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I have recently bought a new home, and I had to terminate my 1 year rental contract earlier from my previous apartment. I had to pay $2500 for the termination penalty according to the contract. So would this penalty be tax deductible? Thanks.

IRS Penalty Abatement Issues

If you owe quite a bit of money in back taxes or if you are not able to pay your tax debts in full, you would probably do well to retain the advice and skill of a tax specialist. The IRS issues millions of fines and assesses tax penalties against individuals or businesses every year. Revenues associated with these IRS tax penalties results in billions of dollars every tax season. As a result of this situation, many taxpayers feel confusion and frustration. They may not be aware of the options available to them and feel they are back into an imaginary corner. If you find yourself in this position your tax professional can file a form requesting IRS penalty abatement.

Startling facts about IRS statistics

The Taxpayer Advocates Annual Report to the US Congress cites that IRS tax penalties are causing serious problems for US taxpayers. An IRS survey of tax specialists across the US indicated that this is the fifth gravest problem regarding tax issues. But, a qualified tax specialist has simple and highly effective methods for dealing with these problems and can request an IRS penalty abatement hearing for you. However, the IRS is oftentimes not very forthcoming about this information, so if you don’t have a tax specialist on your side, you may not even know about these things.

Time is money and it adds up quickly

When faced with the serious reality of tax fines, you are also well advised to consider that these fees may often double or triple in a short amount of time. Most people are mistakenly led by the IRS; they are made to believe that these penalties and interest charges are permanent. This is not universally true for everyone who has outstanding IRS penalties. If you have extreme financial hardship or experience dire circumstances, you may qualify for an IRS penalty abatement hearing. Your tax specialist will inform you of information concerning this process and will get the ball rolling for you. When you find yourself in the position of receiving an IRS notice telling you that you owe them money, you will have to possibly pay more money in interest and fines. Your tax specialist then has the option of filing the paperwork to get you an IRS penalty abatement hearing. The tax codes ensure that you have the right to request this hearing. It is then that your case is presented impartially to the IRS and then the IRS will decide whether or not to grant you a reprieve. Your tax specialist can be an asset and a skill negotiator on your behalf and handle the IRS issues for you.

IRS penalty abatement hearings

There are one hundred and forty provisions in the US tax codes and each one allots for something called a good faith exception. What this means is that if you have acted in “good faith”, and have reasonably tried to make amends to the IRS, then the penalty does not apply. You should never attempt to cheat or deceive the IRS, they will definitely find out about it and it will catch up with you. Then you may have no chance to change the situation or to request an IRS penalty abatement hearing. When consulting with a tax specialist, it is important that you give them all the information and to be as honest as possible. This is going to have a direct effect on their ability to do their job. If they are to make a case for penalty abatement on your behalf, then you have to give them all the information requested. Doing so in a timely and efficient manner will allow chances for a favorable outcome when appearing and negotiating your case.

IRS Tax Attorney

If I day trade in December and have to pay short term capital gain on 500k profit, would i have to pay a tax penalty for underpayment since I did not make estimated quarterly payment to IRS?

I’ve searched online but can’t find the details for the Stimulus. Is the 10% penalty being waved for 2008 Federal Tax Filing if I withdrew from my 401K in 2008?

Doing business outside of the U.S.?  Have an Offshore bank account or Brokerage Account? Own more than 10% of a foreign country legal entity? (and some rules apply to even lower levels of ownership).

The I.R.S. maze of rules and arsenal of penalties is overwhelming; even for CPAs and tax lawyers who work on international taxes.

Make no mistake, the I.R.S. expects “transparency.”  There is a form to file or a regulation to follow where taxpayers have to disclose all offshore economic activities and commercial relationships.

The list below is a summary by the I.R.S. of the many of the penalties that can apply to Offshore Income.

Additional penalties apply related to “transfer pricing” for multinational businesses, that are not listed here.

Please call me at (510) 797-8661 x237 is you believe any of the below may apply to your tax situation and we can discuss what corrective actions you should take.

From the I.R.S.:

The following summary of potential reporting requirements and civil penalties is not necessarily all encompassing, and it is unlikely that any one taxpayer would be subject to all of the reporting obligations or penalties listed below:

(1) Penalties for failure to comply with the Bank Security Act requirement that United States persons report their financial interest in, or authority over, financial accounts located in a foreign country.

U.S. citizens, residents, and certain other persons, must annually report their financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account (such as a bank or investment account) that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. This reporting requirement is met by filing Form TD F 90-22.1 (Report of foreign Bank and Financial Accounts, commonly known as an “FBAR”). FBARs are filed with a Department of the Treasury facility located in Detroit and are not to be filed with tax returns; the filing date for FBARs is June 30th. The requirement to file FBARs is in the regulations under 31 U.S.C. § 5314 (which is a provision of the Bank Secrecy Act). Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account. Criminal penalties may also apply. Refer to IRM 4.26.16.4 for additional FBAR penalty considerations.

(2) Fraud Penalties (Sections 6651(f) and 6663):

When an underpayment of tax, or failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

(3) Failure to File Tax Return (Section 6651):

When a taxpayer is required to file a tax return and does not do so on or before the due date of the return, Section 6651(a)(1) imposes a penalty of 5 percent of the net tax amount required to be shown on the tax return for each month (or fraction of a month) that the amount is late. The maximum penalty is 25 percent. This penalty is increased to 15%, with a maximum of 75%, if the taxpayer’s failure to file is fraudulent.

(4) Failure to Pay tax Penalties (Sections 6651(a) (2) and 6651(a)(3)):

When a taxpayer fails to timely pay the amount of tax shown on the return, Section 6651(a)(2) imposes a late payment penalty equal to .5 percent of the late payment for each month (or part of a month) that the payment is late. The maximum penalty is 25 percent.

When a taxpayer fails to pay a tax that is required to be (but was not) shown on a return within 21 days after the date of the Service’s notice and demand for that tax, Section 6651(a)(3) imposes a penalty of .5 percent for each month (or part thereof) that the assessment remains unpaid. The maximum penalty is 25 percent.

(5) Accuracy- Related Penalty (Section 6662):

The accuracy-related penalty for underpayments in imposed at the rate of 20 percent on the portion of any underpayment of tax required to be shown on a return attributable to negligence, a substantial understatement of tax, a substantial overstatement of pension liabilities or a substantial estate or gift tax valuation understatement. The accuracy-related penalty with respect to a substantial valuation misstatement can be as high as 40 percent.

(6) Penalties for failure to file certain information returns (Sections 6035, 6038, 6038A, 6038B, 6038C, 6039F, 6046, 6046A, and 6048):

Form 5471. Information Return of U.S. Persons With Respect To Certain Foreign Corporations, U.S. persons who are officers, directors, or shareholders in certain foreign corporations (including, for example, an International Business Corporation used in an offshore scheme) report information required by Sections 6035, 6038, and 6046, and compute income from controlled foreign corporations under Sections 951-964. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

Form 5472. Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Reports transactions between a 25% foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party as required by Sections 6038A and 6038C. The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, in $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

Form 926. Return by a U.S. Transferor of Property to a Foreign Corporation. Reports transfers of property to a foreign corporation and to report information under Section 6038B. The penalty for failing to file each of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

Form 3520. Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Reports various transactions involving foreign trusts, including creation of a foreign trust by a U.S. person, transfers of property from a U.S. person to a foreign trust, and receipt of distributions from foreign trusts under Section 6048. This return also reports the receipt of gifts from foreign trusts under Section 6039F. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

Form 3520-A. Annual Information Return of Foreign trust with a U.S. Owner. Reports ownership interests in foreign trusts, by U.S. persons with various interests in and powers over such trusts under Sections 6048(b). The penalty for failing to file each one of these information returns, or for filing an incomplete return, is five percent of the gross value of trust assets determined to be owned by the U.S. person.

Form 8865. Return of U.S. persons With Respect to Certain Foreign Partnerships. U.S. persons with certain interests in foreign partnerships use this form to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions, and changes in foreign partnership interests under Sections 6038, 6038B, and 6046A. Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

I have an IRA that I opened after I closed out an old 401(k) but now I would like to use that money to open some 529 accounts for my kids. Can I convert the IRA to a 529 or will I have to pay a big tax penalty for cashing out first?
this is a traditional IRA and NOT a Roth IRA

Tax debt relief help can cover a variety of tax problems ranging in severity. Some tax problems are fairly simple to handle and include issues such as inability to pay or getting calculation mistakes corrected. Other issues though are much more serious and involved when concerning accusations of tax fraud.

Often Wrong

It’s hard to believe that the IRS has a concept of bad faith when you consider their horrifying collection procedures. This is an agency that has no compunction about seizing assets based on tax information that may be incorrect due to an honest mistake on your part or an error on their part they refuse to acknowledge. The IRS bad faith accusations are usually concerned with civil or criminal tax fraud.

Understanding what constitutes fraud is important when trying to defend yourself against the charges. Fraud accusations can be leveled for a number of reasons including the following.

* Deliberate income and expense manipulation in your favor

* Lying during an audit

* Create false supporting documents

* Not reporting cash

* Hiding assets with third parties

* Using fake names or social security numbers

Obviously some of these reasons are clearly fraud such as the one about using a false social security number. But what about lying during an audit? There are thousands of cases when the IRS has accused taxpayers of lying when they really thought they were telling the truth. The confusion comes about due to the interpretation of financial information and the enormous difficulties faced when trying to comply with a tax code that can fill an oversized conference room. Fraud charges in every case require tax debt relief help.

Making It Right

Defending yourself against fraud charges is not recommended. If you are serious about ending your tax debt problems for good and are ready to obtain tax debt relief help, you should retain tax debt specialist who can address the issues that have resulted in the fraud accusations. In addition, when the IRS decides fraud is involved, there are significant tax penalties attached which must be negotiated also.

The IRS can be quick to determine fraud is involved and slow to respond to objections the charges are false. Getting tax debt relief help is critical when you find yourself in this situation. It’s necessary to respond in detail and with documentation to each and every finding leveled against you.

Tax debt relief help obtained through retention of a tax negotiator can resolve even fraud issues. The IRS must have incontrovertible evidence there was intentional fraudulent behavior in order to make the charges stick. In the vast majority of cases there will not be enough evidence simply because the fraud was not intended. But it takes a tax expert to set the record straight.

Hi All,

I just moved to another company and want to roll over the money my 401k account from the previous company to my scottrade IRA account. Is there tax penalty to do so? How to do it? Every answer will be appreciated.

Thanks,

Some people are fooled into thinking that getting tax relief isn’t necessary when it takes a while for the IRS to begin sending delinquent tax notices. But like an arrow hitting its mark, eventually the IRS will find you. When it does you will probably owe taxes, penalties and interest.

Never Represent Yourself

They say only a fool represents him or her self in court. This may sound harsh and there might be exceptions, but there’s a reason why this expression was invented. People who try to represent themselves in court are too close to the situation and usually don’t have the specialized training needed to deal with the system.

This is true for getting tax relief also. People who try to negotiate with the IRS on their own behalf almost always end up paying a lot more than was necessary. The IRS knows taxpayers are unfamiliar with many of the possible tax resolutions and that taxpayers are reluctant to push their cause.

On the other hand, people who can’t pay their back taxes think a tax negotiator is going to be too expensive. The truth is you should not try to resolve your tax issues on your own, and you can afford a qualified tax negotiator. Tax representation in most cases doesn’t even involve an extensive amount of discussion with the IRS when the IRS knows the representative is thoroughly familiar with the collection process.

When the IRS knows you’re unfamiliar with many of the rules and regulations, the agent can easily present a very one-sided view of the resolution possibilities. When you’re trying to act alone, it’s almost guaranteed any settlement you may reach will be far higher than what a tax attorney could have negotiated.

Let an Expert Represent You

There’s really only one way of making sure you are getting tax relief you need and deserve. You should let a tax attorney who has IRS experience and recognition as a successful negotiator represent you. It’s no secret the IRS likes to use lies and tricks in an attempt to force taxpayers to pay more than they should have to pay.

The problem is the individual taxpayer isn’t going to recognize these tricks. You don’t expect a government agency to make false statements or unfounded accusations. Yet it happens all the time. If the IRS were a private business, these practices would be considered deceptive.

Getting tax relief is not hard for an experienced tax negotiator. A tax representative can solve many tax problems through settlement, making an Offer In Compromise, establishing Installment Payments or declaring Injured Spouse status to name a few. So don’t go to court alone and don’t approach the IRS without help.

There’s just no reason to pay more than you should to the IRS. Are you serious about getting tax relief permanently? Contact a professional tax negotiator today!

I was told I could reduce penalty for not paying qtrly taxes if I did not work 12 months. I only work 9 months but do not know how to show it.