New Rules in the IRS

The recently signed “Taxpayer First Act” will benefit anyone dealing with the IRS in several ways. The upgrades outlined in the bill will modernize the agency, as well as improve operations in communication and collections, which will be outlined in this article.

The main category to discuss is communication. The IRS can be a troubling agency to deal with, as taxes can be confusing, and no one wants to deal with a collection agency. With the new bill, communication should become much clearer. This will happen through directly communicating why a claim is rejected, upgrading the efficiency of IRS infrastructure, making it easier to report identity theft, and informing of common scams rather than using hold music. These changes will make the tax paying process more transparent and less intimidating.

The second category of changes is in collection practices. These changes include accepting direct payments for filing, rather than using a … Read More

Planning your Rollover

If you are getting ready to retire or sell your business, it is possible that you have accumulated some savings in a company retirement plan. This does not sound like an issue, but withdrawals from such a plan can come with a significant tax bill. In order to avoid this issue, you should consider a rollover into an IRA.

The benefit to converting your savings into an IRA is that you will not have to withdraw the lump sum immediately, which postpones your taxes, and that your savings will continue to grow free of tax. As long as you make the rollover before the 60-day cutoff, you will set yourself up for a financially healthy retirement.

There are some other factors you must consider before making this decision, as taxes are sometimes unavoidable. For example, if you receive annuity payouts during retirement, these cannot be rolled-over free of tax. Additionally, a … Read More

Avoiding Business Taxes

If you are self employed, tax law allows you to deduct ordinary business expenses from your tax liability. This can be helpful in making sure you owe fewer taxes each year, but making sure all reported expenses are accepted by the IRS can be tricky. For this reason, it is important to have clear evidence that all reported expenses can be attributed to your business.

One recent example of such an issue comes from a man running his own masonry business. In 2010, the taxpayer reported $25,000 of business income, while the IRS concluded he had received $35,000. The taxpayer claimed the remaining $10,000 was from the sale of damaged property and checks deposited into the business account by his son. Unfortunately for the taxpayer, when the case went to trial, the court ruled against him, as they assume any deposit into a business account is business income, unless there is … Read More