Tax liability is a complicated issue for businesses. Fortunately, there are ways to reduce it and find the right tax solution for your business.

Centralized tax administration allows for a single organizational structure and clear lines of authority. It reduces the risk of divided loyalties, wherein staff serve two masters. Contact J. Gregory PEO for professional help.

Tax planning involves analyzing an individual’s financial situation in order to minimize tax liability. Using a variety of strategies, including tax deductions and credits, it is possible to reduce what one owes or earn a larger refund at the end of each year. In addition to reducing overall taxes, the process can also help individuals save for retirement or college expenses, build a small business and even protect themselves from legal penalties.

Tax law is complex, with countless rules and regulations that can easily be misunderstood. Fortunately, there are many resources available to those who need help understanding these laws. One such resource is a tax consultant. A tax consultant can provide a thorough explanation of current and proposed laws and suggest ways to lower an individual’s or company’s tax bill.

Generally speaking, there are three basic methods to reduce one’s tax bill: lowering income, increasing deductions and taking advantage of credits. Depending on the person’s circumstances, these methods may be used in combination to achieve the desired result. However, it is important to note that tax planning should not be confused with tax evasion or fraud. While avoiding taxes makes good sense, intentionally violating the law to avoid paying taxes is illegal.

In a more practical sense, the process of minimizing tax liability can involve several techniques, such as establishing residency in a state with lower taxes or using certain types of investments to reduce income taxes. However, a tax consultant should always be consulted before making any major changes to an individual’s finances.

While a professional can help guide you through the intricacies of tax laws, it is important to remember that it is ultimately your responsibility to ensure that you pay the proper amount of taxes. The best way to avoid any issues is to work with a professional throughout the year to review your finances and determine the most appropriate strategy for you. This is the only way to ensure that you file accurate forms and avoid a costly tax error. This can be especially important if you are an entrepreneur or operate a business.

Installment Agreements

If a taxpayer can’t pay their tax debt in full, they can enter into an IRS installment agreement. These agreements can have different terms, including a length of time and monthly payment amount. The IRS charges a fee to set up the agreement and another to restructure or reinstate an existing one. Taxpayers with low incomes may qualify to have this fee waived.

Practitioners can help their clients by ensuring they are aware of all possible options when it comes to paying back tax debt. An important tip is to encourage their clients to be realistic about the financial capacity of their household, as the IRS uses that information to determine the maximum payment amount. Also, it’s a good idea to ask for penalty abatement at the beginning and end of an installment agreement, so long as the client adheres to the terms of the agreement.

The fifth comment suggested that the IRS consider eliminating installment agreement user fees for low-income taxpayers. The IRS has charged these fees since 1995 in accordance with an OMB Circular that requires agencies to charge full costs unless they are granted an exception.

In 2013, the IRS revised the fee structure to make its online payment agreement programs more cost effective for taxpayers. Now, users who choose the direct debit online payment option are charged a fee that is only $31 — much less than the previous maximum of $43.

This change is one of many the IRS has made to improve its online programs and make them more affordable for the public. In addition, the IRS has worked to streamline and simplify its process for requesting an online payment agreement to make it easier for individuals to use.

The IRS will continue to work to find additional ways to streamline its processes, reduce wait times and improve access for taxpayers. During the summer months, for example, it can take longer to establish an installment agreement than at other times of the year because of staffing constraints and increased workloads related to Federal e-pay requirements. Similarly, the IRS is working to reduce the wait to receive payments through electronic debit instrument by reducing the processing time and making it easier for customers to file tax returns and get refunds electronically.

Tax Debt Settlement

If you are unable to pay what you owe in full, you can apply online for an IRS payment plan. You can also try to qualify for an offer in compromise, or OIC. This is an agreement between the taxpayer and the IRS to settle the tax debt for less than what is owed. It is for delinquent taxpayers who can demonstrate that paying the total amount they owe, including interest and penalties, is not possible given their current income and assets. The IRS will weigh a number of factors, including your income and assets, when deciding whether to accept an OIC.

Tax settlements are different from tax forgiveness programs. Unlike with student loans or mortgages, the IRS does not forgive taxes owed unless there is an extraordinary circumstance like fraud. Instead, the IRS will stop collection tactics and freeze interest penalties if it is determined that you are unable to repay what is owed.

While there are for-profit companies that advertise services related to settling tax debt, it is best to seek advice from a trusted nonprofit credit counselor or a qualified professional to determine what options are available. Many of these companies charge exorbitant fees for their services and often fail to deliver what they promise. A qualified professional can help you choose the right relief option, prepare the proper paperwork and negotiate with the IRS on your behalf.

If you do not qualify for a settlement or an OIC, the IRS can place liens on property, seize funds from your bank accounts and garnish your wages. These harsh consequences can put you at risk of losing your job or getting evicted from your home. A knowledgeable tax professional can help you avoid these problems by preventing tax debt from accruing in the first place. They can also help you plan ahead for the time when you will be able to fully pay your debts. They can even make sure that you are not missing any important deductions that could lead to an audit. They can also ensure that you do not claim deductions that will be considered invalid during an IRS audit.

Tax Audits

Tax audits are an important tool for the IRS in identifying tax fraud and noncompliance. However, a random audit can also deter voluntary compliance by crowding out intrinsic motivations and thus lowering the incentive to pay taxes.

The IRS audits returns that seem to be suspicious, such as those claiming large deductions, substantial changes in income, or unusual tax credits. Data analysis can identify patterns that indicate high-risk taxpayers. However, the IRS cannot audit all returns and can only use its resources to select a small proportion of the total population for review.

Those selected will receive a notification letter outlining what the IRS wants to verify, such as specific lines of income, deductions, and credit claims. The process may begin with an examination of documents sent by mail or an onsite visit to a home, business, or accountant’s office. In these cases, the taxpayer should be prepared to provide receipts, bank statements, and cancelled checks.

In addition, the IRS often conducts interviews with taxpayers and employees. It can also request access to financial records such as employee wage and benefit statements, payroll deductions, business mileage records, and retirement account contributions.

The results of a tax audit are used by the IRS to determine the amount of taxes owed. Any amounts discovered to be due will be assessed against the taxpayer, who can appeal the assessment.

Regardless of the outcome, an audit can be a stressful time for the taxpayer. The tax code is complex, and many taxpayers rely on professionals to prepare their returns. When an error is discovered, it can be a difficult adjustment for the taxpayer and their family.

In addition, the impact of an audit can be felt years after it is complete. The cash flow shock of owing additional taxes can make it difficult for some families to meet their obligations and can even threaten the stability of their businesses. The IRS can offer a variety of payment options to help manage the costs, including installment agreements. However, the agency must be careful not to put the burden of collecting taxes on struggling taxpayers.