April 15th is just around the corner!

Today is March 31st. That means April 15th is only 15 days away. If you haven't filed your taxes yet, do it now or apply for an extension.

Mortgage Forgiveness Debt Relief Act: How it will affect Your Income Taxes

What exactly is the Mortgage Forgiveness Debt Relief Act and how does it work?

It’s a government assistance plan for home owners that have had their homes foreclosed on and their debt forgiven. Normally when you have a lender forgive a debt, you would have to include the amount forgiven as income on your taxes. Under the Mortgage Forgiveness Act the debt amount forgiven doesn’t have to be reported as income. This act was enacted primarily to help those suffering from the recent sub prime lending crash.

Without the Mortgage Forgiveness Debt Relief Act I would have to report any forgiven debt as income on my tax return. Why do I have to report that as income if I never see any actual money?

Because when you’re debt is forgiven the IRS considers it as paid off. Since you no longer owe that amount the IRS considers that amount as extra income since you no longer are in debt.

Does the Debt Relief Act apply to multiple properties that I own or only my primary residence?

It only applies to your primary residence. Any other debt forgiveness on other properties you own does have to be reported on your income tax return.

Is the Mortgage Forgiveness Debt Relief Act only available to people who lost their homes because of the sub-prime market or can any home owner take advantage of it?

The upper limit of the debt is $2 million so you probably don’t have to worry about that. It can be used on any forgiven debt from 2006-2009.

It applies to all debt forgiveness for homeowners during the time period mentioned above.

What if I had refinanced my home? Can I still qualify?

Yes you can, but according to the IRS the Mortgage Forgiveness Debt Relief only applies to the original principle debt before your home was refinanced.

Now you have the smoking gun…Use it!

The IRS Reports on the Latest Internet Scams

I know that you're already savvy with the internet and wouldn't fall prey to these tax scams, but just in case here's a link to a recent IRS press release going over some of the newest scams used to cheat Americans out of their tax refunds.

http://www.irs.gov/newsroom/article/0,,id=155682,00.html

IRS Tax Debt: The Questions You Wanted Answers to!

I'd like to thank everybody who has sent me questions about their tax debt problems. I'd like to share some of the more common questions so that you can avoid tax debt.

I’ve been told that you can get your IRS debt wiped out if you were divorced and the debt was because of something your ex did. Is that true?

Yes, it’s called Innocent Spouse Relief. It can be claimed under certain circumstances such as: the debt had to have primarily been the ex-spouses, you didn’t know about the debt, or your ex-spouse was abusive to you. Under those circumstances you can apply for Innocent Spouse and have your tax debt removed.

I have an IRS tax debt and I have no problem paying it off, but I don’t think I should pay the interest or penalties. What can I do to get out of paying those?

There’s nothing you can do about IRS interest. The only way to pay less interest is to pay the debt off quicker. Now you can get the penalties removed from your IRS debt under special circumstances that I refer to as catastrophic events. Some of the situations that the IRS will take into consideration are: drug and alcohol abuse; a death in the family; a life threatening disease or medical condition, embezzlement or theft for businesses.

Other wise you’re just going to have to bite the bullet and pay the interest and penalties.

I’m in a monthly payment plan with the IRS. If I skip a month, but make it up the next month will the IRS do anything to me?

The IRS will do plenty. If you miss a scheduled payment the IRS considers you to be in default of your payment agreement. They immediately send you an “intent to levy” notice and you have 30 days to appeal your payment arrangement. If you default a second time the IRS will not renegotiate a payment plan and you will become the victim of an IRS wage or bank levy.

Can the IRS just come into my house and take whatever they want? Isn’t that illegal?

The IRS doesn’t just show up at your door. They do give you multiple chances to find a way to deal with your debt, so when they show up ready to seize your stuff, do not be surprised.

IRS revenue agents are able to get a “writ of entry” from a Federal Judge in order to enter your home and seize your assets. And just so you know it is very easy for the IRS to get that writ, all they have to do is have the judge sign it.

Now you have the smoking gun…Use it!

Small Business Tax Filing: Forms You need to Avoid an IRS Tax Debt

It is tax time again… Are you ready to take care of your taxes for your small business? Make sure you have all the right forms to send in or you could be the victim of an IRS audit or worse, and IRS debt! Here are some of the forms you should have to keep track of your taxes and make sure you file your return correctly.

Tons of paperwork… Let’s go down the list of forms you should have to file your taxes, specifically the forms that have to do with your employees.

• W-4 Employee’s Withholding Allowance Certificate: This one is obvious. Any new hire you have has to fill this out. They have to let you know what their filing status is and how many exemptions they can claim. This form is critical because it determines how much in taxes you take out of their check.

• W-5 Earned Income Credit Advance Payment Certificate: If you have employees who are eligible for the Earned Income Credit can get part of their credit payment in advance when they fill out this form.
  

• W-2 Wage and Tax Statement: Again, this is the form everyone knows. It’s the form an employee receives at the end of the year showing their earnings as well as how much was taken out of their salary for taxes. As an employer you are responsible for making sure the W-2 is correct and the proper amount of taxes were taken out.
  
• 940 Employer’s Annual Federal Unemployment Tax Return: This is the form you need to fill out to show how much you paid out in unemployment.
  

• 941 Employer’s Quarterly Federal Tax Return: I don’t need to tell you how important this is! You have to file a 941 payroll tax every quarter, no exceptions. This form shows how much you paid your employees for the quarter and how much was withheld for taxes. You have to pay the IRS the withheld amount.
  
• 1099-MISC Miscellaneous: This is your income minus any applicable deductions. You also report any contractors you hired on this form as they’re not regular employees.

Just in case… Make sure you have copies of all these forms for both your employees and yourself. The IRS takes a special interest in small businesses and just waits for you to make a mistake so they hit you with a debt and come after you. Don’t let the IRS hurt your business because of a single form.

You may already have a copy, but just in case here’s the link to the IRS Employer’s Tax Guide.
Now you have the smoking gun…Use it!

Only ONE Month Left to File Your Taxes!

Ok, I know it's only March 14th, but the 15th is tomorrow and that leaves you with only one month to file your 2007 income taxes. Take some time (if you have it) to go back through my blog to get some tax tips.

Tax Protesters: Who are these Guys?

Don’t you wish you didn’t have to pay taxes? Well there’s a group of people generally labeled Tax Protesters who do just that. They don’t believe they should pay income tax and don’t. But why do they believe they don’t have to pay taxes? More importantly to you, if you join up will you get to stop paying taxes?

A frame of reference… As a former IRS-Hitman I can tell you that there hasn’t been a single court ruling supporting these groups. They have been denied again and again in federal courts. So why are they so insistent that they shouldn’t pay their income taxes like the rest of us?
Constitutional calamity… One of their major gripes is that the 16th Amendment to the Constitution is Unconstitutional. Just so you have a frame a reference the 16th Amendment which was ratified in 1913 states:

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

I’m not a Constitutional lawyer, but that seems pretty cut and dry to me. Tax protestors also have tried to convince courts that wages are not income and therefore shouldn’t be taxed.

An example… Recently action movie star Wesley Snipes was taken in by one of these Tax Protestors and now owes the IRS over $12 million dollars.

When it comes to tax protesters the law is very cut and dry: you must pay your income taxes. There is nothing in the Constitution that makes you exempt no matter how you would like it to be interpreted.

Now you have the smoking gun…Use it!

Cases of Tax Fraud

I came across this list of tax fraud committed in the construction industry and I thought it would be interesting to show you just how easy a little tax debt can turn into something that can ruin your life. Click here

The Fastest Way to Pay off an IRS Tax Debt

A fast paced world…You’re in debt to the IRS and you want it off your shoulders…right now! You’ve gone round and round with an IRS revenue officer, but they aren’t being much help. They just want to know about your assets and when you can pay the debt in full. And you keep telling the guy that if you had the money to pay off the debt you would.

So how can you pay off the IRS debt fast, fast, fast!
They will get your money…The fastest way is to of course pay off the debt in full, but you don’t have that kind of money…or do you? There’s a reason that IRS revenue officer wants to know about your assets or any other accounts that you might have squirreled away. Because the IRS wants to seize and sell it at auction in order to collect on your debt.

So do you have any assets you can sell? When you’re in debt to the IRS it may be time to tighten your belt.

Do you have a boat, or multiple cars…you may need to sell them. After all you’ll probably be able to get a better price for them then the IRS will.

Do you have any investment accounts like a pension or 401k? You may need to make an early withdrawal to pay off your debt. Just make sure you pay the taxes on the withdrawn money or you’ll owe the IRS all over again.

How about equity in your home or some other property? I know the way the home market is today may not allow you to take out an equity loan or refinance, but if you are able to you might want to consider it.

There are also credit cards and bank loans. I know you’re thinking that you don’t want to trade one debt for another, but trust the IRS-Hitman on this…the highest credit card interest rate is peanuts compared to the interest and penalties the IRS assesses on your debt.

The taxmen have other plans…The fasted way the IRS wants to pay off your debt would involve the following: they would levy your bank accounts, and other funds that you might have. They would seize your assets and property and sell it at auction which is almost always at a loss. And to add insult to injury they’ll put a tax lien on your credit so that you can’t get a bank loan, credit card, or any other method to pay back the lump sum.

Slow and steady…Of course there are slower ways to pay off the IRS including Offers in Compromise, Installment Agreements, and Penalty Abatements. But those can take a year or more and who has that kind of time.

Now you have the smoking gun…Use it!

Exerpt from the IRS-Hitman's 7 Steps to Real Tax Planning

I'm proud to present you with a free e-book giving you 7 steps to real tax planning. I've included the first step here so that you can see what you think. If you want to know how to get the rest of the 7 steps go to www.irs-tax-levy-hq.com and follow the instructions there.

Step 1
Pre-filing preparation:

Personal Tax:

Before you even begin the process of filing your tax return and hopefully getting a refund check you need to make some preparations. The first thing you will need to do is to get all of your paperwork organized and sorted.

How much paperwork you have to get together depends on your filing status, what deductions or credits you have, and whether you’re filing personal taxes or business taxes.

If you were employed for the tax year you will of course need your W-2’s from any jobs you had during the year. Most of you younger tax payers only have to worry about the W-2’s as you usually don’t have any other assets or investments that you need to report on.

If you have deductions or tax credits that you can claim you need to get all of that paperwork, as well as any receipts or invoices proving that the deductions and/ credits are legitimate. If you claim a substantial amount of deductions and credits then you are more likely to get audited and you will need proof to back up your claim.

Small Businesses Tax:

Being a small business owner or independent contractor is a bit more complicated. You still need to get together all of your paperwork and receipts to get any deductions or credits. You have to make sure that you have all invoices for goods and services you made money from over the year so that you can report your gross income correctly on your form 1099. You also have to make sure you have been up to date on your quarterly 941 payroll filings. Speaking of payroll filings, you also need to make sure that you’ve taken the correct amount of taxes out of your employee’s paychecks so that their taxes come out correct.

Once you have made sure you’ve gotten all of your paperwork together it’s time to start filing your taxes.

Now you have the smoking gun...Use it!

Appealing Your Tax Debt When You Believe the IRS is Wrong

An unpleasant surprise… Many of you find it to be a grave injustice when you receive a tax debt notification from the IRS. You’re sure you don’t owe this money, and damn it…you’re not going to pay. Just simmer down for a moment and let the IRS-Hitman give you some friendly advice. The IRS doesn’t care if you think you owe the money or not. They don’t care if you chose not to pay because they’re going to get the money they say you owe one way or another.

Are you confident? But you are certain you’re right then you can always appeal your case with the IRS to have your tax return looked at again, and possibly get the tax debt removed. Let me warn you though; the IRS does not like to admit they’re wrong; they will fight you tooth and nail to prove they’re right no matter the debt amount. If you’re serious about appealing your IRS tax debt you need to be prepared, and that’s where the IRS-Hitman comes in.
I do want to give you one warning directly from the IRS though:

"If the Tax Court determines that your case is intended primarily to cause a delay, or that your position is frivolous or groundless, the Tax Court may award a penalty of up to $25,000 to the United States in its decision.”

What do you do? So how do you go about getting your tax debt appealed? The IRS will send you a letter stating how much you owe them and that they expect payment immediately. Once you receive that letter you have 90 days to petition, in writing, a letter of protest requesting an appeal hearing.

It’s on your shoulders… Of course since you are appealing the IRS decision you better have some very good evidence to dispute their claim. So I hope you’ve saved all of your receipts, documents, bank statements, employer statements, etc…

You do not need legal representation to file an appeal; in fact you don’t even have to go to court. If you owe less than $25,000 you can claim a small case request and just go through the office of appeals where you will discuss the case with an IRS appeals representative. And before you think you would be walking into the lion’s den the appeals office is separate and independent from the IRS.

You can also take your case to tax court. Again you can represent yourself, but this is the big leagues so you may need the services of a tax attorney or a CPA to help represent you.
The moment of truth…Once all of the evidence has been reviewed and the case heard a decision is made. This isn’t your average court hearing, in fact you are guilty until proven innocent, and the burden of proof is on you, even if you have a tax professional helping your case.

If you’re able to prove the debt was wrong then it is erased and you don’t owe it. In fact you can even recoup some of your litigation costs for the tax hearing.

If, however, you weren’t able to approve your case then you still owe the balance, plus penalties and interest, plus the fees of the tax attorney.

A constant battle…You can fight the IRS but you must be fully prepared to do so. The IRS does not play fair and they are very poor losers.

Now you have the smoking gun…Use it!

The #1 Question in America...Where is My IRS Tax Refund?

Money in the bank…It is tax season and you’re licking your lips at the prospect of what you’re going to use your tax refund on. You filed your taxes as soon as you got your W-2 and now all you have to do is wait for your refund to come in…and wait, and wait, and…where’s your refund?

Bad news… If you were expecting a refund from the IRS and haven’t received one you may owe the IRS money in back taxes. So how can you find out if you owe a tax debt to the IRS? And is there anyway that you can get your refund if you do owe an IRS debt?

Go to the source…You can contact the IRS and find out if you do owe them and how much you owe. If the debt is from prior tax years then the IRS will tell you how far the debt goes back. At this point they’ll probably want to know how you intend to pay your debt and ask if you can pay the IRS right now.

Tell them nothing…If you do owe a debt, don’t answer any questions to the IRS over the phone. The IRS is just like the police, “…anything you say can be used against you.”

Check and recheck… Get your tax records together and make sure the numbers come out correct. If you’re certain the IRS made a mistake you can appeal the debt and get back your refund. However you have to prove to the IRS that they made the mistake and not you. More importantly you have to have every scrap of paper to show the IRS.

If you find you do owe the IRS then you will not be getting your refund back. What’s worse until the debt is paid off any future refunds will automatically be applied to your IRS tax debt.

Even worse…Is there anything worse than not getting a refund? You could get a tax refund and then a few months later you receive a letter from the IRS stating that you filed your taxes incorrectly and you need to pay the refund back!

It is all gone…What’s worse you’ve already spent the refund and now you don’t have any way to pay back the IRS the money you owe them.

…and recheck…Again you want to get all of your paperwork together and make sure you filed your return correctly. Make sure you have all your evidence to back up any tax deductions or tax credits that you claimed. But it’s rare for the IRS to reverse their decision once they’ve made it.

Up the creek…So you don’t have a tax refund, but instead have a tax debt and the IRS wants their money right now! The worst thing you can do is panic. There are a number of solutions available to you for taking care of an IRS tax debt, or if possible, getting your refund into your pocket.

Now you have the smoking gun…Use it!

Foreclosure and the IRS: How can You Avoid Owing the IRS after You Lose Your Home

Things aren’t looking so good… According to government statistics home foreclosures are at an all time high. Millions of Americans have no choice but to foreclose on their homes because they owe more on their mortgage loan then their house is worth. Is there anyway that you can turn this tragedy around on your tax return?

Everybody is suffering…Normally when you can’t afford to pay back the money you owe the mortgage lender the debt can be discharged. Needless to say this has hit lenders extremely hard. Prior to 2007 any remaining money left on your debt after the foreclosure had to be reported as income on your tax return.

Help on the horizon…In 2007 the Mortgage Debt Relief Act made it possible for Americans who had lost their homes due to the sub prime catastrophe to not have to report debt left over after a foreclosure as taxable income.

However not everyone can get assistance for that. There are requirements to getting a cancellation of your debt income.

· The foreclosure had to be a direct result of a decline in the home’s value

· Or the foreclosure had happen because of a change in your financial condition.

· The house had to actually be foreclosed on. If you chose to sell the house and your profit came up short, then you still have to report the debt income as taxable.

What can I do? So do you have to owe anything to the IRS if your home is foreclosed on? Well that depends on if after the foreclosure you received a financial gain from the sale, or a financial loss.

Get some pen and paper…To figure out if you owe or not here’s a simplified formula for figuring gain or loss:

Fair market value of the property minus the purchase price of the property equals a gain if the number is positive or loss if the number is negative.

If you have a gain you have to report it on your tax return as income. If there’s a loss you don’t have any income to report, however you can’t use the loss as a deduction on your taxes either.

To collect or not to collect…The IRS wants to be able to collect from you if you owe a debt to them. However if you can’t afford to pay your mortgage, it’s unlikely the IRS will get any money you might owe them. The Mortgage Debt Relief Act makes it possible to not have to owe the IRS.

Now you have the smoking gun…Use it!