Author: Tom Nemann

The Importance of Compliance

When working with the IRS Collections Division, tax compliance is fundamental to resolving any case.  Compliance in this regard refers to the filing of all outstanding returns and the remittance of required tax deposits for the current period.  This is also known as being “current.” Specifically, a taxpayer who is current can show they are capable of meeting deposit requirements.  Their representative can also argue that they should not be subject to collections and are eligible to be considered for a formal resolution.  In turn, the IRS can make a case that further accruals have stopped and they are no longer a risk to the Service.

Most importantly, compliance is a prerequisite to any case resolution.  When a case is with IRS collections, the taxpayer’s compliance with returns and deposits is subject to higher scrutiny.  The Service simply seeks to draw a line in the sand to stop accruals otherwise known as “pyramiding.” When an individual or business is current and not pyramiding, they are more likely to be protected from collections such as bank levies and garnishments.  They can be protected by being placed into “pending installment agreement status” if a formal proposal is made.  Further, an IRS revenue officer is also more likely to grant a hold on collections and work on a timeline for resolution.  Finally, if an appeal is filed, the Office of Appeals is more likely to consider their case without collections to achieve a resolution.

In its simplest form, the IRS can only formalize a resolution with a taxpayer who is compliant, for the exact periods with balances due.  If returns are outstanding or current deposits are not made, the total balance due is also unknown and terms for an agreement cannot be set. More so, after an agreement has been established, if a taxpayer does not rForm 1040emain compliant, new periods outside of agreement have been created.  This automatically breaks the terms of any agreement and the entire process must start over to encompass all periods with balances due.

For an individual, this means that all personal income tax returns (Forms 1040) must be submitted.  Keep in mind an extension to file a return is not an extension to pay.  Therefore, if a balance is expected on any return on extension, it should be filed at once so it can be included in the resolution.  In addition, if required, sufficient year to date estimated income tax deposits must be made in order to show compliance.

For a business, all payroll tax returns (Forms 941), unemployment returns (Forms 940) and corporate income or partnership returns (Forms 1120 & 1065) must be filed.  Primarily the business must show that in the quarter in which it is currently in, sufficient and timely payroll tax deposits have been made.  If current deposits are late, sufficient payments to cover penalties should be addressed as well.

Very often the IRS is also more likely to formalize a resolution for a taxpayer who is compliant in working with a third party payroll service provider.  Specifically, payroll service providers can help establish a very efficient, formal schedule for deposits and filings under the control of a business owner.  This significantly lowers the risk for accruals, which helps both the taxpayer and IRS in the future.

Overall, cases can easily turn in a taxpayers favor when they first can establish compliance.  Being current must be the primary focus of any individual or business working with IRS collections.  Ultimately, having the experienced representatives at 20/20 Tax Resolution, Inc. will make this process easier and more successful in the long run. Please feel free to contact us with any questions — we are here to help.

How do I split my IRS refund?

In April 2014, the Internal Revenue Service issued over 57 million taxpayers a refund via direct deposit at an average of $2,980 per check. Getting money back from the IRS is easier and faster than ever if you provide your bank account information when e-filing or when filing your paper income tax return.

Many taxpayers are unaware of another simple feature available to them regarding their tax refunds; splitting. The IRS will allow you to split your refund into multiple bank accounts. This provides you flexibility to allocate a portion of your refund into your checking account and the remainder into your savings account. Moreover, you can use a portion of your refund to purchase U.S. Series I Savings Bond. These bonds can be for your or other individuals (children, grandchildren) but the total amount of bonds purchased cannot exceed $5,000.

In order to request a split of your refund, complete and attach IRS Form 8888 with your e-filed or paper income tax return. Make sure to include your name, social security number, bank account and routing numbers along with your account type. Next, allocate the exact amounts for each account and designate if you seek to purchase a savings bond. Finally, it is important to review your form for accuracy to avoid any delay.

Funds can be divided in any amount up to and amongst three different bank accounts (within the U.S.). This includes your own account, your spouse’s account or a joint account. Further, taxpayers who file IRS Forms 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-SS, or 1040-PR are all eligible to file Form 8888. It is advised that you contact your bank first to ensure your direct deposit will be accepted.

Also make note of some restrictions. Your refund cannot be divided between a paper check and direct deposit. On Form 8888 you can choose it be issued either via direct deposit or paper check. In addition, refunds from a prior year return cannot be directly deposited nor split.   Finally, if you are simply seeking to have your refund be issued to only one account, Form 8888 is not necessary. This can be requested directly on your income tax return.

With the flexibility to manage your finances more efficiently, filing IRS Form 8888 can help ensure your income tax refund is directed securely to where you need it.

In April 2014, the Internal Revenue Service issued over 57 million taxpayers a refund via direct deposit at an average of $2,980 per check. Getting money back from the IRS is easier and faster than ever if you provide your bank account information when e-filing or when filing your paper income tax return.

Many taxpayers are unaware of another simple feature available to them regarding their tax refunds; splitting. The IRS will allow you to split your refund into multiple bank accounts. This provides you flexibility to allocate a portion of your refund into your checking account and the remainder into your savings account. Moreover, you can use a portion of your refund to purchase U.S. Series I Savings Bond. These bonds can be for your or other individuals (children, grandchildren) but the total amount of bonds purchased cannot exceed $5,000.

In order to request a split of your refund, complete and attach IRS Form 8888 with your e-filed or paper income tax return. Make sure to include your name, social security number, bank account and routing numbers along with your account type. Next, allocate the exact amounts for each account and designate if you seek to purchase a savings bond. Finally, it is important to review your form for accuracy to avoid any delay.

Funds can be divided in any amount up to and amongst three different bank accounts (within the U.S.). This includes your own account, your spouse’s account or a joint account. Further, taxpayers who file IRS Forms 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-SS, or 1040-PR are all eligible to file Form 8888. It is advised that you contact your bank first to ensure your direct deposit will be accepted.

Also make note of some restrictions. Your refund cannot be divided between a paper check and direct deposit. On Form 8888 you can choose it be issued either via direct deposit or paper check. In addition, refunds from a prior year return cannot be directly deposited nor split.   Finally, if you are simply seeking to have your refund be issued to only one account, Form 8888 is not necessary. This can be requested directly on your income tax return.

With the flexibility to manage your finances more efficiently, filing IRS Form 8888 can help ensure your income tax refund is directed securely to where you need it.