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The materials contained herein below, are for informational purposes only, not intended to and may not be construed as rendering legal, tax or accounting advice. Your e-mails or phone calls to our firm seeking such advice do not create a CPA-client relationship, unless you have retained our firm in writing. For specific advice, please consult your adviser, or contact us.

IRS automatically waives estimated tax penalty for eligible 2018 tax filers

posted Aug 16, 2019, 10:09 PM by Zaher Fallahi

IR-2019-144, August 14, 2019

WASHINGTON — The Internal Revenue Service (“IRS”) is automatically waiving the 2018 estimated tax penalty for the more than 400,000 eligible taxpayers who already filed their federal income tax returns but did not claim the waiver.

The IRS will apply this waiver to tax accounts of all eligible taxpayers, so there is no need to contact the IRS to apply for or request the waiver.

Earlier this year, the IRS lowered the usual 90% penalty threshold to 80% to help taxpayers whose withholding and estimated tax payments fell short of their total 2018 tax liability. The agency also removed the requirement that estimated tax payments be made in four equal installments, as long as they were all made by January 15, 2019. The 90% threshold was initially lowered to 85% on January 16 and further lowered to 80% on March 22.

The automatic waiver applies to any individual taxpayer who paid at least 80% of their total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver available to them when they filed their 2018 return earlier this year.

"The IRS is taking this step to help affected taxpayers," said IRS Commissioner Chuck Rettig. "This waiver is designed to provide relief to any person who filed too early to take advantage of the waiver or was unaware of it when they filed."

Refunds planned for eligible taxpayers who paid penalty

Over the next few months, the IRS will mail copies of notices CP 21 granting this relief to affected taxpayers. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested Penalty relief. The agency emphasized that eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.

For those yet to file, the IRS urges every eligible taxpayer to claim the waiver on their return. This includes those with tax-filing extensions due to run out on Oct. 15, 2019. The quickest and easiest way is to file electronically and take advantage of the waiver computation built into their tax software package. Those who choose to file on paper can fill out Form 2210 and attach it to their 2018 return. See the instructions to Form 2210 for details.

Because the U.S. tax system is pay-as-you-go, taxpayers are required by law to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by having tax withheld from paychecks, pension payments or Social Security benefits, making estimated tax payments or a combination of these methods.

Like last year, the IRS urges everyone to do a "Paycheck Checkup" and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It's also an important step for those who made withholding adjustments in 2018 or had a major life change. Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two wage earner households, employees with nonwage sources of income and those with complex tax situations.

 

Zaher Fallahi, Tax Defense Attorney, CPA, licensed in California and Washington D. C., Tax Defense Attorney assists taxpayers with foreign gifts and tax problems nationwide. Tel.: (310) 719-1040, (714) 546-4272 and (877) 687-7558 toll free nationwide, E-mail   taxattorney@zfcpa.com

IRS Tax Withholding Estimator

posted Aug 11, 2019, 8:54 PM by Zaher Fallahi

Source: IRS:    Tax Reform Tax Tip 2019-102

The IRS encourages everyone to use the Tax Withholding Estimator to perform a quick “paycheck checkup.”  This is even more important following the recent changes to the tax law for 2018 and beyond.

The Estimator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work. There are several reasons to check your withholding:

1- Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. 

2- At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks. 

If you are an employee, the Tax Withholding Estimator helps you determine whether you need to give your employer a new Form W-4, Employee's Withholding Allowance Certificate (PDF). You can use your results from the Estimator to help fill out the form and adjust your income tax withholding.  If you receive pension income, you can use the results from the estimator to complete a Form W-4P (PDF) and give it to your payer.

 

Zaher Fallahi, CPA, Tax Attorney, advises taxpayers in resolving their tax problems, Offshore Accounts, FBAR, FATCA, OVDP, Streamlined Procedures and Foreign Gifts.  Tel: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), Toll Free Nationwide 877-687-7558  e-mail taxattorney@zfcpa.com

These summer actions might benefit taxpayers who itemize

posted Aug 3, 2019, 7:01 PM by Zaher Fallahi

Source, IRS:    Tax Reform Tax Tip 2019-102

Summer is a season when people have fun, yet get things done. From buying a new house to cleaning their old one, taxpayers who itemize their deductions may be doing things this summer that will affect the tax returns they file 2019 taxes.

The higher standard deduction under the new tax law means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep the following tips in mind:

1. Deducting state and local income, sales and property taxes

The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. These deductions are limited to a combined, total deduction of $10,000 and it is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.

2. Refinancing a home. The deduction for mortgage interest is also limited

 It is limited to interest paid on a loan secured by the taxpayer’s primary residence or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in item 3 below; “buying a home.”

3. Buying a home. 

Taxpayers who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It is $375,000 if married filing separately. For existing mortgages, if the loan originated on or before December 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

4. Donating items and deducting money

Many taxpayers do a good summer clean-out in summer. They often find unused items in good condition they can donate to a qualified charitable organization. These donations may qualify for a tax deduction. Taxpayers must itemize deductions to deduct and must have proof of all donations. Taxpayers can use the Interactive Tax Assistant to help determine whether they can deduct their charitable donation.

5. Deducting mileage for charity

Driving a personal car while donating services on a trip sponsored by a charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

6. Reporting gambling winnings and claiming gambling losses

Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. They can use the Interactive Tax Assistant to find out more about reporting gambling winnings and  losses next year.

 

Zaher Fallahi, CPA, Tax Attorney, advises taxpayers including Americans Living Abroad, in resolving their tax problems and undisclosed foreign bank accounts; FBAR, FATCA and Offshore Voluntary Disclosure Program (OVDP).  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), Toll Free Nationwide 877-687-7558  e-mail taxattorney@zfcpa.com

Taxpayer Bill of Rights

posted Jun 6, 2019, 9:30 PM by Zaher Fallahi

Source: IRS Issue Number:    IR-2019-44

 

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Explore your rights and our obligations to protect them.


1-The Right to Be Informed

Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.


2-The Right to Quality Service

Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.


3-The Right to Pay No More than the Correct Amount of Tax

Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.


4-The Right to Challenge the IRS’s Position and Be Heard

Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.


5-The Right to Appeal an IRS Decision in an Independent Forum

Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.


6-The Right to Finality

Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

 


7-The Right to Privacy

Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.


8-The Right to Confidentiality

Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.


9-The Right to Retain Representation

Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.


10-The Right to a Fair and Just Tax System

Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely.

 

Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

 

 

Zaher Fallahi Certified Public Accountant (CPA), Esq., is licensed in California and Washington D. C., and assists taxpayers with their Tax Audit Representation and Tax Return Preparation nationwide. For an Attorney-Client Privileged consultation please call: 

 

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County) 

(877) 687-7558

E-mail taxattorney@zfcpa.com         Zaher Fallahi Tax Attorney

Part-time bookkeeper needed

posted May 18, 2019, 11:02 PM by Zaher Fallahi

Costa Mesa small CPA firm needs a part-time bookkeeper. CPA firm experience and working knowledge of QuickBooks is a must. Resume and compensation history and requirement to    zfallahi@zfcpa.com

IRS Reminds of April 15 FATCA and FBAR Filing

posted Apr 6, 2019, 11:24 PM by Zaher Fallahi   [ updated Apr 6, 2019, 11:38 PM ]

IRS reminds those with foreign assets of annual April 15 FBAR deadline

 Source: Issue Number:    IR-2019-63   

WASHINGTON — The Internal Revenue Service today reminded U.S. citizens and resident aliens, including those with dual citizenship, that if they have a foreign bank or financial account, April 15, 2019, is the deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR). They should also check to see if they have a U.S. tax liability and a federal tax return filing requirement.

Here is a rundown of key points to keep in mind:

Deadline for reporting foreign accounts
The deadline for filing the FBAR is the same as for a federal income tax return. This means that the 2018 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 15, 2019. FinCEN grants filers missing the April 15 deadline an automatic extension until Oct. 15, 2019, to file the FBAR. Taxpayers don’t file the FBAR with individual, business, trust or estate tax returns. Taxpayers who want to paper-file their FBAR must call the Financial Crimes Enforcement Network’s Regulatory Helpline to request an exemption from e-filing.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2018. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

IRS ends Offshore Voluntary Disclosure Program (OVDP)

The IRS will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, whistleblower leads, civil examination and criminal prosecution. The IRS continues to use streamlined filing compliance procedures that will remain in place and be available to eligible taxpayers. But, as with OVDP, the IRS said it may end the streamlined filing compliance procedures at some point.

Most people abroad need to file
An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.

A special extended filing and payment deadline applies to U.S. citizens and resident aliens who live and work abroad. For U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, the income tax filing and payment deadline is June 17, 2019. Taxpayers have two extra days because the normal extended deadline—June 15—falls on a Saturday this year.  The same applies for those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.

Interest, currently at the rate of 6 percent per year, compounded daily, will apply to any payment received after the regular April 15 deadline.

Nonresident aliens who received income from U.S. sources in 2018 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is April 15.

Special income tax return reporting for foreign accounts and assets
In addition to the annual Report of Foreign Bank and Financial Accounts (FBAR) requirements outlined above, federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report these items for the country in which each account is located.

Also, separate from the foreign accounts reporting requirements above, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Specified domestic entity reporting
Certain domestic corporations, partnerships and trusts that are considered formed for the purpose of holding (directly or indirectly) specified foreign financial assets must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

Report in U.S. dollars
Any income received, or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FinCen Form 114 and IRS Form 8938 require the use of a December 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Expatriate reporting
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2018 must file a dual-status alien tax return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service, Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Choose Free File or e-file
U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their tax returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $66,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return. Both the e-file and Free File electronic filing options are available until Oct. 15, 2019, for anyone filing a 2018 tax return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file a Form 1040NR.

 End of IRS Reminder

Zaher Fallahi, Top Tax Attorney, CPA, licensed in Washington D. C. and California, advises taxpayers nationwide, including Americans Living Abroad, with Tax Returns, Offshore Voluntary Disclosure Program, Streamlined Procedures, FBAR and Late FBAR, Foreign Gifts and Late Foreign Gifts, and International Information Filing.  For an Attorney-Client Privileged Consultation, Call:

(877) 687-7558 Nationwide Toll Free

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County)

E-mail taxattorney@zfcpa.com

Not reporting offshore accounts is a crime

posted Mar 17, 2019, 12:07 AM by Zaher Fallahi

IRS: Failure to report offshore funds remains a crime; IRS includes topic on its 2019 ‘Dirty Dozen’ scams list

WASHINGTON — Hiding money or assets in unreported offshore accounts remains on the Internal Revenue Service’s “Dirty Dozen” list of tax scams for 2019, the agency said today.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, including offshore schemes. Many of these peak during filing season as people prepare their tax returns or seek help with their taxes.

Taxpayers should remain wary of offshore avoidance schemes. Following the IRS intensifying efforts on offshore issues in recent years, many taxpayers have already voluntarily disclosed their participation in these schemes. The IRS conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitution.

“Offshore evasion remains a primary focal point of overall IRS enforcement efforts,” said IRS Commissioner Chuck Rettig. “Our Criminal Investigation and civil enforcement teams work closely with the Justice Department in the international arena to ensure our nation’s tax laws are followed. Taxpayers considering hiding funds or assets offshore should think twice; the civil penalties and criminal sanctions can be severe.”

Illegal scams like these can lead to significant penalties as well as interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

 

Hiding income offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. They then access the funds using debit cards, credit cards or wire transfers. Others have used foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant fines, as well as the possibility of criminal prosecution.

The IRS reminds taxpayers who have failed to properly report their offshore investments or pay tax on these investments’ income, to come forward.  Since the circumstances of taxpayers vary widely, the IRS offers several options for addressing the noncompliance.

 

Third-party reporting

Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements between the U.S. and partner jurisdictions, automatic third-party account reporting continues. The IRS receives more information regarding potential non-compliance by U.S. persons because of the Department of Justice’s Swiss Bank Program. This information makes it less likely that offshore financial accounts will go unnoticed by the IRS.

Penalties for failure to properly report offshore transactions can be severe. A summary of these penalties as well as a comparison of what must be reported on Form 8938, Statement of Specified Foreign Financial Assets, and the Report of Foreign Bank and Financial Accounts (FBAR) can be found on IRS.gov.

 

Zaher Fallahi, CPA, Tax Attorney, nationwide representation with Offshore Accounts (OVDP), Streamlined Procedures, Foerign Bank Account Report (FBAR), Foreign Account Tax Compliance Act (FATCA), Taxation of Americans Living Abroad and Foreign Gifts. For an Attorney-Client Privileged Consultation, Call:

 (877) 687-7558 Nationwide Toll Free

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County)

E-mail taxattorney@zfcpa.com

Each and every taxpayer has a set of fundamental rights they should be aware of

posted Mar 15, 2019, 10:31 PM by Zaher Fallahi

Source: IRS Issue Number:    IR-2019-44

 

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Explore your rights and our obligations to protect them.


1-The Right to Be Informed

Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.


2-The Right to Quality Service

Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.


3-The Right to Pay No More than the Correct Amount of Tax

Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.


4-The Right to Challenge the IRS’s Position and Be Heard

Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.


5-The Right to Appeal an IRS Decision in an Independent Forum

Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.


6-The Right to Finality

Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

 


7-The Right to Privacy

Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.


8-The Right to Confidentiality

Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.


9-The Right to Retain Representation

Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.


10-The Right to a Fair and Just Tax System

Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

 

Zaher Fallahi Certified Public Accountant (CPA), Esq., is licensed in California and Washington D. C., and assists taxpayers with their Tax Audit Representation and Tax Return Preparation nationwide. For an Attorney-Client Privileged consultation please call: 

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County) 

(877) 687-7558

E-mail taxattorney@zfcpa.com

Avoid improper claims for business credits; topic makes this year’s IRS ‘Dirty Dozen’ list

posted Mar 14, 2019, 9:18 PM by Zaher Fallahi   [ updated Mar 14, 2019, 9:31 PM ]

IIRS Issue Number:    IR-2019-42

 WASHINGTON — The Internal Revenue Service today warned taxpayers to avoid improperly claiming various business tax credits, a common scam used by unscrupulous tax preparers.

 

Two credits often targeted for abuse by shady tax return preparers are the Research Credit and the Fuel Tax Credit. Each of these credits has specific eligibility criteria.

 

Each year, the IRS publishes its “Dirty Dozen” list of common scams that taxpayers may encounter any time. These can peak during the tax filing season as people prepare their tax returns or hire others to help with their taxes.

 

To combat these scams, the IRS warns people to watch out for suggestions to make improper claims on their tax return. Selecting a reputable tax professional can also help. The IRS reminds taxpayers that they are responsible for the information on their tax return no matter who prepares it.

 

Research Credit scams

Section 41 of the Internal Revenue Code provides a credit for increasing research activities, commonly known as the Research Credit. Congress enacted the credit in 1981 to provide an incentive for American private industry to invest in research and experimentation.

Improper claims for this credit generally involve a failure to participate in or substantiate qualified research activities and/or a failure to satisfy the requirements related to qualified research expenses.

 

To get the credit, a taxpayer’s research activities must, among other things, involve a process of experimentation using science with a goal of improving a product or process the taxpayer uses in their business or holds for sale, lease, or license. Activities specifically excluded from qualifying for the credit include research after commercial production, adaptation of an existing business product or process, foreign research and research funded by the customer. Qualified research activities also do not include activities where there is no uncertainty about the taxpayer’s method or capability to achieve a desired result.

 

The IRS often sees expenses for nonqualified activities included in claims for the Research Credit. In addition, qualified research expenses include only in-house wages and supply expenses and a portion, typically 65 percent, of payments to contractors. Qualified research expenses do not include expenses without a proven nexus between the claimed expenses and the qualified research activity.

 

Steps to properly claim the Research Credit

Eligible taxpayers may claim up to 20 percent of qualified expenses above a base amount by completing and attaching Form 6765, Credit for Increasing Research Activities, to their tax return. For tax years beginning in 2016, eligible small businesses may use the Research Credit to offset the alternative minimum tax. Also, qualified small businesses may elect to use a portion of the Research Credit as a payroll tax credit against the employer’s portion of the Social Security tax. They make this election on Form 6765 and must complete and attach Form 8947 Qualified Small Business Payroll Tax Credit for Increasing Research Activities, to their Form941, Employer’s Quarterly Federal Tax Return.

 

To claim the Research Credit, taxpayers must evaluate and document their research activities contemporaneously (that is, over the period of time in which the research occurs) to establish the amount of qualified research expenses paid for each qualified research activity. While some expenses may be estimated, taxpayers must have a factual basis for the assumptions used to create the estimates.

 

Unsupported claims for the Research Credit may subject taxpayers to penalties. Taxpayers should carefully review any reports or studies prepared by third parties to ensure they accurately reflect their activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties

 

Fuel Tax Credit scams

 

The Fuel Tax Credit is generally limited to off-highway business use or use in farming. For that reason, it is not available to most taxpayers. Still, the IRS routinely finds unscrupulous tax return preparers who have enticed sizable groups of taxpayers to inflate their refunds by erroneously claiming the credit.

 

Improper claims for the fuel tax credit generally come in two forms. First, an individual or business may make an erroneous claim on their otherwise legitimate tax return. Second, identity thieves file bogus claims, often as part of a broader fraudulent scheme.

 

The IRS has stepped up efforts to improve Fuel Tax Credit compliance. IRS processing systems, including new identity theft screening filters, are now stopping a significant number of questionable Fuel Tax Credit refund claims.

 

Fraud involving the Fuel Tax Credit is considered a frivolous tax claim and can result in a penalty of $5,000.

 

Additionally, illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

 

Properly claiming the Fuel Tax Credit

The federal government taxes gasoline, diesel fuel, kerosene, alternative fuels and certain other types of fuel. Certain commercial uses of these fuels are nontaxable. Taxes paid for fuel to power vehicles and equipment used off-road may qualify for the credit and may include farm equipment, certain boats, trains and airplanes. Individuals and businesses that purchase fuel for one of those purposes can claim the credit by filing Form 4136, Credit for Federal Tax Paid on Fuels.

 

Zaher Fallahi Certified Public Accountant (CPA) since 1983, is licensed in California and Washington D. C. , and focuses on assisting individuals and businesses with their tax audit, taxes, accounting, and tax planning. For tax audit representation through our affiliate Zaher Fallahi Tax Attorney, please call: 

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County) 

(877) 687-7558 Toll Free, click here for Zaher Fallahi Tax Attorney

E-mail taxattorney@zfcpa.com

 

Tax Time Guide: ‘Where’s My Refund?’ remains easiest way to check tax refund status

posted Mar 2, 2019, 10:58 PM by Zaher Fallahi

Source: IRS   Issue Number:    IR-2019-25    Inside This Issue

 

Tax Time Guide: ‘Where’s My Refund?’ remains easiest way to check tax refund status

WASHINGTON — The Internal Revenue Service today reminds taxpayers that the easiest way to check on a tax refund is “Where’s My Refund?,” an online tool available at IRS.gov and through the IRS2Go app. The fastest way to get a refund is to use IRS e-file and direct deposit.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

The IRS issues nine out of 10 refunds in less than 21 days. Refunds for those claiming the Earned Income Tax Credit or the Additional Child Tax Credit had to be held, by law, until mid-February. Taxpayers claiming these credits should begin to see their refunds deposited in bank accounts February 27.

Using the “Where’s My Refund?” online tool, taxpayers can start checking on the status of their return within 24 hours after the IRS receives an e-filed return or four weeks after the taxpayer mailed a paper return. The tool has a tracker that displays progress through three phases: (1) Return Received; (2) Refund Approved; and (3) Refund Sent.

All that is needed to use “Where’s My Refund?” is the taxpayer’s Social Security number, tax filing status (such as single, married, head of household) and exact amount of the refund claimed on the return.

“Where’s My Refund?” is updated no more than once every 24 hours, usually overnight, so there’s no need to check the status more often.

Taxpayers should only call the IRS tax help hotline on the status of their refund if it has been:

1-21 days or more since the return was e-filed,

2- Six weeks or more since the return was mailed, or when

3- “Where’s My Refund?” tells the taxpayer to contact the IRS.

Taxpayers who owe should pay as much as possible to minimize interest and penalty charges

Taxpayers should visit IRS.gov/payments to explore their payment options. They can pay online, by phone (telephone numbers available at IRS.gov/payments) or using their mobile device and the IRS2Go app. Payment options available include electronic funds withdrawal (during e-file), bank account (Direct Pay), debit or credit card, and the Electronic Federal Tax Payment System (EFTPS).

Taxpayers unsure of the amount they owe they can visit IRS.gov/account, and when logged in they can view their balance, payment history, and make a payment.

It’s especially important in 2019 for taxpayers who had an unexpected result when they filed their 2018 tax return to perform a Paycheck Checkup now to determine whether the right amount is being withheld for their 2019 taxes. Taxpayers who do need to adjust their withholding should submit a 2019 Form W-4, Employee’s Withholding Allowance Certificate, to their employer as soon as possible.

Payment options for those who owe but can’t pay in full

Most taxpayers will be affected by major tax law changes, and while many will get a refund, others may owe tax. Many of those owing tax may qualify for a waiver of the estimated tax penalty that often applies. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for details.

The IRS urges people with a filing requirement and a balance due to file by the April 15 due date even if they cannot pay in full. Taxpayers in this situation should pay what they can and then consider a payment plan for the rest.

Taxpayers who are unable to full pay what they owe should act quickly. Several payment options are available including:

1- Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option, and an agreement can usually be set up in a matter of minutes. Online applications to set up one of these plans are available Monday – Friday, 6 a.m. to 12:30 a.m.; Saturday, 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight. All times are Eastern time.

2- Installment Agreement — Installment agreements paid by direct deposit from a bank account or payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Taxpayers who don’t qualify for a payment agreement may still pay by installment. Certain fees apply.

3- Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves.

4- Offer in Compromise — Some struggling taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.

In addition, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed from the convenience of home or office.

End of IRS Issue:    

Zaher Fallahi Certified Public Accountant (CPA) since 1983, is licensed in California and Washington D. C., and assists taxpayers in Tax Returns Preparation, installment plan, offer-in-compromise, and representation before the IRS Tax Defense Attorney throughout the United States. Tel. : (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), and (877) 687-7558 toll free nationwide, E-mail   taxattorney@zfcpa.com

 

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