine certain facts from Master File Transcripts, available for those years where the IRS has prepared a Substitute Return. These ‘records of account’ provide Adjusted Gross Income, Taxable Income, Tax, Number of Exemptions, Filing Status and Self Employment Tax. When we take on this kind of case, we will assist in re-filing your returns and our negotiations will be based on our more favorable returns for your benefit.

Advance Tax Relief can prepare past returns using various substitute sources when there are missing records. Those returns should be filed as soon as possible in order to avoid accumulated compounding interest. Also, it should be noted that if returns have not been filed in the most recent three tax years, those returns should be prepared immediately in order to claim any refunds that may be due.

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

To protect yourself, your home, and your job from this IRS assault, you need ADVANCE TAX RELIEF LLC - that understands how the IRS works. Our IRS Enrolled Agents and Tax Attorneys understand the complexity of your back tax issues and will work hard to get you the IRS back tax help you deserve. Find out today if you qualify for an irs offer in compromise or IRS tax relief. Call us today, (713)300-3965

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STOP IRS WAGE GARNISHMENT

Can you afford to live on 50% of your paycheck? Probably not. When the IRS or a State has failed to collect back taxes, they will begin to seize assets. If phone calls and letters are not returned, they will take the next step. This process is called a “levy”. The taxing authorities are legally allowed to seize bank accounts, demand payment from accounts receivable, take control of property for auction, and assume title on vehicles. Virtually anything of value can be seized to satisfy the outstanding debt.

Wage garnishments are another form of tax levy, though the seizure of assets from your paycheck is an ongoing process. If the levy on your wages is removed through tax resolution, the wage garnishments will be stopped.

Since wage garnishments function as a basic form of a forced, involuntary installment plan, they can sometimes be removed through tax resolution by setting up a regular and approved installment plan. Besides removing the burden from your employer and giving you the power to handle the payments yourself, an installment plan can often be set up with payments that are considerably less than the wage garnishment amounts. That is why this form of tax resolution is very common.

Levies and wage garnishment can be the most stressful and humiliating of all collection tactics. They do this to force taxpayers into willful compliance. We may be able to release your wages from garnishment and/or possibly stop the levy. Advance Tax Relief has been successful in getting levies lifted and garnishments stopped in a timely manner. We know your rights as a taxpayer and we are here to help.

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

To protect yourself, your home, and your job from this IRS assault, you need ADVANCE TAX RELIEF LLC - that understands how the IRS works. Our IRS Enrolled Agents and Tax Attorneys understand the complexity of your back tax issues and will work hard to get you the IRS back tax help you deserve. Find out today if you qualify for an irs offer in compromise or IRS tax relief. Call us today, (713)300-3965

REMOVE AN IRS TAX LIEN - FACTS YOU MUST KNOW

The IRS is far from perfect, and so does the make mistakes. If you know where to start you can legitimately remove a tax lien.

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You Can Appeal the Lien

You can get the IRS to remove Notice of Federal Tax Lien if you can show that the IRS was in the wrong. A lien can be removed with a tax resolution on appeal if:

1. The tax debt has already been paid in full.

2. The lien was filed in error.

3. The lien was filed in error and the IRS made a processing error with your return.

4. The IRS did not follow proper procedures.

5. You were going through bankruptcy when the lien was filed.

6. You weren’t given a chance to dispute the amount assessed by the IRS.
7. You wish to make spousal defenses by claiming that your spouse should be liable for the lien.
8. You want to discuss collection options, like through the Fresh Start Initiative.
9. The statute of limitations of 10 years on collecting the tax debt has passed.
10. On the notice of the lien, you are given the option to request a Collection Due Process hearing with the Office of Appeals. The request for an appeal must be made within 30 days after fifth day of the lien being filed, or by the date indicated on the notice. We can deal with the IRS and provide assistance with filing an appeal, or requesting a lien withdrawal.

Lien Withdrawal

A new tax lien policy allowing for “withdrawal” gives hope to many struggling taxpayers. Withdrawal removes the lien as if it was never there, and occurs when the taxpayer’s lien is paid off, or it’s proven that the lien was filed falsely. Withdrawal is also possible if you qualify for the Fresh Start Initiative, have entered a direct debit agreement, and your balance is lower than $25,000.

In order to complete an official withdrawal of a lien, the taxpayer must make a formal request to the IRS (using IRS Form 12277, also known as Application for Withdrawal of Filed Form 668(y), Notice of Federal Lien). Once this request is filed, the IRS will return a form 10916(c), which is the magic word to open the door to cleared credit.

It is important to note that this new policy does not include tax liens held at the state levels. Those liens will still be evident on your credit reports. Also not subject to complete withdrawal are tax settlements.

Such settlements, commonly called “Offers in Compromise,” are present when a taxpayer and the IRS settle on terms of a lien where less than what is actually owed is considered adequate payment. Due to this not being an exact repayment in full, the IRS grants what they call a “release” rather than an actual withdrawal.

Lien Release

The same as with a withdrawal, if you qualify for FSI and your balance is below $25,000, you can request that the lien be released. Otherwise, once your debt has been paid in full, or you’ve arranged a streamlined installment agreement, your lien will be released after 30 days.

A lien that’s been “released” means that it’s no longer attached to your property and assets, and public records will reflect the change. But unlike a withdrawal, a release will remain on your credit report for up to ten years after the debt has been paid.

Once you receive a copy of the lien release, you can use it to update your credit report with the credit reporting bureaus.

Lien Subordination

Another common term in lien removal is subordination, which allows another creditor to “subordinate” the IRS’ interest in a property and move ahead of the line. The IRS will only permit this if it’ll help them get paid more or sooner. For example:  if you’re trying to refinance your home, the IRS will allow a lender to go above the lien and refinance in exchange for a cut of the proceeds.

This process is complicated, though, and professional assistance is always recommended.

How to Remove a Lien from your Credit Reports

Once you have the tax lien removed, either through withdrawal or release, it’s time to contact the three credit agencies to make sure they’ve updated your reports.

Once you have received a Notification of Withdrawal or Release from the IRS, get a copy of your credit report (AnnualCreditReport.com) to find the status of the lien. Often, the bureaus will automatically update the lien on your report with no work on your part.
If it has not been updated, contact each agency to dispute the lien.
The agencies will then contact your local courthouse to establish that your information is accurate. Then each agency will alert you on how each dispute turned out, and if the lien was removed or not.
Experian, in particular, will send instructions with what you should send to verify that the lien was released. With those documents, they should be able to update the status of the lien.
Tax liens can slash your credit score, and will tarnish your credit history for years to come. Ensure that any liens are updated or removed from your credit report as soon as possible.

How to Avoid a Property Tax Lien

Pay your taxes in full and on time! File your taxes before the IRS has the time, or the reason, to send an IRS rep out to file a tax lien against you at your local courthouse. The damage a lien could do to your credit report is serious, so it’s best to avoid having one filed in the first place.

Easier said than done, right? Well, there are a few ways you can prevent a tax lien if you can’t pay your taxes on time.

DO NOT ignore or misplace any notices or letters the IRS sends.
DO keep track of your tax status, and keep all of your records in a safe, secure place.
DO respond quickly to any notices, either by phone, mail or fax. Wait too long and the IRS might feel you are trying to avoid paying the debt, and file a lien.
DO contact the IRS immediately if you believe the tax lien was filed in error.
DO arrange for an extension if you cannot pay your tax debt by April 15th.
DO set up an installment agreement with the IRS if you cannot pay the debt in one full payment. If the IRS knows that you have negotiated an installment plan, they will not file a lien against you. If you fail to pay on schedule, you’ll lose your credibility with the IRS and they’ll file a lien against you immediately.

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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