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Over the years many people have commented on taxes, some of the more famous quotes are below:
“There is no such thing as a good tax.” Winston Churchill
“In this world nothing is certain but death and taxes.” Benjamin Franklin
“Death and taxes and childbirth! There’s never any convenient time for any of them” Margaret Mitchell
“Thinking is one thing no one has ever been able to tax.” Charles F. Kettering
“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” Denis Healey
“The way taxes are, you might as well marry for love.” Joe E. Lewis
Although the above quotes may be amusing one common thread is that most normal people simply don’t like paying taxes! In the UK you can pay tax when you buy something, earn a wage, run a business, employ someone, own a house, sell an asset, take out an insurance policy, import an object, make a gift, fuel your car and even when you die. It is certainly reasonably to say that it is just about impossible to avoid paying tax in one form or another. However whilst taxes may be unavoidable a good tax accountant can should be able to help reduce the impact in the following ways:
Preparing tax returns that are correct
Claiming all allowances that you are entitled to
Advising you of legal tax saving measures
Advising you in advance of the tax implications of your decisions
Investigating and advising you of changes in your business status that could save you money.
Planning your future activities to minimise tax
Giving you as much warning as possible of the tax payable
Filing tax returns on time
It is a sensible assumption that in a developed country there will always be taxes of one form or another. What is a fair taxation system in the view of one will inevitable be completely unfair to another. Bearing this in mind it makes sense to learn to live with taxes, by taking the view that paying tax will always remain but with the help of a good tax accountant you only need to pay the minimum that is legally demanded from you. It is important to remember that any method used to reduce your tax liability is completely legal as in the UK there are high penalties for illegal tax evasion strategies. These can range from large fines to extreme cases prison sentences. As such it is worth reiterating that a good tax accountant is a very worthwhile investment. Perhaps the best way to finish this article is with the quote from Denis Healey, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”
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Tags: tax
Posted in Taxes · July 23rd, 2010 · Comments (0)
It’s after April 15th and most tax returns have been filed, hopefully you don’t have any unfiled returns. But, some people may be left wondering how they are going to pay the amount they owe. While there are a several options available to individuals, the Offer in Compromise, or settlement, gets the majority of press time, especially in the infamous “pennies on the dollar” commercials. These commercials never say just unusual it is for the IRS to actually approve an Offer in Compromises (OIC) for individuals. Before you go to the trouble and expense of hiring someone to file an Offer in Compromise for you, keep the following facts in mind.
There are three types of OICs:
Doubt as to Collectability
Doubt as to Liability
Effective Tax Administration
Make sure that if you do decide to file an OIC, you file the correct one. For example, filing a Doubt as to Collectability OIC when you think you should not have a tax balance due would be a mistake.
‘The IRS has to accept my offer’ myth
While this is actually based on fact, the majority of individuals do not know the entire story. Just because you file an OIC does not mean that the IRS will accept it. In fact, in 2009 only 0.113% of individuals with a tax balance had an OIC accepted. That gives you about a 1 in 1,000 chance of having your OIC accepted. If there is a way for the IRS to receive payment of your tax liability, through a lump sum full payment or an installment agreement, your OIC will not be accepted.
The factual part of this myth stems from IRC 7122(f) which states that the IRS does have to accept an Offer in Compromise, if it is not withdrawn, returned, or rejected within twenty-four months of the IRS receipt date. This rarely happens, however, and should not be your basis for filing an OIC.
The down payment and application fee are non-refundable
When you send in your down payment and application fee, you won’t be getting that money back. Whether or not the IRS accepts your Offer in Compromise does not matter – the down payment is kept and applied in the government’s best interest (which is usually your oldest tax liability). The application fee won’t even be applied to your liability – it is just a processing fee.
You will extend how long the IRS can collect
When you file an OIC, you automatically extend the ten-year limit that the IRS has to collect on your unpaid tax. The IRS adds the number of days your OIC is in review, plus an additional thirty days, to your Collection Statute Expiration Date. So if your OIC is not accepted, you are right back where you started and the IRS has more time to try and collect the tax.
Consideration of offers
The IRS won’t even consider your Offer in Compromise if it doesn’t meet the minimum requirements:
Down payment must be submitted with the OIC (unless you qualify for an exemption of the payment)
Application fee of $150 must be submitted with the OIC
You have submitted an OIC that is equal to at least your Reasonable Collection Potential
You cannot submit an OIC while you are in bankruptcy
All of your past returns must have been filed – you must not have any Unfiled Tax Returns
You must be current on your withholding or estimated tax payments for the current yearv
You must submit Form 656 and Form 433A
You don’t have to send the entire amount to the IRS at once
If you are lucky enough to have your OIC accepted, you are not required to mail in the total amount that the IRS agreed to. You certainly can if you have the means to do so, but the IRS does allow the payments to be made over a number of months, depending on the payment arrangement that you request.
Frivolous Offer
If you file an OIC knowing that it will not be accepted and do so only to delay the IRS’ collection efforts, you may receive a $5,000 penalty. Make sure that you meet all of the requirements for submitting an OIC and have good reason to believe that the IRS will accept your OIC.
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Tags: Offer in Compromise
Posted in Taxes · May 2nd, 2010 · Comments (0)