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General Tax Topics, Tax Debt, Uncategorized

Get rid of Tax Debt Fast!

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Author Trudy M Howard

Nothing can be more distressing than receiving a letter from the IRS. Having tax debt can cause stress, high blood pressure, sleepless nights, and it can also cause a break down in family relationships (we see this often in marriages). At Howard Tax Prep, in our Chicago South Loop tax office, we help clients resolve their IRS tax debts and State tax debt once and for all.

So what can you do you need to solve tax problems? Here are the Top 5 things that you can do when you owe the IRS, and have tax debt.

In plain English your options are:

  • Don’t over pay!
  • Ask for a settlement.
  • Ask for A payment plan.
  • Ask them to waive the Fees.
  • Tell them Don’t blame me!

In IRS Speak and complicated tax language, your options are:

1. Have a competent, and experienced tax consultant review your return for MISSED DEDUCTIONS! I once found $6,000 in missed deductions that put my client into a lower tax bracket, netting her a large tax refund of over $2,000! To be honest, I was actually shocked that I found such a large tax deduction, because the missed tax deduction  was something that every good Chicago tax preparer should know! 101. In plain English: Don’t over pay!
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2. IRS Offer in compromise. We’re sure that you’ve heard the commercials promising to “settle your tax debt for pennies on the dollar.” While every good tax debt consultant dislikes the phrase “pennies on the dollar” in some cases you can settle your tax debt with a low payment.  We’ve seen cases such as: $150,000 tax debt settled for $4,000; $20,000 tax debt settled for $50; and $200,000 tax debt settled for $10,000! Not only can you possibly lower your tax debt, while the IRS considers your offer, you have a little more time raise money for your tax debt. In plain English: Ask for a tax settlement.

3. IRS Installment agreement. When most people receive a letter from the IRS the very first thing they do is think of ways to pay down their tax debt. The IRS offers 3 types of installment plans for tax debt. IRS tax debt installment plans, are basically agreements to pay what you owe on a continual basis, over a defined period of time. In plain English: Ask for a tax debt payment plan.

4. IRS Abatement of penalties. This can reduce or eliminate your penalties. In plain English: Waive the Fees.

5. IRS Innocent spouse relief. This can free you from liability if your spouse (or ex-spouse) is the reason for your tax problems. In plain English: Don’t blame me!

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, General Tax Topics, Self Employed, Small Business, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

Starting a New Business with employees? Get Up to $100,000 in Tax-Free Money from the IRS!

In our Chicago South Loop tax preparation office, and our Homewood Il, tax preparation office, we have been creating a lot of small businesses. If you’ve listened to the news, or saw anything on social media, then you likely already know that the employee retention credit (ERC) is a good deal—if you qualify. Now, thanks to the recently enacted American Rescue Plan Act of 2021 (ARPA), you can qualify for up to $100,000 of ERC in the third and fourth quarters of 2021 if you:

1.) begin the business after February 15, 2020 (you could start today),
2.)have average annual gross receipts of $1 million or less, and
3.) do not meet either of the ERC tests—the suspended operations test or the gross receipts test—in
place before ARPA was passed.

Finding the $100,000

When you meet the three requirements above, you qualify as a recovery start-up business and, as such, can claim an ERC of up to $50,000 in both the third and fourth quarters of 2021. It works like this: your recovery start-up business ERC is equal to 70 percent of the qualified wages paid to each employee (up to $10,000 per employee per quarter), with an overall maximum credit of $50,000 per quarter.

Recovery Start-Up Business Example
In April 2021, you start a new retail store as a sole proprietorship business. You project your gross receipts to be as follows:

Second quarter—$50,000
Third quarter—$60,000
Fourth quarter—$100,000

In addition, you hire three full-time sales staff whom you pay hourly. Each earns $2,800 in wages each month. For the fourth quarter, you hire an additional part-time salesperson and pay that person a total of $4,000 in November and December 2021. Your proprietorship business qualifies as a recovery start-up business and is eligible for the ERC in the third and fourth quarters of 2021.

For the third quarter of 2021, your total ERC is $17,640: You have three employees who were paid $8,400 each during the quarter. No employee exceeds the $10,000 wage maximum for the quarter. Total qualified wages for the ERC are $25,200 ($8,400 x three employees). Your credit is 70 percent of $25,200, or $17,640.

No employee exceeds the $10,000 wage maximum for the quarter.
Total qualified wages for the ERC are $25,200 ($8,400 x three employees).
Your credit is 70 percent of $25,200, or $17,640.

For the fourth quarter of 2021, your total ERC is $20,440:
You have three employees who were paid $8,400 each during the quarter, and one employee who was paid $4,000 during the quarter. No employee exceeds the $10,000 wage maximum for the quarter. Total qualified wages for the ERC are $29,200 ($8,400 x three employees + $4,000 for the part-time employee). Your credit is 70 percent of $29,200, or $20,440. For tax year 2021, you receive total employee retention tax credits of $38,080.

One Wrinkle But you need one more step to calculate your net benefit. You can’t deduct wages in tax year 2021 equal to the ERC earned during the tax year; therefore, your net business income increases by $38,080 for tax year 2021.
If you pay a federal and state income marginal tax rate of 27 percent on that income, you’ll pay extra tax of $15,663: $10,282 in federal and state income taxes,4 and $5,381 in self-employment tax. Net result. You have $22,417 more in your pocket this year from claiming the ERC. That’s a nice leg up for a business that started in April 2021.

But you need one more step to calculate your net benefit. You can’t deduct wages in tax year 2021 equal to the ERC earned during the tax year; therefore, your net business income increases by $38,080 for tax year 2021. If you pay a federal and state income marginal tax rate of 27 percent on that income, you’ll pay extra tax of $15,663: $10,282 in federal and state income taxes,4 and $5,381 in self-employment tax. Net result. You have $22,417 more in your pocket this year from claiming the ERC. That’s a nice leg up for a business that started in April 2021.

Takeaways

ARPA added a big incentive for starting a new business. It works like this: your business can qualify for the ERC on 70 percent of the qualified wages paid to each employee (up to $10,000 per employee for each of the last two quarters of 2021), with an overall maximum credit of $50,000 per quarter.

To qualify for the third- and fourth-quarter ERC incentives, your business had to begin after February 15, 2020. The big deal with the two quarters of 2021 is that your business has to be new, but it does not have to suffer from COVID-19 stresses. In fact, it can’t qualify for the recovery start-up business special deal if it otherwise qualifies under the suspended operations test or the gross receipts test.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth. Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!
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Business Taxes, Family Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

What is the unpardonable sin in an IRS audit?

IRS audit

Here in our Chicago South Loop Tax Preparation Office, we help clients that have been audited, and we help resolve tax debt. Suppose for a moment that you are one of our clients, and that you’ve just received that lovely letter from the IRS telling you that you are the subject of an IRS audit.

What one record receives special attention? What one record can create a nightmare for you? What one record makes the IRS suspect that you are the keeper of lousy records?

Think of the record people most hate keeping. That’s the one we are talking about. You have probably guessed what that record might be.

Red-Flag Record for the IRS Examiner

Once your audit examination begins, the examiner likes to see this record. If the record is missing or lacking, the IRS examiner knows that your other records probably are lacking, too.

This record—the one you probably hate keeping—is the mileage log on your vehicle or vehicles.

The IRS notes that a taxpayer’s failure to keep a mileage log on vehicles indicates that the activity under examination is not being conducted in a businesslike manner.

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Do as the Tax Form Says

As a one-owner or husband-and-wife-owned business, regardless of whether it’s a corporation, a partnership, or a proprietorship, you file a tax form that asks you for the following information about your vehicles:

  1. Do you have evidence to support the business/investment use claimed? (If “yes,” is the evidence written?)
  2. List your total business/investment miles on each vehicle.
  3. List your total commuting miles on each vehicle.
  4. List your total personal miles on each vehicle.

IRS Form 4562 has columns for answers to the above questions for up to six vehicles used by either a sole proprietor or an owner of more than 5 percent of a corporation, a partnership, or another entity.

The mileage log (we strongly recommend MILE IQ) is the record of proof that you need to use for your answers to the tax form questions.

Do What the Audit Would Require

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Above, we said to do as the IRS form says. For additional clarification, it is good to know what information the IRS, in a correspondence audit, requires you to provide related to that tax form:

  1. Send copies of repair receipts, inspection slips, and other records showing total mileage for the year.
  2. Send copies of logbooks and other records to support the business mileage claimed.
  3. Provide a copy of your appointment book or calendar of business activities for the year.
  4. If you are claiming actual expenses, provide copies of paid bills, invoices, and canceled checks for automobile expenses. These would include gas, oil, tires, repairs, insurance, interest, tags, taxes, parking fees, and tolls.
  5. Send a copy of the bill of sale or other verification to establish your basis in the vehicle, including the trade-in of another vehicle.

Note that the IRS is looking for

  • a match of the repair bill odometer reading with the mileage in your logbook;
  • a match of the inspection slip odometer reading with the mileage in your logbook;
  • the mileage between repair stops, to see whether that ties in with your claimed mileage; and
  • a business purpose that ties in with your appointment book or other calendar of business activities.

Takeaways

If you want to avoid big trouble during an IRS audit, keep a good mileage log. This takes just minutes a day.

The mileage log is often one of the first records that an IRS examiner will look at. A good mileage log shows that you know the rules and you respect them. We have seen dozens and dozens of IRS audits end favorably and quickly upon presentation of a good mileage log.

On the other hand, a bad mileage log can turn your IRS examiner into an 800-pound gorilla.

Think of it this way: your mileage log (we strongly recommend MILE IQ) gives you the choice to get in and out of the IRS audit quickly and with your wallet or to spend time with an 800-pound gorilla.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth. Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!
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Business Taxes, Family Taxes, General Information, General Tax Topics, Small Business, Uncategorized

$5,000 Chicago Microbusiness Recovery Grant program. Lottery disbursement.

money
Source: Copied & Pasted Email Received from The Chicago BACP
“The Chicago Microbusiness Recovery Grant Program will provide $5 million in grants to businesses with four or fewer employees in low- and moderate-income areas of the city. Grants of $5,000 will be disbursed via a lottery, with winners equitably distributed across eligible Community Areas based on population. Applications are available now and will be open until Monday, May 4th at 5:00 pm.
BACP will be holding a series of webinars in multiple languages this week to inform prospective applicants about the Recovery Grant program and to answer questions. To register, please visit chicago.gov/businessworkshops.
You can find details on the grant below. To apply and learn more, please visit chicago.gov/recoverygrant.
Eligibility Requirements
To be eligible for a grant, businesses must meet the following requirements:
  • Four or fewer employees
  • Less than $250,000 annual revenue
  • Located in the City of Chicago
  • In business for one year
  • 25% decrease in revenue due to COVID-19
  • Located in a low-income Community Area (view map)
  • Search for your Community Area
Required Documentation
Applicants must upload the following documents:
  • A business bank statement from 2020 that includes the business address and business name
  • A valid business license dated 05/01/19 or earlier
  • A valid identification card (driver’s license, CityKey, etc.)
  • A completed W9 form (access a fillable form here)
Grant Details
  • One-time grant of $5,000
  • Grant funds must be used for working capital (rent, payroll, utilities, taxes, insurance, operations)
Timeline
  • 04/28: Grant application is available
  • 05/04: Grant application closes at 5:00pm CDT
  • 05/11: Grant recipients are chosen via lottery and notified of their acceptance. ACH payments are initiated – funds should be received within 2 business days.
Applications are available in Spanish and questions can be submitted to the Recovery Grant Team via these webforms in English or Spanish.
Please note that funds available through the Recovery Grant Program and the Chicago Small Business Resiliency Loan Fund are intended to complement the federal financing available through the U.S. Small Business Administration (SBA). The SBA resumed accepting Paycheck Protection Program applications from participating lenders on Monday, April 27 at 9:30am CDT. Click here to find an eligible Paycheck Protection Program lender. If you need assistance navigating the funding and resource landscape during the COVID-19 outbreak, please reach out to a Small Business Resource Navigator for individualized 1:1 support.
I want to thank all of you for your persistence and dedication during this incredibly difficult time. Your City government will continue to fight for our small businesses and we will continue providing information and resources to navigate this crisis.
Sincerely,
Rosa Escareno
BACP Commissioner”

 

Business Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Deductions, Uncategorized

Economic impact payments: What you need to know.

stimulus

Check IRS.gov for the latest information:

No action needed by most people at this time

THE INFORMATION HAS BEEN COPIED AND PASTED FROM IRS NEWSWIRE. ISSUE NUMBER:IR-2020-61, March 30, 2020

“WASHINGTON – The Treasury Department and the Internal Revenue Service today announced that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people. However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.

Who is eligible for the economic impact payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.

How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

How can I file the tax return needed to receive my economic impact payment?
IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?
Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

I need to file a tax return. How long are the economic impact payments available?
For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

Where can I get more information?
The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.

The IRS has a reduced staff in many of its offices but remains committed to helping eligible individuals receive their payments expeditiously. Check for updated information on IRS.gov/coronavirus rather than calling IRS assistors who are helping process 2019 returns.”

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

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General Information, General Tax Topics, Self Employed, Uncategorized

Illinois Department of Financial and Professional Regulation Warns of Scam Claiming Involvement from IDFPR Official

scam

CHICAGO – The Illinois Department of Financial and Professional Regulation is warning of a survey scam impersonating involvement from a Department official.

Targets receive a text that appears to be from Capital One that says they must complete a banking survey to receive a $50 reward. Upon closing the survey, the target receives a message claiming to be from a Department official that “thanks” them for completing the survey and lists a Department phone number. This is not from IDFPR; it is part of a phishing scam, where scammers are posing as a reputable company to steal your identity or money. The Department will never offer a reward for completing a survey or providing additional information.

To avoid falling victim to phishing scams, please do the following:

• Double-check the message you receive. There may be misspellings or other mistakes in the content of the message.
• Look up the contact information of the company and contact them directly to verify the authenticity of the message.
• Do not click links or download attachments that may be included in the message. That could lead to malware infecting your device.

If you have been the victim of identity theft or believe your personal or financial information may have been compromised, please call the toll-free Identity Theft Hotline through the Illinois Attorney General’s office at 1-866-999-5630 or 1-877-844-5461 (TTY).

Reposted from Illinois E News Release