IRS Revised Form 941

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Continuing the implementation of the payroll tax relief enacted by the Middle Class Tax Relief and Job Creation Act of 2012, the IRS has announced the release of a revised Form 941 payroll tax return. Employees do not need to take any action to benefit from the payroll tax relief, and the lower tax rate “will have no effect on workers’ future Social Security benefits.” Self employed workers will also benefit from the new law with a similar reduction “in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent.”

The revised Form 941 is available on the IRS website. See IR-2012-27.

The Most Common IRS Notices—and How to Respond to Them

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Most people who receive IRS notices or letters in the mail experience a sense of fear or panic before they’ve even opened the notice. While it’s true that the notice you receive may sound formal and even harsh, generally speaking you can settle most issues with a calm head and a few simple steps. So, take a deep breath and read through the notice carefully, making a note of the number of the form and the bottom line as to what the IRS wants from you. The IRS tends to be very systematic and generally speaking they make few mistakes, but occasionally people do receive notices in error so it’s essential that you approach the situation with a clear head. Once you have determined if the letter is correct, you can either do your own research and map a plan of action in response or you can contact a knowledgeable tax attorney who can make the situation seem much less frightening. Some examples of some of the more common IRS notices–along with an explanation of why you may have received your notice—are below.

  1. CP-11 IRS Notice—If you receive a CP-11 notice from the IRS it means there were changes made to a tax return by the IRS which caused you to owe money. The form should clearly show which changes in your return resulted in taxes being owed and should explain how and why the changes were made. If you made a calculation error, then the notice should indicate “math error.” There will be a three-digit code which is assigned to each change which was made on your return. Your notice should also explain what you need to do if you agree with the changes and what you need to do if you disagree with the changes made to your filed form.
  2. CP-88 IRS Notice—This notice from the IRS is to let you know they are holding on to your tax refund rather than sending it to you. Of course this type of notice will cause you dismay, particularly if you were counting on your refund to pay bills. Generally the notice will inform you that you are not entitled to a refund because you neglected to file the proper tax forms in the prior year. You will not be able to receive your refund until you’ve filed all the necessary returns.
  3. CP 90/ CP 297/ CP 297A/ LT 11 or L 1058—Any of these notices are very serious and you should take them seriously. If you receive a CP 90 notice this means the IRS is letting you know they intend to take a portion of federal payments which you normally receive. This could be in the form of salary, Social Security benefits or retirement benefits. A CP-90 or CP 297 notice means the IRS intends to levy your properties, bank accounts, vehicle, business assets or wages. Should you ignore these initial notices of intent to levy, you will receive a CP 501 which is your first reminder letter. A CP-503 is your second reminder letter, and a CP 504 is last notice of money owed and at this point in the procedure a Federal Tax Lien may be placed against you if you are unwise enough to ignore this particular notice. If you do ignore a CP 504 then you will receive an LT 11 or L 1058 which is a formal letter sent after you have ignored all prior notices giving you 30 days to make the situation right or risk having your bank accounts levied.
  4. CP 523 IRS Notice—This is a notice that you have not paid your installment agreement as promised, for whatever reason. If a CP 523 is sent to you this means the IRS is giving you notice that they intend to revoke your agreement due to your failure to pay.

While receipt of any of these notices can surely ruin your day, there are legal channels to deal with them. If you have further questions you should consult a tax attorney who can more fully explain your rights to you.

Negotiating an Installment Agreement with the IRS

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Over 210 million business and individual tax returns are filed on an annual basis, and many of us make the kinds of mistakes which end up costing us additional taxes and IRS penalties.  Most Americans fear an IRS audit nearly as much as they fear a potential root canal, and the fear of owing the IRS money is almost as bad. In fact, when most of hear the words “wage levy,” “bank levy,” “property seizure,” and “federal tax lien,” it brings about a severe level of stress in our lives. The fact is, if you simply cannot afford to pay all your taxes by the time given you by the IRS it is possible to contact them and negotiate an installment agreement for the balance owed.

Establishing an installment agreement with the IRS is one of the top ten reasons individuals contact the IRS. Many people feel that the IRS is somewhat negligent in providing the necessary information to those who need help paying their taxes therefore it is up to the individual to seek out the necessary information. The IRS will pursue collection through wage or bank levies if an installment agreement is not set up in a timely manner and they consider it to be your responsibility to set up your own installment agreement. If you have decided to request an installment agreement which will allow you to pay your taxes over a stated period of time, you can use Form 9465, Installment Agreement Request to send your request to the IRS. As governmental forms go, this happens to be one of the easier ones to fill out. You will be required to provide your basic information as well as the tax year you owe for, the amount owed and how much you are able to pay each month.

When Can You Use Form 9465?

You can use this form if you are unable to pay your current tax owed in full or if you owe back taxes. If you are unable to owe the tax amount on the taxes you are currently filing, don’t wait to file. Go ahead and file on time, but include Form 9465 with your return, and make sure it is right on top so it will be easily seen. Prior to finalizing the agreement the IRS may ask for financial information from you which proves you don’t have the current income or assets to enable you to pay your IRS bill in full. The IRS may ask you to complete Form 433-A if you are setting up an installment agreement as an individual or Form 433-B if you are providing financial information for your business in order to set up an installment agreement.

After The IRS Has Approved Your Installment Agreement

Once your IRS installment agreement is in place you can allow yourself a sigh of relief since the IRS is not allowed to enforce further collection beyond your agreement or to modify or terminate your agreement unless one of the following conditions applied to your agreement. If you provided incorrect or incomplete information on your 433-A or B form, if your financial circumstances have changed significantly since you signed the installment agreement, if you fail to make your payment as agreed or fail to pay another tax on time or should you neglect to provide updated financial data when the IRS requests it, your agreement could be nullified. If the IRS has good reason to believe that you are attempting to elude the payment of your taxes, hiding your assets or preparing to flee the country they may also nullify your installment agreement. Barring any of these issues, however, you should be able to successfully pay your IRS tax monthly until it is paid in full.

Should you have any other questions regarding your past due taxes or an installment agreement with the IRS it is a good idea to contact an attorney who can provide further information.