IRS IS DROPPING THE HAMMER ON PEOPLE WHO OWE TAXES
The IRS is dropping the hammer. The IRS is sending out millions of Notices of Intent to Levy using Notice LT 11 to taxpayers who have not paid their taxes. While it may look and feel like it is no big deal – BEWARE IT IS! This notice is the last step that IRS takes just before taking money from your bank account, garnishing your wages, or seizing property.
If you have just received IRS Notice LT11, YOU ARE ABOUT TO LOSE the right to contest the amount owed and the right to a hearing!! Therefore, YOU NEED TO TAKE IMMEDIATE ACTION. YOU HAVE 30 DAYS FROM THE DATE OF THE LETTER TO REQUEST A HEARING!!!
You have a legal right to a hearing before the IRS levies – takes money from your bank account or garnishes your wages. However, if you do not request a hearing within the deadline for doing so, you lose your legal right to contest it. For example, if you have a payment that you made that is not credited, you should request a hearing. If the amount the IRS is claiming you owe is not correct, you should request a hearing. If you need to work out a payment plan, you should request a hearing.
Here’s some background about what is going on. During the pandemic, you were told, “We are all in this together.” People lost jobs, and others were told to go home; they couldn’t work. Everyone was sheltering in place to flatten the curve of COVID-19.
Congress passed special legislation to provide money to taxpayers to get through to the other side of the pandemic. Instead of actively seizing bank accounts and aggressively collecting, IRS sent out letters reminding people what they owed and asked them to pay their tax bills. Congress didn’t pass this legislation to help people during the pandemic pay their taxes. It was to help you survive while you didn’t have any income. Many people had to spend money they were going to pay their taxes with to survive while they didn’t have income.
So, now the IRS is unleashing itself on you and other Americans. Instead of “we are all in this together,” it’s let’s trick people out of their right to a hearing. Why am I saying that? It’s because they buried the information about your right to a hearing on page two of Notice LT11 toward the bottom of the page. Wouldn’t you tell someone on page one what to do to protect their rights if we are all in this together? I sure would, and I bet you would, too.
In situations like this, having a tax professional whose focus is on tax resolution can make a big difference. If you get an IRS Notice LT11, BEWARE! You are about to lose important legal rights.
Call us if you have a tax problem. We are here to help you get your life back from the IRS!
Recordkeeping Tips for Freelancers and Gig Workers So You Can Avoid Getting in Tax Trouble
If you are working as a freelancer or gig worker, you are certainly not alone. Millions of men and women are earning extra income driving for ride sharing services, designing websites for online entrepreneurs and writing for local businesses.
Some freelancers and gig workers have even said goodbye to their traditional careers, trading the security of a steady paycheck for the freedom and flexibility of gig work and freelance clients. But whether you are freelancing full time or just for extra cash, you need to keep careful records so come tax time, you can stay out of tax trouble.
Note: If you fall behind on filing your taxes, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe back taxes.
Set Up a Separate Bank Account
Freelancers and gig workers play many roles but they all have one thing in common, they are also business owners.
Whether or not you have incorporated your business or formed a formal business, you do operate your own business. That means you need a separate bank account to collect your earnings and pay your expenses.
If you have not already done so, you should set up a separate bank account for your freelancing income. If you do have a formal business structure and an employer identification number (EIN), you can use that information to open the account. If not, you can simply open a second account to collect your payments and take care of any business-related expenses.
Print Reports from Payment Providers
Gig workers and freelancers are paid in many different ways, from direct payments from clients to automated clearinghouse (ACH) transfers to their bank accounts. These independent workers may also receive payment through third party apps like Paypal, Stripe and Payoneer, and keeping it all straight can be a real challenge.
Luckily many of the major payment providers make it easy to find out exactly how much their members received during a given time period. If you want to see where you stand, and how much tax you might owe, sign on and print out a payment report from every provider you receive income from.
You can fill out those reports with your own carefully kept records, including documentation of direct client payments and bank transfers. If you are unsure how much you have received via ACH, you can check with your bank or request a written report.
Signing up for a bookkeeping service or bookkeeping software can also help keep track of all your income and expenses.
Maintain Contact Information for Everyone You Have Worked For
During the course of a single year, freelancers and gig workers may work for dozens of individuals and companies, and they may receive payments from just as many sources. In a perfect world, everyone who hires those freelancers and gig workers would maintain their own records and send out 1099s for tax purposes, but that is far from guaranteed.
If you want to avoid unpleasant entanglements with the IRS, you need to keep your own records and check off each 1099 as it comes in. If you earned income from a client and do not receive a 1099, it is your responsibility to follow up and get the proper paperwork, so make your life easier and keep contact information from everyone you worked for, even if they were only a one-time client.
Keep a Running Tally with a Spreadsheet
It can be hard to track your income from freelance jobs and gig work, but a spreadsheet will make it easier. If you want to avoid underreporting your income and the tax penalties that could bring, set up a spreadsheet and record every dollar you earn from your freelancing and gig work efforts.
Keeping a running tally of your freelance and gig work income serves a number of different purposes. For one thing, it will help you determine the amount of your required quarterly income tax payments, so you do not overpay or underpay what you owe. Tallying your income as you go can also help you see how you are doing, making it easier to ramp up your freelancing and gig work efforts as you go.
Measure, Photograph and Document Your Home Office
As a freelancer or gig worker, you may be eligible for some generous income tax deductions, including a write-off for your home office. If you operate your freelancing business out of your home or find gig clients there, you may be able to deduct part of your utility bills, rent or mortgage and other applicable expenses.
Not just any space will do if you want to take the home office deduction, and proper documentation could be the difference between a valid deduction and a disallowed one. You must use your home office solely for your business, and it is important to keep careful records to avoid problems with the IRS.
That means measuring the space your home office occupies, so you can compare it to the total square footage of your home. It also means photographing the space, so you can show those images to the IRS if they question the deduction.
Scan Receipts to Make Tax Deductions Easier
You may also be eligible for additional tax deductions, including write-offs for office supplies, internet access and the like. But you will need to back up those deductions if the IRS comes calling, so make sure you have all those receipts on hand.
A shoebox full of paper receipts will not do, so make sure you scan or photograph those documents and keep them in a safe place. (Some receipts due to the paper used turns dark over time and can’t be read - Take That Photograph!) That could mean setting up a folder on your hard drive (with a backup plan in place), uploading the images to the cloud or a combination approach designed to safeguard records of your business-related purchases.
Life as a freelancer or gig worker can be wonderful, but keeping proper records is essential. From making tax planning easier and less stressful to saving you money, there are many advantages to keeping careful records.
If you do run into tax trouble, reach out to our tax resolution firm and we’ll schedule a confidential consultation to explain your options in full to permanently resolve your tax problem.
9 Common Mistakes First Time Tax Filers Make That Can Land You In Tax Trouble
Being an adult has its perks, from being able to rent a car and book a hotel room to the chance to earn a living and rent an apartment. But life as an adult also comes with some challenges, including the burden of filing and paying taxes.
If this year is the first time you will be filing a tax return, it is important to plan ahead. Mistakes are common among first-time filers, and those blunders could delay a much-anticipated refund or even trigger an audit from the IRS.
Here are 9 of the mistakes first-time filers are likely to make - and how you can avoid them.
Note: If you or someone you know owes back taxes, our firm can help negotiate with the IRS and potentially settle your tax debt. Call us today. Our tax resolution team can navigate the IRS maze so that you have nothing to worry about.
1. Forgetting to file
When filing taxes is new, it is easy to forget to do it. Forgetting to file is a big risk for first-time filers, one that could have long-lasting implications for your adult life.
2. Not reporting all your income
As a first-time filer, it is easy to forget to report all your income, especially if you work a side hustle or participate in the gig economy. Failing to report all your income is a big no-no, and this mistake could trigger a visit from the IRS.
3. Not tracking the cost basis of your investments
If you invest in stocks, bonds or mutual funds, you may owe capital gains tax when you sell, so it is important to track the cost basis (how much you paid and any cost for purchase such as broker’s fees) as you go along. If you fail to track the cost basis, you could end up overpaying taxes on any future sales.
4. Paying for a refund anticipation loan
As a first-time filer, you are probably anxious for your refund, but paying to get it could be a big mistake. Unless you are in dire need, it is better to wait the 7-10 days for your e-filed return to be processed and your direct deposit to land in your bank account.
5. Choosing the wrong filing status
If you choose the wrong filing status, your return could be delayed, or even rejected outright.
6. Not asking your parents if they are claiming you on their tax return.
If your parents are still providing support for you, they may be able to claim you as a dependent when they file their taxes. If you incorrectly claim yourself as a dependent in this situation, you could be in trouble with the IRS. Even more importantly, you could land your parents in hot water as well.
7. Failing to claim all your deductions
From student loan payments to mortgage interest, the IRS provides a wealth of deductions that can reduce taxes for first-time filers. Failing to claim those available deductions is like leaving money on the table.
8. Waiting until the last minute
Many first-time filers assume that their returns will be simple, and that they can wait until the last minute to file. If you wait until April 15, you will be at the mercy of everything from closed post offices to a failed internet connection, so start early and get this chore out of the way as soon as possible.
9. Not planning for next year
When you are neck deep in tax paperwork, it is hard to see ahead, but failing to plan for future taxes is a big first-time filer mistake. Now that your return has been filed, do some homework on additional tax deductions, including those for 401(k) and IRA contributions.
The April 15 tax filing deadline will be here before you know it, and when it is over you will have officially become a taxpayer. If you want your first foray into taxpayer status to be a successful one, avoiding the 9 mistakes listed above is a good place to start.
If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed.