Tax Evasion, Fraud and the Statute of Limitations

When calculating or filing back taxes, you may make various mistakes, leading to remitting an amount that is less than what you owe. While the error may be minor or accidental, the IRS may consider it as fraud or a way to evade paying taxes. Since the difference between tax evasion and fraud is confusing, you should learn about the two to avoid getting in trouble with the IRS. Here, we provide more details about these two aspects to help you differentiate them. We'll also discuss what you should do if you find yourself in such situations to avoid further consequences.

What is Tax Evasion?

Tax evasion refers to using illegal methods to avoid paying your taxes in full. For example, you may fail to submit the relevant tax filing forms then refuse to remit any amount even after an assessment. Since the IRS can determine the taxes you owe them using documents sent by third parties like your employer, they can easily detect evasion.  This issue will then lead to penalties and criminal charges depending on the gravity of the situation.

What is Tax Fraud?

Tax fraud is the deliberate misinterpretation of information regarding your taxes or failing to include some details on your return forms. An example is when you do not disclose all income sources to reduce the amount due.

Other examples of tax fraud are:

  • Using the wrong social security number
  • Claiming false deduction
  • Claiming personal expenses as business spending
  • Filing under the incorrect status
When you commit tax fraud, you may face criminal charges and get a maximum sentence of three years or a fine of up to $100,000. In some cases, you might have to pay an additional amount equal to 75% of the taxes you avoided.

Statute of Limitations for Tax Evasion and Fraud

A statute of limitations is the maximum period that parties in a dispute have to start legal proceedings from when the issue occurred.  The law gives the IRS three years to audit your returns if they suspect you provided wrong information and evaded taxes. During this period, the body will review your accounts and financial details to track expenses and income. If they detect that you failed to disclose about 25% of your income, they will hand over the matter to relevant authorities for prosecution. The statute of limitations for such a tax evasion charge will then extend up to six years. Since tax fraud is not a specific crime, the statute of limitations often differs depending on the issue at hand. For example, if you fail to pay taxes, the duration will be six years. On the other hand, the law provides a maximum of three years to prosecute those who fail to supply some information or keep the required records. It is important to note that the statute of limitations for tax evasion and fraud can be longer due to various reasons. For example, if you commit a similar or related crime, authorities will start counting the duration from the date of your last fraudulent act. Besides, when you leave the US, they will stop counting until you go back or they locate you.

Preventing Tax Evasion and Fraud Charges

Tax evasion and fraud have significant consequences on your finances and reputation. Hence, it is vital to avoid such cases by remitting the correct amount and providing accurate information when filing taxes. If you cannot pay all your taxes in full, consider working with liability experts to apply for installment agreement programs. These can also help you file your taxes to avoid errors that may appear as fraudulent attempts.

Reach Out to Tax Industry to Deal With Tax Evasion and Fraud Charges

When facing a tax evasion or fraud charge, it is crucial to get the proper representation. At Tax industry, we have qualified attorneys to help you navigate tax laws and disputes. These experts can guide you in proving honest mistakes like calculation and typing errors. If found innocent, we will assist you in choosing a Tax debt relief program to clear your tax debt. Contact us now to consult our liability experts.

How to Find Out How Much You Owe in Taxes to the IRS

When you owe taxes to the IRS, it is essential to clear them to avoid debt accumulation. Taking this precaution also prevents the consequences of unpaid taxes like federal liens and financial audits. Unfortunately, it may be challenging to calculate your debt since the fines and penalties accumulate with time. Here, we discuss four methods to find out the amount you owe the IRS. We'll also highlight the steps to follow when using each and discuss why it is advisable to work with tax resolution experts when determining your tax debt.

1. Call the IRS

One ideal way to determine the taxes you owe is by contacting the IRS via phone between 7:00 am and 7:00 pm. This method is suitable if you do not know how to use the online tool or prefer to talk to a representative for clarification. Since the IRS receives many calls, you may have to wait for about thirty minutes to connect with their staff. The best strategy to avoid staying on hold for an extended period is to call as early as possible. If you want to contact the IRS to determine the amount of personal taxes you owe, you can use 1-800-829-1040.  On the other hand, if you are calling on behalf of a business, use 1-800-829-4933. Once you get connected with a representative, they will request various details to confirm your identity. Some of the information they may need is your social security number, date of birth, and filing status. They will then use this data to check your profile and inform you how much you owe.

2. Using the IRS Online System

The IRS provides you with a tool to view your tax status and payment history. While the system can help you determine the amount you owe, it is not available all the time. The periods you can log in are Monday-Saturday, 6 am-9 pm, and 10 am-12 am on Sundays.  When using the portal to check your tax balance, you need to confirm your identity. The system will require you to provide various details like:
  • Social security number
  • Date of birth
  • Email address
  • Mobile phone number
  • Filing status
  • A bank account number 
Once you log in to your account, you can confirm the balance you owe. Still, it is crucial to note that the system takes about 24 hours to update. Hence, you may not view the most recent penalties and fines.

3. Mailing the IRS

Another way to determine the taxes you owe is by mailing the IRS. Once they receive your request, they will send you a transcript of your account. This document includes one-year taxes, excluding the penalties and fines. While mailing the IRS may help you determine the taxes owed, it has some drawbacks. For example, the transcript will not provide an accurate tax debt quotation. Besides, you will need to wait for some time to get feedback, which means that the penalties will continue to accumulate.

4. Consulting Tax Relief Professionals

The best way to determine your tax debt is by consulting liability experts. Such include tax attorneys, CPAs, and enrolled agents. When working with these experts, all you need is to provide them with various identifying details. After that, they will determine the exact amount you owe, including penalties. The main benefit of working with tax liability experts is that you will have an accurate figure of your debt. Besides, they can guide you in selecting a repayment program that is suitable for your financial status.

Contact Tax Industry to Find Out How Much You Owe

Working with a tax liability professional is the simplest way to determine your total debt. At Tax Industry, we have a team of experts specialized in tax resolution.  With their services, you can avoid lengthy processes of contacting the IRS. Further, they can help you negotiate favorable installment repayment terms and forgiveness programs. Contact us now to consult with a tax liability expert.

Delinquent Taxes and How to Handle Them

The IRS requires each taxpayer to remit the taxes they owe before the provided deadline. If you do not send the whole amount, the debt accumulates with an interest of 1.5% each month up to 25%. Besides, your account becomes delinquent, implying that you now owe the IRS and are subject to debt collection. If you have delinquent taxes, it is crucial to clear them to avoid getting in trouble with the IRS. This measure also stops the penalties from accumulating, saving you from repaying a hefty amount. Here, we provide more details about delinquent taxes and the best ways to deal with them. We will also discuss the precautions you can take to avoid owing the IRS in the future.

What Happens When I Have Delinquent Taxes?

Once the deadline for paying taxes passes, the IRS will start the collection process. The first step they will take is sending a notice to your mailing address.  This document states the amount due and the consequences you may face if you do not pay. It also indicates how much the penalties and fines will accumulate until you clear the balance. It is vital to contact the IRS after receiving the notice to develop a payment plan. If you do not do this, they may take various debt collection actions. For example, the IRS can freeze all your bank accounts and assets. Besides, they may file a federal tax lien, affecting your ability to get financial credit.

How to Handle Delinquent Taxes

The best way to deal with delinquent taxes is by responding to the notice sent by the IRS in time. If possible, pay the total amount you owe and update your filing documents. In case you cannot repay in full, it is advisable to consult a tax liability professional. With their help, you can determine the most suitable installment program based on your financial situation and the amount you owe. Further, it will be easier to negotiate with the IRS for an installment payment program.

Repaying Delinquent Taxes

The IRS offers various programs to help you pay delinquent taxes. These include an installment agreement, offer in compromise, and currently not collectible. The installment agreement plan allows you to repay debts that are equal to or less than $50,000. In most cases, the IRS will give you 72 months to clear the total amount. Offer in compromise is a tax relief program that allows you to pay less than what you owe. Still, you will need to remit an agreed lump sum amount and then pay the balance over a specified duration.  When facing financial hardships, you may not be in a position to pay your tax debt. In such a case, the IRS can declare your account currently not collectible to stop recovery attempts. To qualify for this relief program, you must show that paying your debt will cause severe hardship.

How to Avoid Delinquent Taxes

Delinquent taxes often result from minor calculation errors and failing to provide correct information. Hence, it is essential to double-check all figures when filling your forms. Alternatively, use the IRS online system to avoid miscalculations or hire an expert to file your taxes. More strategies to prevent a tax debt are:
  • Filing under the correct status
  • Reporting all your income
  • Reviewing all your details before submitting tax forms
Another way to avoid delinquent taxes is by ensuring you remit the total amount owed by the due date. Further, understand all the taxes that apply to your filing status to ensure you pay the correct amount.

Get Professional Help to Deal with Delinquent Taxes

Handing delinquent taxes without the help of an expert can be challenging. At Tax Industry, we provide reliable tax resolution services. Our experienced attorneys and CPAs can help you qualify for a repayment program by providing all the needed documentation.  Reach out to us now to book a consultation appointment and resolve your tax liability.

How to Negotiate a Payment Installment Agreement with the IRS

irs-installment-plan
Owing taxes to the IRS often leads to fines, penalties, and, in some cases, financial audits. It may also affect your credit score and damage your business reputation. Fortunately, the IRS provides various programs to help taxpayers repay what they owe. One popular and convenient tax relief program with negotiable terms is an installment agreement. Applying and qualifying for this plan is an effective way to avoid debt accumulation and clear the entire amount over some time. When applying for tax relief, it is crucial to determine how to negotiate with the IRS. Here, we discuss the installment agreement options available and their requirements. We will also explain how to confirm if you qualify and mention the methods you can use to boost the chances of qualifying.

Installment Agreements You Can Negotiate With the IRS

The IRS provides several installment payment agreements for different categories of debt. Each of these has specific aspects that you must meet to qualify. The first and most common one is guaranteed installment, available to those who owe income tax equal to or less than $10,000. Another option is the streamlined agreement used to clear debts of up to $50,000. If you qualify for this category, you have to repay back taxes in 72 months. The IRS also provides a partial payment installment agreement for those who cannot afford the minimum repayment amounts for the other packages.

Negotiating Payment Installment Agreements With the IRS

Before contacting the IRS, you should first understand the requirements for each installment agreement plan. This way, you can prepare the needed documents and set up costs for negotiation. To qualify for guaranteed installment, you must not have any tax debt for the last five years. Besides, you should prove that you cannot pay the entire amount at once. If the IRS accepts your application, you will have a maximum of three years to clear the debt. Moreover, they will require a setup fee of $31 when you make a direct debit agreement through OPA(Online Payment Agreements). You must also pay an additional $149 for OPA. If you don't use this tool for the application, the fees will increase to $107 and $225, respectively. When applying for a partial installment agreement, you should be able to prove that you cannot pay the debt in full. Further, you need to clear any past tax or fine and ascertain you are not bankrupt. The IRS will require fees similar to those charged for the guaranteed installment option to set up this plan. If you are interested in the streamlined installment agreement, you must have a total tax debt, including penalties of less than $50,000. Unlike in other relief programs, the IRS does not require you to provide any verification of your assets during the negotiation process. You will pay $105 to create a new agreement and $45 to reinstate an existing one when setting up this plan. But, if you use a direct debit agreement, the IRS will charge you $52.

Tips for Negotiating a Payment Installment Agreement

Understanding how to apply and negotiate for tax relief can increase the chances of qualifying. If you have an online payment agreement, use it to set an installment payment plan. Alternatively, apply by mail by printing out form 9465 and filling in all the needed details. In the application, mention how much you can repay each month. However, ensure that the amount you state will allow you to clear the balance within the provided period. Other items to include are:
  • Payment date
  • Any needed documents
  • A cheque for your set up fee
Since selecting the right payment installment plan and negotiating with the IRS may be challenging, it is advisable to contact a tax liability expert. This will guide you in the entire process and help you pick the most convenient plan for you.

Contact Tax Industry to Negotiate an Installment Agreement

Getting professional help when negotiating for debt relief with the IRS can increase the chances of qualifying. At Tax Industry, we offer reliable tax resolution services. Our experts can help you work out the right installment agreement plan to avoid debt accumulation and penalties. Reach out to us today to schedule a consultation.

6 Common Back Tax Mistakes

flts back taxes
Each year, the IRS requires citizens to remit a certain amount of taxes based on their revenue. Unfortunately, when facing financial challenges, you may find it hard to pay what you owe. In some cases, you may also make mistakes when calculating your taxes and remit a lower amount. If you owe taxes from previous years, it is essential to clear them as soon as possible. Besides, take various precautions to protect yourself and your business from audits and asset freezing. Are you wondering which mistakes to avoid when owing to the IRS? Read on to discover six common blunders people make with back taxes and how you can prevent them.

1. Failing to Confirm Details on the Notice Letter

Once the IRS notices that you owe them taxes, they will send a notice explaining the reason for the contact and instructions on handling the issue at hand. Most people often fail to confirm the details indicated then end up repaying an amount higher than what they owe. After receiving notice, confirm if the details indicated are correct. You can do this by comparing it with tax forms from the year in question. This way, you can correct an erroneous tax bill and prevent paying higher fines and penalties.

2. Not Responding to the IRS

Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation. Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation.

3. Delaying to Select a Payment Plan

The IRS offers payment plans to help clear back taxes when facing financial problems. Still, most people delay selecting a suitable tax debt relief program, leading to interest accumulation. Waiting too long to start repaying the debt also affects credit scores and financial credibility. The best way to avoid this issue is by picking a suitable repayment plan quickly. Some of the programs to consider are installment agreement, offer in compromise, and IRS Fresh Start.

4. Paying Taxes with Credit

Another common mistake with back taxes is borrowing money to repay it. While you may want to clear your debt faster, it is crucial to consider your financial situation. Taking out a loan or paying tax bills with a credit card charging a high-interest rate will further affect your finances. In the long run, you will end up spending a significantly high amount. Avoid further damage to your assets by applying for a suitable IRS repayment program. This way, you have more time to clear the debt with limited straining or financial pressure.

5. Failing to Seek Professional Help

While you may find it less expensive to deal with the IRS alone, it may lead to costly mistakes. Without professional help, you may reduce the chances of qualifying for a repayment program. Moreover, you increase the chances of higher penalties and fines after failing to abide by IRS policies. Working with a tax resolution expert can help you deal with back taxes more efficiently. These experts will ensure you select a payment plan that is suitable for your financial status.

6. Inadequate Documentation

If you do not keep proper records of your interactions with the IRS, it may be hard to provide evidence for a claim. Besides that, following up on your application may be challenging and time-consuming. Avoid this back tax mistake by keeping copies of all documents shared by or with the IRS. Further, ensure you note the name of the personnel you converse with for simplified follow-up. If possible, record these conversations as you may need them for future reference.

Contact Tax Industry to Help Deal with Back Taxes

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Tax Industry, we offer specialized tax resolution services to help you deal with IRS debt. Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today for back tax filing and tax relief services.

Five Reasons the IRS Abates Penalties

flts back taxes
Receiving a penalty from the IRS can be devastating, especially when you don’t have the means to repay it on time. A penalty makes it harder to clear your outstanding taxes since it attracts further penalties and interest until you repay the debt fully. However, it is possible to apply for and get relief/abatement from a tax penalty if you show that you made an effort to comply but could not do this because of circumstances you could not control. Once you get the notice of penalty, check all the details to ensure they are correct and see what you can resolve. You can receive penalty relief for the following tax issues:
  • Failure to pay outstanding taxes on time
  • Failure to file tax returns on time
  • Failure to deposit specific taxes according to requirements
  • Other applicable penalties from the above
After assessing the notice, you (or a tax relief specialists acting on your behalf) can submit a written request seeking penalty abatement. This article discusses the main reasons which IRS accepts for penalty abatement.

Reasonable Cause

If you have reasonable cause for not paying, filing or depositing on time, your application must demonstrate the reasons for the delay/non-payment. Some acceptable reasons include:
  • Travelling abroad/out of the country
  • Being incarcerated
  • Being seriously ill/dealing with the serious illness of a close family member
  • Death of an immediate family member
  • Destruction or theft leading to loss of documents
Depending on your reason above, you should attach proof in the form of insurance claims, doctors’ reports and hospital records, a death certificate, or pictures of floods/hurricanes leading to the destruction of documents. The IRS evaluates whether the person acted prudently according to the circumstances but could not because of circumstances beyond their control. They will also check whether the taxpayer could have foreseen the event causing non-compliance and what steps they could have taken to ensure compliance.

Statutory Exceptions

Congress may provide statutory exceptions, giving taxpayers relief from tax penalties after major disasters like fires, hurricanes, earthquakes, and floods.

Administrative Relief

Qualified taxpayers can receive an administrative waiver called First Time Abatement (FTA) for penalties for failing to file, pay, or deposit taxes. Eligible taxpayers are those who show all of the following:
  • The taxpayer filed all returns or extensions
  • The taxpayer has paid or made arrangements to pay all outstanding taxes
  • The taxpayer was not required to file returns or was not assessed for penalties for three tax years before the year attracting the penalty

Correcting IRS Errors

The IRS must abate any penalties assessed because of an error in the written advice given by an IRS officer or employee in their official capacity. Where appropriate, the IRS may also consider abatement if the taxpayer shows they relied on an IRS officer’s oral advice. The taxpayer must prove that they exercised ordinary prudence and business care considering their situation, the advice rendered and the penalty. They will also consider the taxpayer’s filing and payment history and whether they received the correct information in written format.

Relying on a Tax Advisor

A taxpayer may receive limited penalty abatement for relying on a tax advisor – but this cannot be the only reason given. If there is a failure to file, pay, or deposit taxes, the taxpayer is still held liable even if he/she relied on a tax debt relief advisor. Only accuracy-based penalties based on reasonable cause may be abated.

Get Professional Tax Liability Advice from Finishline Tax Solutions

If you have received a notice of tax penalty from the IRS, you may be able to get penalty abatement. There is no guarantee of abatement even when you have reasonable cause, but you can improve your chances by getting Finishline tax professionals to help you apply for an abatement. Even if the abatement is rejected initially, our professionals can help you to file an appeal, during which the IRS agent will assess the totality of your circumstance. Contact Finishline Tax solutions today to fix your taxes once and for all.

What You Need to Know About IRS Hardship

flts tax professional

Not every one that owes back taxes to the Internal Revenue Service (IRS) can make full payments in one fell swoop. The IRS has many avenues to pay back taxes in installments, but some people are still unable to clear their tax debt. If your current financial situation makes it difficult/impossible to pay back taxes and meet your daily living expenses, there are other avenues to explore. It is possible to apply for the IRS Hardship Program, which grants you temporary reprieve from settling your tax debt relief. Learn more about the IRS Hardship Program in this article.


What Is the IRS Hardship Program?


As mentioned, this program gives taxpayers temporary reprieve on back taxes they owe by placing their account in CNC status (Currently Non-Collectible). According to IRS Policy 5-71, your tax liability is considered CNC if you can show that paying the taxes will create hardship. If you have difficulty repaying back taxes, it may be better to pursue an Offer in Compromise (or settlement) before seeking CNC status. The OIC status allows you to pay a fraction of the debt (which you suggest according to your financial ability) for the liability to be cleared. Meanwhile, the CNC status is temporary; if your financial situation gets better, you will resume payment at a later date. To apply for CNC status, the IRS requires that you fill one of three forms: Form 433A for individuals, Form 433F for self-employed individuals, and Form 433B for C corporations, S corporations, and partnerships looking for hardship status.


Assessing Financial Health for IRS Hardship Applicants


When you apply for the Hardship Program, the IRS assesses the application to determine whether you qualify for CNC status. Apart from living expenses, the IRS considers the following:

  • Number, age, and health status of dependents where applicable
  • Your employment status and age
  • Health status of close family members
  • Cost of living in your locale
  • Any extraordinary expenses

They will assess your financial health, checking whether you are able to borrow against assets you own, all your income sources, or inability to work harder because of a medical condition. You should be able to show that:

  • You lost your job and are/aren’t receiving unemployment benefits
  • Your income has declined
  • You have been looking for a job with no success
  • You were forced to wind up your business
  • You lost your home in foreclosure or sold it at a loss
  • Your employer went out of business

Protections of the IRS Hardship Status


During IRS Hardship, the IRS cannot seek repayment of your tax liability, whether through wage garnishment or seizure of property or assets. However, note that the tax liability is not forgiven, and penalties and interest on the loan continue to accrue. Every year, the IRS sends a bill showing the amount owed. You will pay that amount once the Hardship status is lifted. The CNC status can be held for ten years, and the IRS reviews your income/financial status every two years. They will lift the status if they believe you can now support yourself and dependents. At this point, you must resume payment. However, you can also pay down your debt if you have extra money while under CNC status. Making payments this way doesn’t affect your CNC status until the next scheduled review.


Need to Handle Your Tax Liability? Look for Tax Professionals


When you are unable to pay your tax liability, it can be difficult to decide the next steps to take. No two people have the same financial situation, which is where tax professionals come in. At Finishline Tax Solutions, we can represent your best interests to apply for tax relief and negotiate on your behalf with the IRS. Our job is to determine the best solution and even file an Appeal if your request for CNC status is denied. We can also help you to prepare and file your taxes in time.


Talk to a Professional Today

What to Do When Your Business Owes Back Taxes

flts back taxes

Most small business owners struggle to manage their taxes and other accounting functions. Usually, you must accomplish many roles with limited staff, and so non-immediate administrative functions take a back burner in the face of operational crises.


The IRS doesn’t care about the demands on the plate of a small business owner, only that you fulfill your obligations on time and in full. Otherwise, you risk accruing many penalties, fines, and interest on back taxes.


If you ever find that your small business owes overdue taxes, follow these steps to get back into the IRS’s good books and keep your business from losing valuable funds. The thing to remember is that the IRS doesn’t want to have to close your business.


Therefore, you can take certain steps to make things right and keep your business running. Here’s what you should do:


1. Stay in Touch


You must be proactive about contacting the IRS if you haven’t filed or paid taxes on time. Even if the agency goes quiet, they will always come back – and often at an inopportune time for you. Meanwhile, your interests and fines keep increasing, and they may create a debt so big your business can’t afford to pay it.


Note that the IRS has massive legal powers to collect overdue taxes. They can take almost anything you own and freeze your assets without needing a court order. They can also close down your operations and seize assets to pay off the tax debt.


2. Take Advantage of Time


Because the IRS is one agency managing thousands of businesses, you can take advantage of time, which is on your side if you act right away. Often, you’ll receive computerized tax bills followed by phone calls. Only if you ignore these will a person be assigned to your case.


From the time you notice there’s a lapse in your taxes, notify the IRS (or respond to their notification) and always cooperate. Provide the financial information that IRS collectors ask for – you should never lie to the IRS, but be careful not to disclose too much. Only provide the information they have asked for, unless you have been served with a formal summons.


3. Negotiate for a Discount or Payment Plan


In most instances, the IRS allows business owners to pay overdue taxes in monthly instalments. The only downside is that interests and penalties continue to accrue on the outstanding amounts. If you are able to make a single payment, you can also ask for a discount on the total amount owed.


About 25 percent of businesses are successful in applying for the Offer in Compromise through the OIC process. This is a lengthy formal process that allows businesses in a precarious financial situation to apply for the IRS to accept a fraction of the tax they owe.


When the IRS assesses your application and believes that they won’t collect more in future, they will agree to the Offer in Compromise to settle your tax debt.


4. Request for “Uncollectible” Status


If your business is in dire shape, you can request the IRS to temporarily place your account under the “Uncollectible” status. If they agree, they will stop collection notices for some time. However, you will still owe the penalties and tax by the end, and interest will accrue for the period the account is “uncollectible”.


In the direst circumstances, you may have to file for bankruptcy. This is a complex and complicated legal process that must only be a final resort. In some cases, it can wipe out your tax debt, but this comes at a high price. Always consult a tax debt agency before filing for bankruptcy.


5. Seek Professional Assistance


Once you find out that you owe overdue taxes, your best move is to consult tax debt professionals. A tax debt agency can help you assess your financial situation and the taxes you owe and advise you on the best cause of action. Professional tax preparer s in the team can also file and negotiate on your business’s behalf with the IRS.

Once you sort your back taxes, prioritize tax payments in future and ensure you file your returns in time.


Talk to a Professional Today

File Back Taxes and COVID-19 Tax Deadline

On 20th March 2020, the Treasury Department made an announcement stating the guidelines for the COVID-19 tax deadline. Certain businesses and taxpayers now have a 90-day extension for filing and paying their tax liability for 2019. The deadline for tax filing is 15th July 2020. If you are unable to file back taxes on time, you can still request a 3-month extension and file back taxes by 15th October 2020. The deadline for paying the taxes has also been extended to 15th July 2020. If you are able to pay your taxes before this deadline, you won't have to pay any additional penalties or interest.

Coronavirus pandemic has affected the world in a way that it’ll take us years to get back to normal. Every country has been trying its best to make it a little less stressful for its citizens. In this direction, the United States has also granted an extension to help its taxpayers with back taxes filing. Now, the taxpayers can enjoy a 90-day payment extension to file back taxes. This has brought a sigh of relief for many. Here is all that you need to know about the extension.

How To File Back Taxes After The COVID-19 Extension

The Corona Virus that originated in the Wuhan district of China has infected about 2.6 million people worldwide. Government and private organizations across the globe are counting costs because of this pandemic. In the United States, unemployment reached a record high and ended a decade of expansion efforts. But, the government is trying its best to make sure that the citizens are able to financially survive this pandemic. For this, the tax day has now shifted from 15th April 2020 to 15th July 2020. This change is applicable to the deadline to file back taxes. However, the IRS is still accepting returns and processing all the refunds. 

Here are the most common questions asked about the changes in the deadline made because of the Coronavirus:

Which taxpayers are eligible for the tax payment and filing deferral?

The following filers are eligible for the coronavirus tax extension:

  • Corporations who file Form 1120
  • Individuals for file Form 1040
  • States and trusts that file Form 1041
  • Fiscal year associations, companies, and partnerships who had 15th April 2020 as their due date

What must be done to delay the tax filing and payment?

The process to file back taxes or an extension is normal as before. Only the deadline has extended to 15th July. When you file the return, the special coronavirus extension for 90-days will be applied automatically. This means that all the penalties and interest are waived for 90 days. The same is applicable for paying the taxes as well. For all the qualifying businesses and taxpayers, no interest or penalties will accrue if they make the payment by 15th July.

What can I do if I can’t file back taxes by the new deadline?

If you are unable to file back taxes by 15th July 2020, you can request an extension by filing Form 4868. This way, you will have a 3-month extension and would have to file back taxes by 15th October 2020. However, the extension is not applicable to paying the taxes. The deadline for the payment is 15th July 2020.

How does this extension apply to refunds?

The extension won’t have any effect on the refund. According to the Treasury Department, all the taxpayers will be receiving their refunds in the normal time period. For example, in the case of electronic filing, 9/10 people will get their refunds in less than 21 days.

What payments are covered by this deferral?

The coronavirus tax deadline covers all the income tax payments along with the penalties and interest associated with it like failure-to-file or failure-to-pay penalty. Also, all the estimated tax payments and included tax payments on self-employment income that were due on 15th April 2020 are covered as well.

  1. Is there a limit on the amount of payment that can be deferred?

No, there is no limit on the tax payment amount that can be deferred.

Is the deferral applicable to the estimated tax payments of 2020 including the estimated taxes on self-employment income?

It is dependent on the date of the payment. For the estimated tax payment of first-quarter 2020, the deferral is applicable. This means that you can make the tax payment by 15th July 2020. For the estimated tax payment of second-quarter 2020, the deferral is not applicable. Also, there will be no waiver or deferral for the failure-to-pay penalty for estimated tax payments.

Is the deferral applicable to the state tax returns as well?

All the states have been issuing their own guidelines and deadlines to file back taxes. In some cases, it is the same as that of the federal guidelines while in others, it is different. You should check your state guidelines to ensure that you are eligible for the deferral.

Does this deferral mean that we don’t owe any taxes or need not file back taxes for the year 2019?

No. This deferral is only extending the deadline for the tax liability. Starting from 16th July 2020, all the penalties and interest will start to accrue on the outstanding tax payments. 

You can take the help of a tax resolution service to help you with the COVID-19 tax extension. A right tax resolution service will help you file back taxes and get the maximum possible refund by making legitimate claims and deductions. For some tax resolution firms, all you have to do is bring the documents to their offices. You won’t have to wait at all and a tax expert will do all your work for you. After they have completed the return, they will send a completed return electronically that you can review and approve.

Back taxes filing isn’t easy. However, the experts in the field can make it easy for you. Take the help of tax professionals while preparing your returns. They know how to file back taxes and will help eliminate errors. With tax experts by your side, you can rest assured that your tax returns are prepared correctly. Contact the best tax relief firm to hire a tax attorney today!