Tax Talk - The 20/20 tax resolution blog

From time to time the IRS delivers some tax tips to us that we’d like to share with you.  This one is exceptionally timely with the April 15^th tax deadline approaching.  Please be sure to contact us at 20/20 Tax Resolution if you have any questions.

Will you be making a payment with your federal tax return this year? If so, here are 10 important things the IRS wants you to know about making tax payments correctly.

1.  Never send cash!

 2.  If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.

 3.  Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.

 4.  Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.

 5.  If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.

 6.  Enclose your payment with your return but do not staple it to the form.

 7.  If you pay by check or money order, make sure it is payable to the “United States Treasury.”

 8.  Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.

 9.  Complete and include Form 1040-V, Payment Voucher, when sending your payment to the IRS. This will help the IRS process your payment accurately and efficiently.

 10.  For more information, call 800-829-4477 for TeleTax Topic 158, Ensuring   Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov

The current economic downturn was tough on many businesses in 2009.  The IRS’s 2009 collection statistics, which were released in January, bear this out.  In 2009, the IRS collected $48.9 billion, which represents a 13 percent decrease in collections from 2008 when the IRS collected $56.4 billion.  Although the amount collected in 2009 decreased, the level of enforced collection actually increased.  The number of liens issued by the IRS increased approximately 25 percent from 768,168 in 2008 to 965,618 in 2009.  Likewise, the number of levies issued by the IRS increased approximately 32 percent from 2,631,038 in 2008 to 4,478,181 in 2009.

As the effects of the economic downturn were felt by everyone, it appears the number of businesses and individuals that fell out of compliance with the IRS increased.  However, the ability to repay those liabilities decreased, despite the increase in enforced collection.  It is likely that the number of taxpayers owing money to the IRS and the number of liens filed in response will remain high and may even continue to increase through 2010.