Recovering From Tax Penalties and ProblemsPosted on May 2nd, 2016
If you’ve had tax penalties or problems levied against you by the IRS, you are not alone. Across the country, an estimated one in six individuals owe the Internal Revenue Service money that they cannot pay. While there are settlement opportunities that can be taken to lower the amount owed to the IRS, by the time negotiations have concluded and a payment plan has been reached, the penalties and problems will have already caused significant damage to the individual’s financial health.
Regaining long-term financial stability can be particularly difficult after these penalties have taken their toll. However, there are steps you can take to rebuild your fiscal wellbeing and prevent future tax problems. Some of these steps include:
- Determine Your Remaining Assets: The first step to regaining financial stability is identifying and verifying your current financial position. Taking an inventory of your current assets and savings will provide you with an idea of how much you will need to save in order to regain a comfortable financial position. For individuals facing IRS problems in the years preceding or during retirement, back tax repayment can deplete a lifetime worth of retirement savings. As a result, these clients may rely on an aggressive saving strategy to replace these missing funds.
- Identify Your Needs: The type of strategy you implement to recover from tax problems depends on your financial needs. Financial recovery from six months of failure-to-file penalties requires a vastly different strategy that the one required following six months of wage garnishment. With this in mind, identifying your needs and adjusting your strategy appropriately is critical to rebuilding your financial wellbeing after facing tax problems.
- Begin Establishing Separate Savings Accounts: When you’re in the process of recovering your financial wellbeing following tax problems, any unexpected expenses can derail your saving efforts. With this in mind, developing separate savings accounts to accommodate these unexpected costs can help limit the financial impact of these surprises on your saving efforts.
- Meet with a Tax Professional: Federal and state tax problems often leave individuals financially compromised and without a strategy for making up lost income. Consulting an experienced tax professional can help you prevent future tax problems while putting in place strategies for restoring your financial health. An experienced tax professional can also help prevent future tax problems and help you utilize your tax situation to your advantage by providing comprehensive tax planning and preparation services.
At Phoenix Tax Planning, LLC, managing partner Gary Deardorff and his team are committed to helping all clients overcome financial adversity caused by unpaid back taxes and other tax-related penalties. Our Phoenix tax professional is experienced in negotiating with the IRS on our clients’ behalf and reaching a new, more feasible planning. Throughout the course of repayment, our team helps clients develop strategies for rebuilding their financial health while remaining on track with their IRS payment obligations. For more information about our available tax strategies, contact Phoenix Tax Planning, LLC today.
Understanding IRS PenaltiesPosted on April 29th, 2016
Owing money to the IRS is an increasingly common problem across the country. With an estimated 1 in 6 people owing money to the agency that they cannot afford to pay, more and more individuals are finding themselves facing tax problems that can quickly threaten their long-term financial wellbeing.
Tax Penalties and other Tax Problems Explained
There are two types of IRS tax penalties. The first is a failure-to-file penalty, which goes into effect if an individual fails to file their federal tax return or files their return after the designated filing date. The rate for this penalty is 5% of the unpaid taxes per month the return is late.
The second penalty is a failure-to-pay penalty, which is applied when an individual fails to pay the appropriate amount of taxes by the deadline. Generally, the fine for this penalty is 0.5% of the unpaid taxes per month the payment is late. While this amount may seem negligible, interest can quickly compound, creating a situation where an individual is unable to meet their obligation and is at risk of a tax problem.
Tax problems are the resulting consequences of failing to resolve tax penalties promptly and are measures adopted by the IRS in order to recover owed back taxes. As a result, they can often have a tremendous negative impact on an individuals’ financial health. Some of the common tax problems facing individuals who owe taxes include:
- Wage Garnishment: With this, the IRS takes a percentage of your wages each payday, often leaving insufficient funds to pay for daily necessities. In order to address this tax issue, a payment plan for owed back taxes must be arranged with the IRS.
- IRS Lien: Liens provide the IRS with the legal right to collect taxes from the sale of your assets and often appear on your credit report. Individuals with this issue find themselves unable to open checking accounts or borrow against any assets, thus making repayment difficult. If opened against a business, a lien allows the IRS to seize any and all accounts receivable.
- IRS Levy: Unlike a lien, levies allow the IRS to seize any and all assets you own, including wages, checking accounts, cars, stocks, bonds, and more. Often your property is sold at auction and the revenue applied to your debt.
While being fined with tax penalties can be overwhelming for anyone, addressing them early on is critical in order to prevent these issues from becoming long-term problems.
At Phoenix Tax Planning, LLC, our professionals are highly experienced in negotiating with the IRS to develop payment plans for penalties and problems. Following settlement, Peoria EA Gary Deardorff and his team work closely with clients to restore long-term financial wellbeing and prevent future issues with the IRS. To learn more about tax relief and preventing tax penalties from becoming larger problems in the future, contact our Peoria tax consulting firm today.
The Importance of Strategic Tax PreparationPosted on April 25th, 2016
Proactive and strategic tax planning is uniquely tied to long term financial success. Without integrating a long-term tax strategy into ongoing financial saving efforts, clients may find themselves at risk of losing out on important tax credit opportunities. In more serious scenarios, failing to consider ongoing tax laws when developing a long-term financial plan can leave clients vulnerable to IRS problems that can derail your saving efforts. As a result, strategic tax preparation is a critical component to achieving long-term financial success.
What is involved in Strategic Tax Planning for Individuals?
For individuals, strategic tax planning begins with an in-depth evaluation of prior tax returns and future financial goals. Your tax consultant will also evaluate your current financial situation, identifying areas where additional tax credits and deductions may be applicable. Because major life changes can impact your tax obligations, this step is particularly important. Ultimately, your unique tax strategy should reflect your current financial situation. With this in mind, routine consultations with your tax professional are especially important to the success of a long-term tax planning.
Tax Strategies for Businesses
Similarly, proactive tax preparation for businesses also requires understanding the enterprises’ current business plan. Often, the development of these year-long tax strategies works hand in hand with ongoing business plans for growth, such as when to hire a new employee or purchase large equipment.
Integrating a strategic tax plan into an existing business plan also ensures that businesses remain wholly compliant with the ever-changing tax code. As businesses are responsible for paying taxes on behalf of their employees, ensuring compliance throughout the year with current federal and state regulations is an important cornerstone of ongoing tax strategy. Additionally, available tax credits for certain businesses can help support and enhance revenue, improving a business’ bottom line.
Unique Tax Needs for Entrepreneurs
For self-employed individuals, strategic and proactive tax preparation is particularly critical. Unless their enterprises are incorporated, these individuals can face higher tax rates than other individuals as the revenue from their business is counted as part of their personal gross income. As self-employed individuals do not rely on a higher authority to pay taxes on their behalf, these individuals must be diligent about maintaining a regular tax payment plan throughout the year to eliminate the risk of underpaying the IRS. By developing a long-term tax strategy, these clients are able to eliminate the risk of IRS penalties, improving their overall tax situation in turn.
Learn More about Strategic Tax Planning Today
At Phoenix Tax Planning, LLC, our mission is to help all clients develop lasting tax strategies that help them keep more of their income. Located in Peoria, our tax professionals welcome business owners, entrepreneurs, and individuals from throughout the metro Phoenix region. Contact our team today to learn more about how our tax professionals can help you achieve long term financial success through tailored tax strategies.