The IRS Fresh Start Program was created to offer a convenient option to individuals and small corporations that are struggling with paying taxes. This program has been greatly beneficial for several individuals, but it is crucial to understand both the pros and cons before you hop on. Today, we shall look closely at what this program covers, including its positives and drawbacks. So, keep reading below.
IRS Fresh Start Program Overview
The IRS Fresh Start Program was launched by the United States Internal Revenue Service. It aids taxpayers and small enterprises with outstanding tax dues. Its purpose is to simplify the process of repaying taxes and help protect taxpayers from forceful IRS collection methods.
Installment Agreements
The Fresh Start Program expanded access to short-term and long-term payment plans. This allows taxpayers to make smaller monthly payments over a longer duration.
Tax Liens
The program increased the threshold at which the IRS generally files a Notice of Federal Tax Lien. This means that the IRS will not file a lien unless the taxpayer owes more than $10,000, which is up from the older threshold of only $5,000.
Offers in Compromise (OIC)
Taxpayers have the opportunity to resolve their tax payments for a reduced amount through this program. The IRS deploys a more lenient approach in assessing a taxpayer's payment capacity. This expands the option of OICs to a larger audience.
Penalty Relief
For unemployed taxpayers, the program provides relief from penalties. If you are unemployed for 30 consecutive days or greater, or if you are self-employed and face a 25% reduction in income, you may qualify for this relief.
The Fresh Start Program was designed to give taxpayers in debt a "fresh start" with their tax obligations. It is generally a good idea to consult with a tax professional to understand all the nuances and benefits available for your specific situation.
Advantages of the Fresh Start Program
Simpler Access to Installment Agreements
More taxpayers can use the instalment agreement option under this program. This means paying back taxes becomes more manageable.
Greater Lien Threshold
Before the Fresh Start Program, the IRS could file a tax lien for owed amounts as low as $5,000. The program increased this threshold to $10,000, giving taxpayers more ease.
Extended Payment Time
The program extended the time to pay from 5 to 6 years. This provides more time for taxpayers to pay their dues easily.
Help for Financially Unstable Individuals
The Fresh Start Program made it easier for taxpayers to settle their tax debts for less than the full amount they owe. The IRS now looks more favourably upon OICs by offering an option for those who are to pay their tax debt. For certain unemployed taxpayers, the program offers a 6-month grace period from the failed penalty payments.
Disadvantages of the Fresh Start Program
Not Suitable for Everyone
The Fresh Start Program is designed primarily for individual taxpayers who owe up to $50,000 and businesses that owe up to $25,000. Those with larger debts might not find this program as beneficial.
Accumulating Interest
While instalment agreements can make payments more manageable, interest continues to accrue on the outstanding balance. This results in greater overall debt.
Demands Strict Adherence
If you are under an instalment agreement and miss a payment, the IRS can reject your agreement. The IRS can also enforce more aggressive collection actions.
OIC Acceptance Is Not Definite
While the program has made it easier to apply for an OIC, not all offers are accepted. The IRS will evaluate your ability to pay, income, expenses, and asset equity to decide.
Possible Public Scrutiny
When the IRS accepts an OIC, it is a public record. Some taxpayers might not be comfortable with their financial situations being publicly available.
Endnote
The IRS Fresh Start Program offers several benefits for taxpayers facing financial troubles. Make sure to consult a tax professional before you proceed to make sure you understand the tax complexities and what best fits your current financial condition.
It’s important to remember that tax attorneys from a reputable law firm have a wealth of resources at their disposal to help you stay on top of your situation and ensure you receive the best possible outcome with minimal stress. If you’re having trouble with your taxes, it may be time to talk to an attorney about ways they can help you solve your tax issues or perhaps even avoid them altogether. Here are three ways a tax attorney can help with your tax problems.
1. Avoid Jail Time
If you're facing tax-related charges, your first thought is probably how you can keep from going to jail? Jail time for tax evasion is a real possibility if you are found guilty of breaking federal tax laws. However, you can use particular strategies to lessen your chance of being jailed. One of these strategies involves hiring an attorney immediately to help defend against these charges.
Regardless of your particular criminal charge, your attorney can go to bat for you in court and fight for leniency. Most people don't realise that federal law allows someone convicted of a misdemeanour or nonviolent felony to ask for probation instead of jail time. With a bit of luck and some clever legal manoeuvring, your attorney may be able to get you off without serving any time behind bars.
2. You Won’t Face Severe Penalties
If you’re facing an IRS audit or a criminal investigation, your life can quickly become unbearable. An attorney can help reduce your fines and even prevent you from being charged in court altogether.
Tax law can be complicated, but an experienced lawyer will ensure that every angle in your case is addressed and that you receive the best possible outcome based on your potential penalty. An attorney can also assess if you’re eligible for an IRS instalment plan, which allows you to pay off your debt over time. In some cases, they may even get some of your fines and penalties waived through negotiation.
3. Deal With Tax Authorities On Your Behalf
Many taxpayers feel confused, intimidated, or even hopeless when dealing with a government agency. You might not have all of the information you need to answer questions, and it's easy to feel that you don't know what you're doing. Additionally, it can be challenging to reach out and contact tax authorities by yourself.
If you’re being audited or under investigation, your tax attorney can communicate on your behalf. They have all of your financial records, and they can explain your situation more clearly than you can on paper. An experienced attorney will clear up any confusion or potential issues right away. The lawyer will also handle complex disagreements with a state or federal agency and negotiate a settlement.
Endnote
If you’re facing any tax trouble, you might not know where to turn. There are so many different types of taxes with diverse issues, and each one requires a particular form of solution to be adequately handled. If you're unable to resolve your tax issue with the IRS on your own, consider hiring an attorney to help you out.
To move abroad and leave the US can be a life-changing decision and is of course a big step. To make this step happen, a lot of things need to be considered before you are actually settled in your host country. How should you apply for a visa? What about the visas of your family? How can you apply for rental property abroad? A lot of things need to be arranged locally, but for US citizens there is an extra requirement to consider which is often forgotten by US expats. This could result in an annoying administrative burden and a risk of being audited by the IRS. This article outlines why you should file, what to consider and how to file.
Specific IRS forms for Americans abroad
When you as a US citizen live abroad, all your foreign income should be reported on your form 1040 as usual. As you most likely also pay tax locally, form 1116 and form 2555 make it possible to reduce your US tax bill by claiming the Foreign Tax Credit or the Foreign Earned Income Exclusion.
Different tax terminology
The tax terminology is very different from how it is in the US. Form 1116 and form 2555 use Foreign Tax Credit, Foreign Earned Income Exclusion, Foreign Housing Exclusion, Physical Presence tests and many more. This does not make it easy to easily understand your return.
Tax software not supporting the expat forms
Most tax software providers do not support these specific forms as they are not specifically designed for the expat market, but more for the US domestic market. Even if the forms are supported, it is still difficult to complete as the tax terminology is different. However, there is some DIY US expat tax software designed specifically for the US expat market that can aid in quickly e-filing US tax returns with the IRS platform.
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Tax professionals not familiar with form 1116 and 2555
There is a good chance that your trusted tax professional is not familiar with the forms 1116 and form 2555 as they are specifically for Americans abroad.
How to file from abroad
These are the options you have as a US expat:
- Do it yourself and fill the forms 1116 and/or 2555 yourself.
- Use DIY software.
- Hire a US expat tax professional. This can easily cost you $500 or even more.
Conclusion
Clearly, you need to file your US taxes when living abroad. This is often forgotten and could result in unwanted hassle which you really just don’t want. A lot of Americans will owe no taxes, but still have the obligation to file. Just file, it is not that difficult to get your US taxes filed!
Also expect that these forms will be new to you and that different terminology will be used from that which you are used to. These new forms 1116 and form 2555 are often not supported by tax software and you should check whether your trusted tax professional is able to complete these forms.
When you have plans to move abroad, just research the options to make sure you pick the right fit to file your US taxes.
That's because both corporate and personal finance jobs call for people with diverse skill sets, varied backgrounds, and open minds. So, if that sounds like you, find out how to break into this rewarding, growing segment of the modern economy. Here are three points to keep in mind before making the leap into the world of numbers, metrics, money, and all things financial.
You Should Enjoy Working with Numbers
In addition to being the type of person who pays attention to details, you should have a facility and at least a modest level of enjoyment when it comes to working with numbers. That doesn't mean you need to be a math genius or statistical expert, but if quantitative and math-related subjects are not your cup of tea, then this field is probably not for you. However, if you did well in high school and college math courses and have even a passing interest in banking, business, the stock market, economics, or similar subjects, then you'll easily find a home in the wide world of financial careers.
Degrees are Worth the Effort
One of the traditional aspects of the financial services sector is that college and graduate degrees are highly valued. There aren't a lot of freelancers for one very simple reason in that many state and federal laws regulate who can offer services as accountants, analysts, consumer counselors, and loan advisors. If you want to rise quickly in this area, it only makes sense to obtain a college degree. Even if you decide later on to go in alone as a sole proprietor, most of your prospective clients will want to know about your academic credentials.
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Getting a student loan to pay for your undergrad or graduate education is a wise investment. People who hold MBAs, master's degrees in business administration, CPAs, certified public accountancy licenses, and CFPs (certified financial planning certificates) all need to have college diplomas, at least, to get jobs in their line of expertise. But pay rates are high and opportunities are many, so it's no surprise that student loans are the primary way many of these skilled folks begin their educational journeys.
Government Work is Always Available
The organisation known as the IRS, or Internal Revenue Service, is a part of the US Treasury Department and are charged with seeing to it that working adults pay the right amount of taxes each year. Of course, the IRS gets its share of negative media attention every April, when the majority of citizens have to settle their tax bills. The good news, for working professionals anyway, is that the IRS regularly hires thousands of people with financial skills. The jobs offer very good pay, the chance to travel, excellent benefits, and one of the best retirement plans around. If you are averse to corporate or solo work, the IRS might be the place to ply your skills.
While it’s typical for the government to come after you for under-declaring your business income, you can bet it won’t give back money that should have been deducted from the corporate taxes you paid.
So, when paying corporate taxes to the IRS, you need to make sure you're calculating the right amount by keeping an eye out for these four tax credits:
1. Document expenses
Running a business requires managing a lot of paperwork. The good news is that the amount you pay to get documents printed can be deducted from your taxes. Acquiring or processing legal documents such as business plans and proposals is also tax-deductible. You might want to keep receipts for your document expenses and include the professional fees for attorneys or accountants tasked with preparing these documents. You will be surprised by how much you can save.
2. Cost of using vehicles
If you have a car you use to attend meetings with clients or transfer from one work location to another, your vehicle expenses are considered deductible. For this, you only need to measure the mileage the car has covered. There are apps that can help you measure your mileage so you have a better estimate of your deductibles. Take note that this is applicable only for business purposes, so personal travel should therefore be calculated as personal expenses.
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3. Research costs
Developing a new solution requires a lot of research and testing, which can drive up the cost of coming up with a new product. Luckily, you can offset these costs by using tax credits for research, especially if it is scientific. Under R&D credit rules, you can choose to deduct research costs immediately or amortize them. It is important to point out, however, that not all research activities are deductible. To be sure, you will need to refer to the IRS’s list of qualified research activities.
4. Miscellaneous fees
There are also other items you can write off. It’s this category that is the most neglected. You will have to be very detail-oriented in order to find these deductions, ranging from bank charges to payments in petty cash, from journal subscriptions to website maintenance expenses. It becomes manageable when you track your expenses closely using tools like tools like Hurdlr. The app can help you keep tabs on all your deductibles in real-time so you don’t have to waste time reviewing your expenses come tax season.
These are just some of the tax breaks you should look into if you want to save a lot of money. There are more than we’ve listed here, no doubt, so be sure that all your expenses are accounted for. You never know what routine expenses for your business can get you some money back on your tax return!
It's not just citizens of seven Muslim-majority countries who are facing a US-enforced travel ban.
Under new rules, American citizens too could soon be banned from travelling by having their passports revoked for unpaid taxes, warns the boss of one of the world's largest independent financial advisory organizations.
Nigel Green, founder and CEO of deVere Group, is speaking out as the America's Internal Revenue Service (IRS) publishes details on its website of new powers to revoke US passports for taxes that remain unpaid.
He comments: "As President Trump hits out at the judge who has blocked his travel ban for citizens of seven Muslim majority countries, there are more travel complications from US authorities being introduced – ones that could prevent US citizens from travelling internationally.
"The IRS is to have a new tool to collect taxes. The new law will use the threat of stopping people being able to travel by revoking passports if there are unpaid taxes. It was passed by Congress in 2015 and details are now on the IRS website."
Mr Green continues: "If you have seriously delinquent tax debt, the IRS can certify that to the State Department. The Department generally will not issue or renew a passport to you after receiving certification from the IRS. The IRS website confirms that certifications will begin in early 2017."
He goes on to say: "This latest move would likely affect Americans living abroad most acutely for two reasons.
"First, because they would typically use their passports more often – not only for travel but for administrative matters, such as rental contracts, in their countries of residence.
"And second, since the worldwide rollout of the highly controversial Foreign Account Tax Compliance Act, or FATCA, in 2014, tax returns have become more complex, onerous and burdensome for US expats due to additional reporting requirements.
"Indeed, in our experience of working with US citizens who live abroad, 35 per cent are now likely to make a mistake on their tax return and/or file late due to the new complexities."
Mr Green concludes: "For US citizens who are resident overseas, the IRS' latest weapon to collect taxes, means it is more important than ever to stay on top of your taxes and file on time and correctly.
"With this in mind it's recommended that before submitting their tax returns they have them checked by an advisor with the relevant cross-border experience."
Mr Green concludes: "FATCA is a toxic law on many levels and there are renewed and strengthened efforts being made to have it repealed. But until that happens, Americans overseas must adhere to the FATCA rules or face the heavy consequences."
Earlier this week, the deVere CEO launched the Washington-based Campaign to Repeal FATCA, and with co-leader, Jim Jatras, a leading authority on FATCA, is assembling a team of experienced DC professionals to push the repeal effort over the top.
(Source: deVere Group)
