Client Videos from Alliance Financial & Income Tax

Alliance Financial & Income Tax's Monthly Newsletter

Tax Preparation vs. Tax Planning

Many people assume tax planning is the same as tax preparation but the two are actually quite different. Let's take a closer look:

What is Tax Preparation?

Tax preparation is the process of preparing and filing a tax return. Generally, it is a one-time event that culminates in signing your return and finding out whether you owe the IRS money or will be receiving a refund.

For most people, tax preparation involves one or two trips to your accountant (EA), generally around tax time (i.e., between January and April), to hand over any financial documents necessary to prepare your return and then to sign your return. They will also make sure any tax reporting on your return complies with federal and state tax law.

Alternately, Individual taxpayers might use an enrolled agent, attorney, or a tax preparer who doesn't necessarily have a professional credential. For simple returns, some individuals prepare and file their own tax forms with the IRS. No matter who prepares your tax return, however, you expect them to be trustworthy (you will be entrusting them with your personal financial details), skilled in tax preparation and to accurately file your income tax return in a timely manner.

What is Tax Planning?

Tax planning is a year-round process (as opposed to a seasonal event) and is a separate service from tax preparation. Both individuals and business owners can take advantage of tax planning services, which are typically performed by a CPA and accounting firm or an Enrolled Agent (EA) with in-depth experience and knowledge of tax law, rather than a tax preparer.

Examples of tax planning include bunching expenses (e.g., medical) to maximize deductions, how to use tax-loss harvesting to offset investment gains, increasing retirement plan contributions to defer income, and the best timing for capital expenditures to reap the tax benefits. Good recordkeeping is also an important part of tax planning and makes it easier to pay quarterly estimated taxes, for example, or prepare tax returns the following year.

Tax planning is something that most taxpayers do not take advantage of - but should - because it can help minimize their tax liability on next year's tax return by planning ahead. While it may mean spending more time with an accountant, say quarterly or even monthly, the tax benefit is usually worth it. By reviewing past returns an accountant will have a more clear picture of what can be done this year to save money on next year's tax return.

If you're ready to learn more about what strategies you can use to reduce your tax bill next year, help is just a phone call away.  816-220-2001

What do They Expect You to do With Federal Tax Liens on Your Credit Report?

How Can You Possibly Get a Loan To Pay Them Off, When Your Banker Won't Even Talk To You?

Federal Tax Liens prevent you from being able to borrow any money for a car or a home.

Taxpayers with IRS Problems often have to shop at Buy Here, Pay Here car lots because these car dealers don't care if you have a Federal Tax Lien, because they charge so much for the cars and usually have very high-interest rates.

Cars are expensive enough without having to pay 18% to 21% interest on a used car loan, but with a Federal Tax Lien, you don't have many choices.

The banks have gotten so tough on opening new bank accounts that anyone with a Federal Tax Lien is usually prevented from even having a simple checking or savings account.

This makes it hard for taxpayers to cash their paychecks or to pay their monthly bills. Often they have to pay more money and use money orders or certified checks, just to pay their rent or utility bills.

Have a Tax Problem? Mike Mead can help. Call us today at 816-220-2001

Why it’s important for taxpayers to know their filing status

When a taxpayer files their tax return, they need to know their filing status. What folks should remember is that a taxpayer’s status could change during the year. So, any time is a good a time for a taxpayer to learn about the different filing statuses and which one is best for them.

Knowing the correct filing status can help taxpayers determine several things about filing their tax return:

• Is the taxpayer required to file a federal tax return or should they file to receive a refund?
• What is their standard deduction amount?
• Is the taxpayer eligibility for certain credits?
• How much tax they should pay?

The taxpayer’s filing status generally depends on whether they are single or married on Dec. 31 and that is their status for the whole year.

Here’s a list of filing statuses and a description of who claims them:

• Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
• Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year.
• Married filing separately. Alternatively, married couples can choose to file separate tax returns. It may result in less tax owed than filing a joint tax return.
• Head of household. Unmarried taxpayers may be able file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. Taxpayers should check the rules to make sure they qualify.
• Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

More than one filing status may apply and taxpayers can generally choose the filing status the allows them to pay the least amount of tax.

Have questions?  Give us a call at 816-220-2001.  Learn more about your specific tax preparation today. 

Top 7 Questions You Should ask Your Tax Resolution Specialist

For those looking to get tax relief from back taxes here are some things to know about tax problem resolution.

1) The first of many questions people ask is how long does it take to resolve their tax problems and get tax relief?

A: From the time we receive all of the appropriate documentation, a typical tax resolution case usually takes 3–4 months assuming the taxpayer is compliant and has filed all their tax returns. Some cases can take up to 9 months or more.

2) What documentation is needed for the tax resolution company to complete and resolve a tax problem?

A: A reliable tax resolution company would obtain the taxpayer's tax records, and also obtain the taxpayers financial statements to analyze the taxpayer's reasonable collection potential (RCP).

3) But what if the taxpayers does not have all the necessary paperwork to file unfiled tax returns, can tax resolution be performed?

A: Yes, a respected tax resolution company would be able to get your tax records such as W2's, 1099's, 1098's etc. The taxpayer should not worry about obtaining their lost tax documents.

4) Can I use my own tax preparer to resolve my tax problem?

A: From our experience, it is most beneficial and cost efficient for the taxpayer to retain a tax resolution specialist who is very familiar with and specialize in tax problem resolution and representation field. Don't compromise on your representation, it's your fundamental right to protect yourself and learn about all your tax relief options.

5) What about the cost of your service?

A: Simple, we resolve the taxpayer's tax problem based on a reasonable flat fee, no additional fees are incurred by the taxpayer. All fees are quoted to the client at their initial free consultation.

6) Another popular, and very important question is who will handle the taxpayer's case from start to finish?

A: Not all tax resolution companies like this question. Many companies out there will have you speak to "consultants", "assistants", "case managers", and so on. Your case is handled from start to finish by the principal of the firm, Mike Mead EA, CTC himself. Mike will be your power of attorney and represent you before all administrative levels of the IRS. 

7) Will tax resolution professionals be available to assist with an IRS audit?

A: Yes, a respected and licensed tax resolution specialist can represent you at an IRS audit. Mike Mead EA, CTC represents all his clients and to the client's surprise they do not have to be personally present at the audit.

Now that you have answers, who do you call for a free case analysis?

Contact Mike Mead EA, CTC at 816-220-2001.

Mike Mead focuses his tax practice on tax resolution services in all 50 states including Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

WHAT IS CURRENTLY NOT COLLECTIBLE STATUS FROM THE IRS?

Big companies are known for getting all sorts of breaks, but when average people fall behind, they rarely receive help. When you owe back taxes, but can’t afford to pay them, then you may qualify for a special tax status known as currently not collectible. 

If you’re approved for currently not collectible status, then the IRS must not only cease its collection efforts but can no longer garnish your wages or seize your property. 

Want to know if you qualify for currently not collectible status? Contact our firm here for a specific evaluation of your situation. Contact us today. 

What is Currently Not Collectible Status? 

If the IRS agrees you can’t both pay your back taxes and cover your reasonable living expenses, it may place your account in Currently Not Collectible status. It’s based on your current financial situation. 

You can request currently not collectible status by submitting the proper form and proof to the IRS of your income and expenses, as well as whether you can sell any assets you may have or get a loan.

As you’ll need to be able to document your inability to pay, be sure to gather copies of all your bills, your most recent paycheck stubs, and statements detailing other sources of income such as alimony, pensions or investments. If the IRS determines that your necessary expenses exceed your income, then it will notify you of your Currently Not Collectible status

WARNING: Don’t try to do this alone. We recommend reaching out to our tax resolution firm to guide you through your options. Talking to the IRS directly could be like shooting yourself in the foot. They’ll ask you very invasive questions that could land you in deeper trouble. Remember, the IRS is not your friend. Their job is to collect what they believe you owe them, so it’s best to have a professional in your corner. 

Not a Permanent Solution

Keep in mind that currently not collectible status applies only to your back taxes. You will still have to file tax returns, and you will not be exempted from paying current and future taxes. You will also continue to accumulate penalties and interest on your unpaid taxes. After a year or two, the IRS may review your status, and if you’re able to begin paying your back taxes, then you must do so. If you’re still not able to pay, then your status will be renewed. 

Statute of Limitations   

The IRS can attempt to collect outstanding taxes for only 10 years from the date the taxes were assessed against you, usually that’s the date you filed.  If at the end of this 10-year period the IRS hasn’t collected, then the taxes are no longer owed. 

In difficult times, many families have trouble meeting their commitments. If you’re worried about the IRS garnishing your wages, levying your bank account or taking your home, then reaching out to our firm and getting a free, no-obligation, confidential consultation on your tax problem may give you some peace of mind. If you’re not approved for Currently Not Collectible status, our firm will explain the many other tax relief options with you. Contact us now.  Contact us today.