Tax Relief and Planning
Tax Help is Available.
Avoiding and ignoring the IRS is an bad decision. Whether you owe back taxes or have not prepared for tax season, we can help. Jo Ann Koontz & Associates is staffed with tax attorneys and CPAs that will research your case and provide a plan and solution specifically for your situation.
The IRS provides many resources for individuals and businesses dealing with tax debt. We can help you take advantage of these services, but make sure you aren't taken advantage of along the way.
Here is a quick list of services we can help with and below are many resources developed to help you:
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Not every attorney is also an accountant.
When you partner with Koontz & Associates you also get an accounting perspective. Your closing is going to have a strong impact on how you file your taxes. Wouldn't you want an accountant at the table when you close?
Buyers and Sellers may save money by having both an attorney and an accountant at the closing table. We are a comprehensive fabric. Nothing will "fall through the cracks."
Most importantly, we'll come up with questions that you never knew you should ask. You may be distracted by the millions of loose ends you need to tie up during the closing process. We are here to help you tie those knots and make sure everything is tight.
What are you waiting for? Get in touch and find out why it's better when you close with us.
Stated simply, being in compliance means you have filed all required tax returns and have paid your tax bill. If you have not filed all returns or you are unable to pay your taxes or have fallen behind due to job loss, divorce, home foreclosure, a devastating illness, or other unusual hardships you may no longer be in compliance. At Koontz & Associates, PL, we are here to help you sort out your IRS compliance issues.
Recently, the IRS announced the “Fresh Start” initiative to help taxpayers facing financial difficulties. Depending on your circumstances, you may be able to adjust payments for back taxes, avoid defaulting on Installment Agreements, and possibly defer collection action. There are many situations in which IRS has been given more flexibility to assist struggling taxpayers. Fresh Start may allow:
- The postponement of collection actions
- Allowing a skipped payment or a reduced monthly payment amount without automatic suspension of an Installment Agreement
- An additional review for Offers In Compromise based on home values
- Prevention of Offer In Compromise defaults
- Eased requirements for expedited levy releases
- More options for those taxpayers unable to pay their tax liability
Streamlined Installment Agreement Program
The IRS expanded the Streamlined Installment Agreement Program. Under the streamlined process, financial analysis by the IRS is not required. Installment Agreements do not require collection manager approval or the filing of liens. Taxpayers may be granted a streamlined agreement even if they are able to fully pay their accounts. The IRS raised the monetary threshold for Streamlined Installment Agreements from $25,000 to $50,000 and also increased the maximum term for a Streamlined Installment Agreement from 60 months to 72 months.
We encourage you to contact our office before you contact the IRS. We can work with the IRS while at the same time protecting your interests. If you have concerns regarding a past or current tax liability, we can review your options, as well as provide assistance with IRS negotiations.
If you have received a notice from the Internal Revenue Service, you should consider consulting with a tax professional prior to responding. An experienced CPA or attorney can help you review the IRS notice and help you determine the best way to respond while protecting your rights as a taxpayer.
The IRS does not communicate via email, so an official IRS notice will be mailed to you. You will need to respond within a stated time period. In many cases, additional financial penalties will apply if you fail to reply.
A tax professional or tax attorney may be able to negotiate on your behalf. Use our education and extensive experience in tax preparation and tax law to your advantage. Why be frustrated and muddle through correspondence and meetings with the IRS? Call tax professional Jo Ann Koontz for assistance.
Internal Revenue Service Audits and Appeals
The Internal Revenue Service may send you a notice of intent to audit your tax returns. The purpose of a tax audit is to verify that the income and expenses you reported on your tax return are correct. Often, when the IRS selects your return for an audit it is because a variation has been statistically identified based upon the numbers you provided.
The IRS uses many different factors when selecting which returns to audit. The majority of tax audits are selected by computers. The IRS uses several different formulas to analyze returns and perform statistical analysis to score tax returns based on their likelihood of being correct.
Being selected does not necessarily mean there is a problem; sometimes you may actually be due a refund after the audit, or the IRS may accept your tax return as filed.
Once the IRS determines that it would like to obtain more information about your tax return, they will send a letter stating that your return has been selected for an audit. Here are three different audit methods used by the IRS.
- Correspondence Audit: This is the most common type of audit and is handled entirely by mail. The IRS will normally request specific documentation to support particular items on the tax return.
- Field Audit: This is when the IRS wants to come to your home, place of business, or your tax preparer’s office to perform the audit.
- Office Audit: This is when you are required to go to an IRS office to meet with an IRS auditor. The IRS examiner will determine the time and the particular documents required to be submitted for support.
After the audit, you will receive an IRS examination report that will show the proposed changes to your tax. The report will provide a clear explanation of any adjustments made. It will state that you have no changes; you are due a refund; or that changes have been made and you owe more tax plus interest and penalties assessed.
Once you receive the IRS examination report, you have two options: You can approve their findings, or you can choose to disagree with their findings. If you disagree, you have 30 days to do the following:
- Mail in additional documents you would like them to consider,
- Request a discussion of the findings with the examiner (you can do this and submit additional information to be considered).
- Discuss your case with the group manager or senior manager
- Request an appeal
If you do not respond within 30 days then the IRS will send a notice that your case is considered not agreed and you will have only 30 more days to file for an appeal or the IRS findings will become final.
If you owe money to the IRS, you may be able to obtain an Offer in Compromise (OIC) to pay the money that you owe. An OIC provides a way to have a large portion of your tax debt forgiven. You must agree to pay a smaller amount in a timely fashion. Both the amount and the time are agreed upon by both you and the IRS. You may be able to obtain an OIC if you believe the IRS is incorrect as to the amount of taxes you owe or if you are unable to pay back the full amount owed. In the second instance, the IRS will carefully consider the amount owed, your income, your assets, and your living expenses.
An OIC is quite difficult to obtain; only about 1% of offers submitted to the IRS are accepted. However, in 2012, the IRS expanded its Fresh Start initiative which means that more people will qualify for Offers in Compromise. Many taxpayers and tax professionals are unaware of these changes to the program as well. Some of the changes made include:
- Changing the calculation to determine a taxpayer’s future income
- Expanding the qualified amounts and types for Allowable Living Expenses
- Making provisions for the repayment of student loans
- Making provisions for the repayment of state and local taxes
The Sarasota law firm of Koontz & Associates, PL will help you determine if you are eligible for an OIC, and can help craft a persuasive argument regarding your eligibility for presentation to the IRS.
Three Types of Offers in Compromise Provide Certain Advantages and Disadvantages
There are three different types of OICs. The one for which you qualify is largely dependent upon your income and assets and the amount you owe. No matter how much you owe the IRS, the amount to be paid is determined by a preset formula. Different options include:
- Cash Offer
- Short Term Deferred Offer
- Long Term Deferred Offer
Though the amount considered will differ for the type of OIC, each will involve values that include the “quick sale value” of your assets, as well as the amount that the IRS could collect from your available income. The calculations are complicated and easily misunderstood without experience in this area of tax law. Be wary of companies that claim to be able to submit an OIC on your behalf. Be especially cautious of companies who make extreme claims of settlement and have no attorneys or CPAs employed with their company. In recent years, there have been an increased number of scams and frauds. For reduced risk, be certain to work with an experienced and licensed tax attorney or CPA.
Short Sales and Foreclosures
If you have had a cancellation of a debt, a short sale, or a foreclosure on your home, you face special tax issues. At Koontz & Associates, PL, we routinely handle these procedures and the unique tax implications they present. Debt forgiveness may result in harsh tax consequences, which may be reduced or eliminated with proper planning.
Cancellation of Debt
Lenders who release a borrower from an outstanding loan are required to issue a Form 1099-C which reports the cancellation of debt. Although the borrower is not receiving cash, the IRS considers the extinguished debt obligation to be taxable income. This includes mortgage lenders and even credit card companies.
For example, if the seller borrowed $300,000, the lender receives $200,000 in proceeds from a short sale and forgives the remaining $100,000 balance; the IRS’ position is that the seller has $100,000 of income that no tax has been paid on. The IRS does not consider that the loan proceeds were “spent” on a property which has lost value. The result is phantom income, meaning that the seller has not received cash from the sale proceeds with which to pay the tax. The amount of debt forgiven by lenders, particularly in short sales, can be substantial, and may result in unexpected taxable income and higher tax rates.
Cancellation of debt income can cause complications to the seller’s tax return. Although one may traditionally fall into a lower tax bracket, cancellation of debt may substantially increase a seller’s taxable income and their total income could be taxed at a higher tax rate. It is not uncommon to see as much as $150,000, or more, granted in debt forgiveness which could easily result in a higher tax rate for many borrowers.
Reducing Tax on Cancellation of Debt Income
The Internal Revenue Code provides an insolvency exclusion which exempts forgiven debt for a taxpayer, to the extent of their insolvency. Insolvency is the difference between the taxpayer’s outstanding liabilities and the fair market value of all assets held on the date of sale or debt forgiveness. However, a borrower should never assume that they qualify for this exemption by virtue of the fact that there is negative equity in their home. To determine eligibility for the insolvency exclusion, a detailed analysis of a taxpayer’s assets and liabilities would need to be performed.
Lenders are required by law to report on Form 1099-C any release of debt greater than $600 and have no discretion to withhold such information. The resulting tax liability occurs upon the release of loan obligation, not upon the issuance of the 1099-C. Not only does the lender have a reporting obligation, but the borrower must also report this liability on their tax return for that year. Failure to do so can result in a 25% underreporting penalty and an increased audit period from three to six years.
Some borrowers believe that foreclosure may allow them to circumvent tax liability, but release of debt may occur following completion of a foreclosure. In addition, this may happen without the borrower even knowing it, until they receive the 1099-C from the lender. Again, the borrower has no ability to request the lender not issue the 1099-C, and if the lender chooses to release the debt following the foreclosure action, either on its own accord or in response to post-deficiency negotiations, the debt forgiven will likely be much larger and the incidental tax liability much greater due to the additional costs and fees that accumulate and grow on the balance of a loan throughout a foreclosure action.
Borrowers also believe bankruptcy to be a potential solution to tax liability. This may be accurate depending upon when the borrower files bankruptcy. Income tax liability is not typically dischargeable particularly if the forgiveness of debt occurs prior to the bankruptcy filing.
The Importance of Tax Planning Prior to a Short Sale or Foreclosure
Tax consequences resulting from short sales, debt settlement, loan modifications, and foreclosures are fact specific and should always be evaluated by a professional. In many cases, tax planning can help a seller legally avoid or minimize the tax consequences of their transaction. If the seller proceeds without planning for the tax impact of the transaction, they are often unpleasantly surprised with the outcome.
Call Koontz & Associates, PL for a Review of Your Debt Forgiveness Tax Issues
Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing clients. To schedule a consultation, call the Sarasota office of Koontz & Associates, PL at 941-225-2615.
Under the rules of the Internal Revenue Service, not filing your income tax return is not only expensive, but it is illegal. Harsh penalties are imposed upon individuals and businesses that do not file or pay their taxes. Many people choose not to file because they cannot pay the taxes due. However, not filing can make matters much worse than reporting the tax owed and working out an arrangement with the IRS. Let Koontz & Associates, PL assist you with getting your tax return filed.
The failure to file penalty is significant. The typical failure to file penalty when no fraud or negligence is involved is 5% per month on the total tax liability that is owed. This penalty begins the day after the tax return was due. When fraud or negligence is involved, the rate jumps to 15%. Get help before penalties start. Even if you have not filed in years, it is recommended that you start. It is never too late to comply.
If you can prove to the IRS that there was reasonable cause for your failure to file on time, the IRS may remove or reduce your tax penalties. In order to do so you must file what is called a Request for Penalty Abatement. The IRS handles each request for penalty abatement on a case by case basis. If you have penalties that are a significant portion of your total tax bill, consider using Koontz & Associates, PL to review your tax situation and to negotiate with the IRS on your behalf.
Substitute for Return (SFR)
If you do not file your tax return, the IRS has a solution to start the collection process from you. After months of notices requesting a return be filed, the IRS will create a substitute for your return. A Substitute for Return (SFR) is a formal way for the Internal Revenue Service to make an estimate of how much you might owe for your taxes. The purpose of a Substitute for Return (SFR) is to calculate a definite dollar amount of your tax liability so that the IRS can begin collection efforts. The IRS uses its substitute tax return to issue a proposed assessment of taxes you owe and that calculation is based on all the income reported to IRS without consideration for any deductions to which you may be entitled. Therefore, the balance is typically much higher than what is truly due.
If you fail to respond to the proposed assessment, the IRS assessment will become final. Once the IRS assessment becomes final, the IRS can legally collect on the tax for a period of ten years. The best way to avoid and resolve a Substitute for Return situation is to file a tax return. If a Substitue for Return has already been filed, you can still file a return and reduce the tax due, if it is less than the estimate of the SFR. Let Koontz & Associates, PL offer you proper assistance to avoid IRS tax issues.
The IRS has a Currently Not Collectible Status for taxpayers who have faced hardship and are currently unable to pay their tax debt. Generally it is used when someone is having a difficult time financially. For example, it may be used if you have lost your job or had your hours cut back. If you are granted this status, the IRS will not continue enforcement actions against you like levies and garnishments. Because this is a temporary solution, interest and penalties will continue to be charged against you. The Currently Not Collectible Status is a temporary postponement of paying taxes. In some cases, a postponement may last up to ten years. This status is regularly reviewed, and if your circumstances change, you are obligated to notify the IRS. Koontz & Associates, PL can help you review and complete the forms needed to file for this status.
If you owe money to the IRS, you may already be facing financial hardship. This may be the reason you were unable to pay your taxes in the first place. Now you need to pay the taxes you owe along with the IRS penalties and interest accrued on your debt. Many people simply do not have the money to pay such a large lump sum to the government. Fortunately, the IRS offers several ways to make this debt more manageable, one of which is an Installment Agreement.
Weigh the Pros and Cons of an Installment Agreement
When you obtain an Installment Agreement, you make smaller monthly payments to the IRS at a rate agreed upon by both parties. Installment Agreements are easier to obtain since the IRS adopted the Fresh Start program in 2012. Typically, the IRS will grant an Installment Agreement to anyone who requests one, provided that you have a previous history of paying your taxes and all your current taxes are filed and up-to-date.
The biggest advantage of an Installment Agreement is that the government cannot file a tax lien against you while you are making your payments, if one has not already been filed. However, there are some drawbacks, including the interest that continues to accrue. Combined with IRS penalties, interest can reach 8% to 10% a year.
If you are considering entering into an Installment Agreement with the IRS, Koontz & Associates, PL can help you examine your options and choose the best way to manage your debt with the IRS. If you decide that an Installment Agreement is the right solution for you, we will help you through every step of the process from filing an application to making your final payment and obtaining the release.
Different Types of Installment Agreements Benefit Different Taxpayer Circumstances
There are three types of Installment Agreements available and Koontz & Associates, PL can help you decide which type you qualify for and which would most beneficial. They include:
- Streamlined Installment Agreement – This is type of agreement is given to those who can pay their debt within 60 months or less. It is the most common type of Installment Agreement, especially since the adoption of the Fresh Start program; prior to the adoption of this program, only those who owed $25,000 or less could qualify, but now those who owe $50,000 or less may obtain a streamlined Installment Agreement. When you apply for this type of agreement, you will not need to fill out a financial statement, and no federal tax lien is required.
- Basic Installment Agreement – If your debt exceeds $50,000 or if you cannot pay within 60 months, you will need a basic Installment Agreement with the IRS. In order to do so, you fill out a financial statement, which will be reviewed by the IRS in order to determine the rate of repayment. Generally, that rate is calculated by subtracting your allowable expenses from your monthly income. Not all expenses are allowable so you will need to consult with a tax attorney or CPA to craft a careful budget prior to filing an application for an Installment Agreement. In addition, there are some categories and amounts of expenses which you may be entitled to, but they must be requested. The IRS will not automatically give them to you. These may allow the monthly payment to be reduced. Often, when the IRS requires a payback amount that the taxpayer deems unreasonable, he or she can appeal to the IRS and come to a compromise. Koontz & Associates, PL will help you apply, negotiate and represent you for your appeal.
- Partial Pay Installment Agreement – If you cannot pay back what you owe within 60 months, you may also want to consider a Partial Pay Installment Agreement, which allows you to pay back an amount deemed reasonable, considering your essential living expenses. Because your taxes will not be paid in full before the statute of limitation expires, the IRS may still file a tax lien against you, and they will conduct periodic reviews of your financial situation. If it changes in any way, your Installment Agreement may be altered.
Because there are advantages and disadvantages to all three types of Installment Agreements, it is essential that you carefully investigate which one will benefit you the most. Koontz & Associates, PL will examine your financial situation and help you determine which type of agreement is best. Once that is determined, an agreement is made with the IRS.
Many people become paralyzed with fear when they owe money to such an onerous creditor as the Internal Revenue Service. They cringe at the sight of that dreaded piece of mail – a notice from the IRS. The most important thing is to respond promptly. Ignoring the problem will only make it worse.
An IRS notice includes the amount of tax owed, plus any penalties and interest added from the date the tax was due. If you are unable to pay your balance in full, and fail to respond, the IRS will begin collection actions against you. This may include offsetting any refund to which you may be entitled, filing a notice of federal tax lien against your property, or serving a notice of levy of assets such as wages, bank accounts, Social Security benefits and retirement income. To prevent these drastic actions, you must communicate with the IRS promptly.
The first thing you should do is to confirm the tax assessment is in fact correct. If you believe it isn’t, you must contact the IRS within 60 days and speak with someone who can explain the charges. If you still believe the charges are incorrect, or if you are uncomfortable calling the IRS, you should contact an attorney or a tax professional.
Second, if you are able, you should remit some payment with the notice/bill in order to show good faith effort to comply. Because your balance is subject to interest and a monthly late payment penalty, it is in your best interest to pay the balance in full as quickly as possible. Penalties are also assessed for failure to file a tax return, so you should file immediately even if you cannot pay your balance in full.
If you are able to pay your full balance and simply need more time, you may request up to 120 days to pay in full. You are not obligated to pay a fee for this arrangement, although the interest continues to accrue. The IRS will encourage you to obtain a cash advance on your credit card or obtain a bank loan, but many people are unwilling or unable to do so, as the fees for doing so may be too high.
The most common solution to this daunting debt is to submit a request for an Installment Agreement. This is a monthly payment plan you can use to pay the debt, ward off collection efforts and return to a good night’s sleep. Again, interest continues to accrue until the debt is paid in full. In many cases, the IRS still files a tax lien.
To qualify, you must meet certain criteria. You must demonstrate current and future filing compliance – meaning all tax returns have been filed. In addition, you must begin making payments toward your current tax liability, the purpose of which is to show that this problem will not continue to recur and the issues which contributed to the problem have been resolved.
You must disclose your income, expenses, assets and liabilities. Based on the information provided, you can make an offer of the monthly payment you feel you can afford. The IRS will ultimately determine your monthly payments based on your disposable income, according to local standards. Frequently, the IRS calculation of the amount you can afford is higher than what you’re comfortable with. There is some room for negotiation, if you properly exercise your rights.
The IRS will respond to your request usually within 30 days, either to inform you whether your request has been approved or denied, or in some cases, whether more information is needed to make a decision.
Once the IRS approves an Installment Agreement, it is imperative that you comply with all the terms and not miss any payments or make late payments. If you default, the Installment Agreement may be voided and the IRS may immediately reinstate enforcement actions to collect.
Another option for taxpayers who are unable to pay is to request an Offer in Compromise (OIC). An OIC is an agreement between the taxpayer and the IRS that allows you to settle your outstanding tax liability by paying less than the full amount owed. Although, it should be noted that if the liabilities can be fully paid through an Installment Agreement or other means, the taxpayer will in most cases not be eligible for an OIC.
If you truly cannot afford to pay anything as a result of your financial hardship, the IRS may place you in a status known as “Currently Not Collectible.” This is a temporary hold on your account which permits you to not make any payments for the duration of the hardship. This status is reviewed annually and you have an obligation to inform the IRS promptly if there is a change in your financial circumstances. Interest continues to accrue, but no collection action will be enforced.
The tax rules and regulations are complex and change frequently. You should always file your tax return timely, even if you know you cannot pay the balance due in full. Knowing that payment arrangements can be made provides a significant relief for many taxpayers. If you are not comfortable representing yourself, you should hire an attorney or tax professional that practices in this area regularly and understands the intricacies of dealing with the IRS.
As a business owner, you bear the responsibility of paying income tax whether your business is a sole proprietorship, a partnership, an LLC, or a corporation. Proper calculation and payment of your business taxes are essential for the financial health of your company and to ensure that you do not encounter any legal or tax liability issues in the future. Business income taxes are extremely complex, especially in light of recent changes in tax legislation. Without the proper skills and an intimate knowledge of tax law, it is very easy to make a mistake that could prove costly for your company. Attorney and Certified Public Accountant Jo Ann M. Koontz of Koontz & Associates, PL can assist you in calculating your business income tax, taking advantage of the deductions available to you, and avoiding serious mistakes.
New Legislation Makes Business Income Tax Preparation More Complicated
New tax legislation is passed every year and has great impact for individuals and for businesses, but unlike the provisions made for individuals, the incentives and benefits for corporations may be temporary. It is essential that you take advantage of the tax incentives and create a comprehensive tax plan that takes temporary benefits into consideration. Koontz & Associates, PL have followed these changes closely and are ready to help you take advantage of these incentives and put a creative financial strategy in place for the future.
Significant Benefits for Companies that Invest in Equipment, Property, and Services
Both the American Taxpayer Relief Act of 2013 and the 2012 Relief Act provided significant incentives for businesses who invest in capital and equipment. However, because many of these incentives are temporary, it is vital that you take advantage of them now. Changes included:
- A 50% first-year bonus deprecation allowance to apply for qualifying property placed in service through 2013. For longer lasting and transportation property, the allowance extends into 2014.
- Under Internal Revenue Code Section 179, taxpayers in 2013 may expense as much as $500,000 of qualifying property reduced by the amount by which the property exceeds $2,000,000. Beginning in 2014, however, taxpayers may only deduct $25,000 of qualifying property with an investment cap of $200,000 regardless of inflation.
- Research Tax Credits, originally set to expire in 2011, have been extended through 2013. This credit may be claimed for costs incurred by business research or payments to universities and other institutions for their research. This applies to the amount by which the research for this fiscal year exceeds the annual average for research for the last four years.
- The Relief Act extended the 15-year recovery period for leasehold, retail, and restaurant improvements. Taxpayers may continue to take those deductions through 2013.
Changed Vehicle Deductions Have Easy-to-Miss Details
Business vehicles have always been eligible for tax deductions. However, new changes have been made with regard to depreciation reductions and lease inclusions. Vehicle expenses can be calculated using mileage costs or using actual expenses, such as lease payments, registration, maintenance, storage, repairs, oil changes, and tolls. The actual deductions taken will vary depending on the size and type of vehicle, whether it is a luxury car, and whether it is leased. Deciding whether to calculate costs based on mileage or actual expenses can be tricky. Koontz & Associates, PL can help you make the right decision for your business.
Sweeping Health Care Reform Has Significant Effects on Southwest Florida Business Owners
The U.S. Supreme Court ruled that the Patient Protection and Affordable Care Act (PPAC) is constitutional. This act has significant consequences for businesses. With the Supreme Court’s declaration, all businesses are now required to meet the provisions of PPAC. Employers must report the total cost of provided health benefits on their employees’ W-2 forms, whether the employer or the employee pays for it.
Small businesses have slightly different provisions for health care. If you own a small business with no more than 10 employees and an average wage that does not exceed an average of $25,000, you may be able to take a 35% tax credit on health insurance premiums paid in 2012 and 2013. Tax exempt employers can take a 25% discount on premiums paid between 2010 and 2013. After 2014, taxable employers can deduct 50% of insurance costs and non-profit employers can deduct 35%. An employer must offer insurance through a state insurance exchange.
Employee Services Are Rewarded with Significant Tax Incentives
In addition to health care, employers are rewarded for giving jobs to those-in-need and to providing services to their employees. The Work Opportunity Tax Credit (WOTC) grants tax incentives to employers who hire from hard-to-employ groups. Usually, this incentive is equal to 40 percent of the worker’s wages, with a maximum set at $6,000. The Heroes Act of 2011 extended this tax credit to companies who hire veterans and disabled veterans. The tax credit for hiring these workers can go as high as $9,600.
In addition, the Relief Act made a permanent extension for tax credits given to companies that provide child care and facilities for their employees. Companies may deduct 25% of all child care costs and 10% of all child care resource and referral costs, not to exceed $150,000 in any tax year.
Some Tax Hikes Negatively Impact Business Owners
Not all of the changes in tax law will positively impact business owners. There are increases of which you should be aware. They include:
- Personal holding company taxes – The rate on these taxes has been permanently raised from 15% to 20%, beginning December 31, 2012
- Accumulated Earnings Taxes – The rate on these taxes has also been permanently raised from 15% to 20%, beginning December 31, 2012
It is vital that you be aware of these changes or work with and who is familiar with them to keep from unwittingly making a smaller payment than required and having issues with the IRS in the future.
Call Koontz & Associates, PL for Corporate Income Tax Services in Southwest Florida
Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing tax clients. To schedule a consultation, call the Sarasota office of Koontz & Associates, PL at 941.225-2615.
Sales & Use Taxes
Almost every Floridian who purchases, sells or provides goods and services is subject to Sales and Use Taxes. Florida sales tax is generally 6% but it can be higher depending upon additional local levies. This applies to the purchase price, admission prices, storage, and services, as well as tangible items. Use tax is similar to sales tax, although it only applies in certain situations, for instance:
- If you buy a taxable item in Florida and did not pay taxes at the time of purchase
- If you buy a taxable item outside of the state without paying taxes and have it delivered into Florida
- If you buy a tax exempt item with the intent to resell and then use it for personal or business purposes
In addition to little-known laws regarding use tax, there are also laws regarding discretionary sales surtax, which is a county tax that applies to almost all goods or services subject to regular sales tax. However, these taxes are not universal across Florida but are calculated according to the county to where the goods are shipped. Not paying sales or use taxes or the discretionary sales surtax can result in serious legal consequences including criminal sanctions. Because sales and use tax regulations are not always clear cut, it is easy to make mistakes. Consulting with us can help ensure that you meet all requirements, and minimize your tax liability by taking advantage of all exemptions.
Sales and Use Tax Questions
If you are starting a new business in Florida, it is essential that you determine whether state law requires you to collect and remit sales tax. Most businesses are required to pay sales and use tax and relatively few are exempt. Exempt from taxation are federal, state, county, and municipal governments, charities, religious groups, educational institutions, science organizations, and veterans’ institutes. If you are not sure whether you are subject to taxation or eligible for exemption, consult with us. We can help you complete tax registration with the state of Florida and also prepare and file your sales and use tax returns allowing your business to utilize all eligible exceptions, deductions, and incentives, and reap the greatest profits possible.
Tourist Development Tax
Florida law allows for a Tourist Development Tax. Individual counties may impose local option transient rental taxes on rentals or leases of accommodations in hotels, motels, apartments, rooming houses, mobile home parks, RV parks, condominiums, or timeshare resorts for a term of six months or less. The revenues may be used for capital construction of tourist-related facilities, tourist promotion, and beach and shoreline maintenance; however, the approved uses vary according to the particular levy. Depending on a county's eligibility, the maximum tax rate varies from a minimum of 3 percent to a maximum of 6 percent. These local option taxes can be administered by the Department of Revenue or by one or more units of local government. Koontz & Associates, PL can assist you with your questions and concerns about these taxes and the relevance to your situation.
Call Koontz & Associates, PL for Information on Sales & Use and Tourist Development Taxes
Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing clients. To schedule a consultation, call the Sarasota office of Koontz & Associates, PL at 941-225-2615.
How much did you spend on care for your child or a dependent in 2015? The money you spend on a child or an individual that is dependent on you can provide a deduction of up to $3,000 for one qualifying person, or $6,000 for two or more individuals. Find out if your child or dependent qualifies for a deduction. We recommend speaking with a tax professional for complete details about your deduction, but here is a brief overview on child deduction and individual dependent deductions.
Who is considered a qualifying individual:
- Your child if they are 13 years old or younger when the care is provided.
- Your spouse if he or she is not physically or mentally capable of caring for themselves.
- An individual that is not physically or mentally capable of caring for themselves and has lived with you for more than half a year. This individual also needs to be your dependent or could have been claimed as a dependent on another taxpayer's return.
What is deductible?
If you have paid someone to take care of a qualifying child or individual, your cost will likely be deductible. This cost includes expenses paid for care provided inside the household or outside the household. The expenses must be for the well-being of the individual.
You will also need to provide proof of the care provided. Form W-10, Dependent Care Provider's Identification and Certification can be completed for proof of the persons or organization that provided the care. Note that the care provider cannot be your spouse or the parent of your qualifying individual.
The truth is that each family or individual's situation is unique and so is their filing. You will need to speak with a tax professional to have a full understanding of what is deductible and how to fully take advantage and maximize your deduction.
Dependent Care Benefits
Special rules apply if your employer provides dependent care benefits. Form 2441, Child and Dependent Care Expenses, will guide you through the process of reporting your benefits.
Child and dependent deductions is an important topic to discuss with your accountant. These deductions are made available by the IRS to help families and individuals reduce their taxes. Contact Jo Ann Koontz to set up a consultation about reducing your taxes by maximizing your deduction - 941-225-2615.
Recommended Resources Provided by the IRS
- Am I Eligible to Claim the Child and Dependent Care Credit?
- Topic 602 - Child and Dependent Care Credit
- What You Need to Know About the Child and Dependent Care Tax Credit
Koontz & Associates, PL Prepares Individual Tax Returns
Planning, calculating, and paying income tax can be complicated. The professional tax services provided by the Sarasota Law and CPA firm of Koontz & Associates, PL can ease the stress of income tax payment with comprehensive individual income tax preparation and planning services.
New Laws Make Certified Public Accountants a Necessity for Smart Tax Planning
Each year, the federal government passes new laws regarding income taxes, and in the last few years, the government has made sweeping changes. When President Obama signed The American Taxpayer Relief Act into law it reduced the amount of income tax to be paid by most Americans and it extended many tax incentives, either permanently or temporarily.
While the Act is primarily beneficial for most Americans, not all of its provisions work to your advantage. In addition, the widespread changes make income tax planning for the following years very difficult. Koontz & Parkin CPAs can help you take advantage of the positive aspects of the Act, minimize negative impact, and make a smart, well-informed tax plan for the future. In particular, the Koontz & Associates, PL team can help you with specific areas affected by the new laws, including:
- Tax Rates: The Taxpayer Relief Act permanently extended previous tax rates for families, except for single filers with incomes above $400,000, heads of households with incomes above $425,000, and married couples with joint returns of $450,000 or more. These taxpayers will pay at a 39.6% interest rate, with adjustments for inflation in the following years. However, the amount of Social Security each worker must pay increased to 6.2% (a 2% increase) meaning that Americans will actually take home less income this fiscal year.
- Capital Gains and Dividends: For taxpayers with the incomes mentioned in the section above, capital gains and dividends are now being taxed at 20% rather than at 15%, as they were in previous years. For other taxpayers, the taxation rate remains at 15%, and for income below the top 15% tax-bracket, there is a 0% taxation rate.
- Alternative Minimum Tax: The Alternative Minimum Tax (AMT) was established more than 40 years ago to ensure that wealthy citizens paid their taxes. However, it was never adjusted for inflation, and in recent years it began affecting middle-income taxpayers, as well. The American Taxpayer Relief Act made permanent adjustments for inflation and changed exemption amounts.
- Estate Tax: For a number of years, estate, gift, and generation-skipping transfer taxes have been inconsistent. The Taxpayer Relief Act set a standard of taxation, and the minimum estate, gift, and generation-skipping transfer tax is now 40%, which represents a 35% increase from 2012. However, there is no change in the exclusion amount for estate and gift tax in 2013. In subsequent years, it is at $5 million, with adjustments for inflation. The generation-skipping transfer tax exemption is also $5 million for 2013 and years following, with adjustments for inflation.
- Tax Deductions: The American Taxpayer Relief Act permanently and temporarily extended a number of tax credits and deductions, including a permanent extension of the enhanced adoption credit/exclusion, a permanent extension of the enhanced child and dependent care credit, a permanent extension of the $1,000 child tax credit, and a permanent extension of the enhanced student loan interest deduction. Temporary extensions include the higher education tuition deduction, transit benefits parity, IRA distributions to charitable organizations, American Opportunity Tax Credit, teachers’ classroom expense deductions, cancellation of indebtedness on principal residence, and residential energy efficient property credit.
- 3.8% Net Investment Tax: Additional tax is now calculated based on a taxpayer’s “net investment income,” including interest, dividends, annuities, rent, royalties, and similar sources of income. However, it is not calculated based on income from a business or the sale of property related to a business. It is also based on the lesser of the taxpayer’s net investment income or adjusted gross income in excess of $200,000 ($250,000 for a married couple or $125,000 for married couple filing separately).
- 0.9% Medicare Tax: Beginning in 2013, higher income individuals are required to pay an additional 0.9% Medicare tax. In other words, any income exceeding $200,000 ($250,000 for a married couple or $125,000 for a married couple filing separately) will be taxed at a 2.35% Medicare rate.
- Retirement Savings: The American Taxpayer Relief Act has made it easier for taxpayers to save and plan for retirement, lifting most restrictions on Roth accounts.
Call Koontz & Associates, PL for Individual Income Tax and Planning Services in Sarasota
Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing clients. To schedule a consultation, call the Sarasota office of Koontz & Associates, PL at 941.225-2615.
At Koontz & Associates, we understand the tax implications of any decision you make and we can help you minimize your tax commitment wherever possible by looking at the big picture.
Your tax standing is delicate — one bad decision has the potential to destroy your financial record, sink your business, and jeopardize your goals for the future. No matter what issue you’re currently having, it needs to be addressed quickly.
Not having any of the problems below? Good! Let’s keep it that way. Request a consult so we can establish a relationship now and make sure you don’t find yourself in a messy tax situation down the road. Remember, it’s easier and less expensive to prevent tax issues ahead of time than it is to fix them when the damage has already been done.
If you owe unpaid taxes, the IRS may place a tax lien on your property in order to secure payment. A tax lien is the government's claim to your property. Once a notice of federal tax lien is filed, it attaches to just about everything you own.
Let Koontz & Associates, PL help you as soon as you receive notification of a tax lien!
The IRS will impose a tax lien when there are unpaid taxes and you have failed to pay or take action within 21 days of when the IRS sent formal notification. The IRS states that they may file a notice of federal tax lien after the following three steps:
- The IRS assessed a tax liability
- The IRS sent a notice to demand payment of the tax liability
- You did not pay the debt in full within 10 days after you were notified
Once the IRS takes these three steps they can file a notice of federal tax lien. A lien will then be placed on your property for the amount of tax owed plus interest and penalties. The federal tax lien will attach to real property, tangible and intangible property owned by the taxpayer. Once the lien is filed, it attaches to any asset you currently have and any assets you acquire in the future.
Tax lien notices are recorded in public records and therefore are picked up by all the major credit reporting agencies. In essence, a federal IRS lien may severely and negatively impact your credit rating and will make it extremely difficult to purchase a home, buy a car, get a new credit card, or sign a lease.
It is possible to gain a Tax Lien Release. In order to release a tax lien you will need to obtain a Certificate of Release of Lien from the IRS.
There are a five common ways the IRS will release or withdraw a tax lien. Once satisfied, the IRS will have 30 days to release the tax lien.
- Taxes are Paid in Full
- A Direct Debit Installment Agreement was Signed
- Taxes were settled with an Offer in Compromise
- Statute of Limitations Expired with the Lien Non-enforceable
- IRS Accepted a Bond Guaranteeing Payment
Immediately upon receipt of a Notice of Intent to Lien or Lien filing from the Internal Revenue Service, contact a tax professional to discuss your best options.
If you owe the Internal Revenue Service money, you are probably concerned about payment of the debt, interest, and penalties. Some taxpayers are able to obtain a penalty abatement which may significantly reduce or even eliminate the penalty levied by the IRS. According to the IRS, the purpose of these penalties is to encourage taxpayers to comply with tax law. Therefore, if you can prove that your non-compliance is the result of mitigating circumstances, you may be eligible for a reduction or even elimination of your tax penalty.
To obtain this type of relief, you must submit a penalty abatement request letter to the IRS. The IRS receives millions of these letters every year, and the majority of them are rejected. Most penalty abatement letters are poorly and unconvincingly written and they fail to identify the required causes which are eligible for abatement. Sarasota CPA and attorney Jo Ann M. Koontz can help you write a compelling letter that may convince the IRS that your non-compliance was the result of circumstances and that you truly deserve relief from penalties.
Help to Determine If You Qualify for Penalty Abatement
Not everyone qualifies for penalty abatements. In order to prove your eligibility, you must show that your non-compliance with tax rules was the result of factors over which you had no control, including:
- Reasonable Cause – A taxpayer must prove that he or she took reasonable care to understand the law and comply with tax payment but unknowingly failed to comply. Examples of reasonable cause may include death, serious illness, unavoidable absence, divorce, substance abuse, natural disaster, or the destruction of records.
- IRS Error – If your non-compliance was the result of a mistake by the IRS, you should qualify for abatement. This can include mistakes in written or oral advice given by the IRS that impacted your business decisions.
- Hazards of Litigation – If it appears likely that the demands of the IRS will not be upheld in court, the IRS Office of Appeals may waive the penalties. This occurs most often in audits in which the IRS is levying accuracy-related penalties.
- Statutory Exceptions – There are some specific provisions for abatement set out by law. For example, if the taxpayer is newly retired or disabled or if the taxes owed are less than $1,000, IRS policy dictates that these taxpayers qualify for abatement.
- Administrative Waiver – On occasion, the IRS will issue a widespread waiver for tax penalties. For example, in 2012, the IRS issued a penalty waiver for all those who were facing financial hardship. Another administrative waiver is First-Time Abatement (FTA), which offers penalty forgiveness for those who have a history of tax law compliance. According to the 2012 Treasury Inspector General for Tax Administration Support, 1.65 million taxpayers qualified for this abatement in 2010, yet only 8.8% of taxpayers in a sample group received the abatement. This was largely due to the fact that many taxpayers and tax professionals were simply unaware of the abatement policy.
Because the regulations surrounding penalty abatements are quite complex, it is essential that you work with an experienced tax lawyer or CPA. Koontz & Associates, PL can help you determine if you are eligible for penalty abatement. If you are eligible, then a letter should be prepared for the IRS to convincingly set out your case seeking penalty forgiveness.
Located in Sarasota, Florida, Koontz & Associates, PL have years of experience with individual and business tax planning, preparation, and representation. Jo Ann M. Koontz is uniquely qualified as both an attorney and Certified Public Accountant. Marina Parkin, educated in Toronto, is both a United States Certified Public Accountant and Canadian Chartered Accountant.
Koontz & Associates, PL serve clients using the latest tax code and regulations. Our goal is to assure that our clients are maximizing available deductions, paying tax at a proper rate, and following all legal compliance requirements. The Koontz team works closely with clients to create long lasting professional relationships.
Individual Income Tax Preparation
Each year, we help individual taxpayers plan and prepare their taxes. We help you benefit from new tax laws. Many taxpayers are unaware of standard and new deductions for which they are eligible. We will help you determine the deductions for which you are eligible so you are able to minimize your tax liability. Each calendar year offers an opportunity for tax and financial planning. Our team will assist you in the creation of a comprehensive financial strategy that provides you with substantial tax savings.
Minimize Business Taxes
Your business will benefit from our tax planning and preparation services. We can help you minimize your business taxes by paying careful attention to your business structure and the accurate and timely application of federal tax regulations, incentives, and deductions. Special incentives often exist for investment in equipment and capital. There are also forms of relief and exemptions that may be available in a specific fiscal year. Many of these benefits are temporary and business owners have limited time to apply the tax savings. Koontz & Associates, PL helps business owners create a multi-year plan to minimize taxes.
Tax Issue Resolution for Unique Tax Situations
Individuals and businesses may encounter unique tax situations. Tax issues may arise for individuals who own property or have multiple types of investments. We are familiar with and skilled at resolving unusual tax circumstances. Areas of expertise include:
- Payroll Tax
- Individual, Business, and Corporate Income Tax
- Federal taxation of non-residents
- Taxation on foreign investments
- Real estate taxes
- Tangible personal property tax
- Self-employment tax
- Application for Employee Identification Number (EIN) or
- Application for Individual Tax Identification Number (ITIN)
- Income tax issues related to the cancellation of debts, foreclosures or short sales
- Innocent Spouse Relief
- IRS Installment Agreements
- Offers in Compromise
- Penalty Abatement
Business owners must also deal with a wide variety of tax matters, including sales and use taxes, state corporate income tax, cancellation of debts, and the taxation of sale or purchase of a business.
Legal Representation for Tax Problems
There are a number of tax issues that call for legal representation. Jo Ann M. Koontz is both an experienced CPA and a highly regarded attorney with extensive experience in taxes, real estate, and business organization. Koontz & Associates, PL specializes in a variety of tax problems and solutions.
Whether you are the victim of tax fraud, a Ponzi scheme, or you owe money to the IRS, Koontz & Parkin, CPAs will provide you legal and tax counsel with integrity that is grounded in a firm knowledge of tax regulations and business planning.
Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing clients. To schedule an appointment please call the Sarasota office of Koontz & Associates, PL at 941.225-2615.
Most married couples file joint income tax returns. Filing jointly means that both spouses are held liable for any taxes, interest, and penalties--including those resulting from mistakes or deliberate non-compliance in taxation. If within three years, the IRS determines that taxes were not filed correctly, the IRS may go after both spouses in an attempt to collect what is owed. If one spouse made all the financial decisions, including filing and paying the taxes, both spouses can face collection action from the IRS. This is the case even if they are now separated or divorced and the other spouse knew nothing of the intentional or unintentional errors in filing or paying taxes.
To this end, the IRS instituted a policy referred to as Innocent Spouse Relief, which provides relief from taxes, penalties, and interest owed by an ex-spouse. In 2012, the IRS expanded the availability of Innocent Spouse Relief, making it easier than ever before to obtain such relief. If you believe you qualify for Innocent Spouse Relief, tax attorney and CPA Jo Ann M. Koontz can analyze your situation and help you to obtain relief.
There are three types of innocent spouse relief with different qualifications for each one.
- Original Spouse Relief – This is the first and most basic form of relief. In order to qualify, you must have a jointly filed tax return with your spouse on which your spouse made serious mistakes or committed fraud. You must not have been aware of the fraud, and you must be able to prove that you did not know and had no way to know.
- Separate Liability Election – This type of relief divides the amount owed between you and your former spouse. In order to qualify, you must have filed a joint tax return with a spouse to whom you are no longer married or from whom you are separated. Alternatively, you may qualify for separate liability election if you were not a member of the same household when you filed the joint tax return.
- Equitable Relief – If you do not qualify for either of the other two forms of Innocent Spouse Relief, the IRS will examine your eligibility for equitable relief. This is the only type of innocent spouse relief that allows you to obtain relief from underpayment or understatement of tax. You may qualify for equitable relief in situations when you were the victim of abuse, when you were unaware of your spouse’s fraudulent actions, or when circumstances denied your ability to pay the tax.