Tax Talk - The 20/20 tax resolution blog

20/20 Tax Resolution Senior Tax Consultant David Miles, E.A. was recently published in The National Association of Enrolled Agents (NAEA) March-April 2010 bi-monthly publication, EA Journal. Miles’ article, “A Closer Look at the Disqualified Employment Tax Levy” was ultimately the lead and cover article that was distributed to its 11,000 tax professional members.

For those who are unaware of the presence of the NAEA, according to their website, “The NAEA is the professional society representing enrolled agents (EAs), which number some 40,000 nationwide. Its 11,000 members are licensed by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS), including examination, collection and appeals functions.

While the enrolled agent license was created in 1884 and has a long and storied past, today’s EAs are the only tax professionals tested by IRS on their knowledge of tax law and regulations. They provide tax preparation, representation, tax planning and other financial services to millions of individual and business taxpayers. EAs adhere to a code of ethics and professional conduct and are required by IRS to take Continuing Professional Education. Like attorneys and certified public accountants, enrolled agents are governed by Treasury Circular 230 in their practice before the IRS.”

Miles’ article is constructed as guidance for the practitioner community, but it does have valuable insight to the IRS’s approach to businesses that are continuing to owe employment taxes quarter after quarter.  His closer look into the IRS’s new collection tool, The Disqualified Employment Tax Levy, proves to be informative for both tax practitioners and business taxpayers.

20/20 Tax Resolution is proud of Miles’ position as not only an advocate for the taxpayer, but also as a leader and contributor to the practitioner community.

To read Miles’ article in its entirety please click here.

Please contact 20/20 Tax Resolution with any further questions regarding this article.

Susan Taylor Martin of the St. Petersburg Times wrote a very interesting article on the U.S. anti-IRS sentiment that has been brewing in the collective American psyche for nearly half a century. Martin’s article was in response to the Texas software engineer who recently flew a plane into the Austin IRS building after years of being disgruntled by the existence of the IRS.  Also recently in the news was the Ohio man who bulldozed his home after the IRS placed liens on his properties and was facing foreclosure.  Thankfully, this type of destruction is a rare occurrence and, as Martin’s article points out, is representative of an extreme example of the existing anti-IRS sentiment.

However, this “sentiment” has presented itself enough times that the IRS has developed a separate agency, The Treasury Inspector General for Tax Administration (TIGTA), to handle the threats directed at the IRS. All TIGTA’s investigations from 2004 through 2010 are listed directly on TIGTA’s website with highlights of the numerous threats, bribes, and criminal behavior directed towards the IRS.

Over the years 20/20 Tax Resolution has seen thousands of businesses and individuals in extremely stressful conditions as a result of their back tax scenarios with the IRS and State tax authorities.  Owing back taxes is never an easy position to be in, but there are logical and rational approaches to address the situation.  Contacting a tax professional for guidance is the best first step.

Still looking for that last minute holiday gift?  Don’t worry 20/20 has done the research necessary for you to get those tax-themed gifts out the door.

1040 IRS toilet paper:

According to www.prankplace.com this product isn’t deductible, but it’ll sure make you feel better. A collage of the 1040 IRS Form is printed throughout the whole roll!

Set up a 529 account:

According to David McPherson of ABC News.com ,”Thinking about buying a savings bond for Junior’s college fund? I say forget it, and instead help fund a 529 college savings plan. U.S. savings bonds are more trouble than they’re worth with a long list of peculiar rules.

A 529 plan offers far more flexibility, including higher contribution limits and the ability to transfer account balances among family members. To learn more about 529 plans, check out Savingforcollege.com.

Stick The IRS! Board Game:

This Monopoly-style game can be found here.  Enjoy the family fun watching players have a chance to receive “annual reports” that determine whether the tax shelter investment made them rich or, as in most “real life” shelters, turn out to be a bust.

Boost Your 401(k) Contribution Rate (A gift to yourself and your future):

According to Carla Fried of CBS MoneyWatch.com, “…contact H.R. or your plan administrator and boost your contribution rate by a percentage point. Or two. Or three. You know full well that you will not go off the deep end when your take-home pay takes a slight dip. So just do it.  Now.  No more excuses.  How much is enough? Well, setting aside 10 percent of pre-tax income for retirement is good; 15 percent is ideal.”

We realize that some of these suggestions are gags, but owing back taxes is no laughing matter.  If you or someone you know has back tax issues with any taxing authority, start 2010 on the right path.  Give the gift of a financially secure road map to the future.  Please contact 20/20 Tax Resolution today for a free consultation.

Happy Holidays to you all from us here at 20/20 Tax Resolution.

**Tax consultant David F. Miles, EA of 20/20 Tax Resolution wants to remind you that if you owe tax associated with your social security number you will not receive a stimulus check.  The stimulus payment will be offset and credited to the back tax liability.  Business owners whose only tax debt resides with the company should still receive a stimulus payment. **

Wondering where to put that extra cash? Before you buy a flat screen, try these suggestions and improve your long-term financial well-being.

Question: I’m thinking of using my stimulus check to make my home more energy efficient. Do you think this is wise choice, and do you have suggestions for other ways to use this extra money? -D.D.

Answer: I’m glad you asked because in a rare display of bureaucratic efficiency, it appears the federal government is actually getting those economic stimulus payments out ahead of schedule.

Which means two things:

First, you may find yourself on the receiving end of a check or direct deposit from the IRS of anywhere from $300 to $1,200 (plus a possible $300 per qualifying child) sooner than you think, if indeed you haven’t gotten the payment already. (The IRS Web site has a calculator that estimates your payment.)

Second, it means that people in the more than 130 million American households eligible for these payments will soon be asking themselves much the same question you pose: What should I do with this little windfall?

Well, the honchos down Washington – not mention the nation’s retailers – are hoping you’ll quickly spend this manna from DC and in so doing, rejuvenate the flagging economy. And if that’s what you’ve decided to do with this extra cash – or, given the rising price of food and other living expenses, that’s what you have to do with it – fine.

But if you’re in a position to do otherwise, I don’t think it would be unpatriotic to use this money to improve your financial prospects.

Certainly your idea of using the stimulus rebate to boost the energy efficiency of your home in the face of increasingly burdensome energy costs can be one way to both spend and invest your money, although I caution you that there are also plenty of people out there touting all sorts of energy-saving home improvements and products that may take decades to generate a decent return.

Keep in mind that the extent to which those savings enhance your financial security depends on what you do with the extra cash. If lower utility bills allow you to increase your contributions to a 401(k), that’s great. If the savings end up going to more lattes, then I’d say the long-term benefit is more tenuous.

So if you’re looking to really turn this bonus of sorts to your financial advantage, I’d be more inclined to consider moves where the payoff is more direct and easily quantified. Here are some suggestions.

Pay down debt. It’s no secret that a rising tide of borrowing helped fuel the last economic boom – and contributed to its demise. So if you went a little crazy during the good years and piled on too much credit-card, home-equity or other debt, this rebate check could be a good way to lighten the load.

To get the biggest bang for your loan-repayment buck, start with debt that carries the highest rate (most likely credit cards, which charge an average rate of 12%) and then move on to lower-rate loans.

Of course, this move will pay off even more if you keep your debt under control once you’ve pared it down. You can then apply the money that used to go toward repaying loans to one of options below.

Build an emergency reserve. With the economy flagging and it looking more and more like we’re sliding into recession, it’s even more important than usual to have a cushion of ready cash equal to three months’ of living expenses that can help tide you over a layoff or other financial setback. If you don’t have such a reserve, your stimulus payment can be your first step to building one.

Remember, this is money you have to depend on in a pinch, so you want to keep it in a secure place where it won’t get hammered if the financial markets head south. For the most part, that means keeping it in a short-term bank CD or a money-market fund run by a well-known investment firm. You can check out CD rates and compare yields on money-market funds on sites like Bankrate.com.

Invest it. If you’ve got your debt under control and have a decent emergency fund, then why not use this government grant of sorts to either start an investing program or add to one you already have? You don’t have to do anything fancy. Indeed, given the recent experience of how supposedly sophisticated investors got tripped up by securities backed by subprime debt, I think simpler is better.

There are no guarantees, of course, but if you stick with a mix of low-cost mutual funds with solid track records like the ones you’ll find on our Money 70 list of recommended funds, you should do just fine.

Invest it in an IRA. As long as you’re investing your check, why not consider investing it in an IRA and improve your retirement prospects at the same time? And assuming you qualify you can also get a nice tax deduction (if you do a traditional IRA) or enjoy tax-free withdrawals down the road (if you opt for a Roth IRA).

And you may be able to cash in on another tax bennie. If your income falls below certain thresholds, the Saver’s Credit program can provide a tax credit of up to 50% of your contribution to an IRA or other retirement accounts up to a maximum credit of $1,000 for singles or $2,000 for married couples. And yes, this credit is in addition to the regular tax benefits IRAs and other retirement accounts offer.

Finally, at the risk of sounding preachy, I’ll throw out one more idea. If your finances are pretty solid, you might want to consider donating a portion of this money that you weren’t expecting (at least not until recently) to a charity or a cause that you feel deserves your support. That may not improve your financial well being like the others I’ve suggested, but you may collect dividends in other ways.

Written by Walter Updegrave for CNNMoney.com