Archive for June, 2011
Explanation of Enrolled Agents About Tax Dispute Process
Posted on June 28, 2011 | Tax Studies.
An important detail for enrolled agents to communicate with the public is that every taxpayer has a right to appeal an IRS decision. In addition to questioning the results of an audit, taxpayers also appeal tax liens, levies, seizures, termination of installment agreements, and penalty assessments.
Because every taxpayer case is different, enrolled agent careers are built around understanding each situation. A high level of tax knowledge permits an EA to often reach immediate IRS settlements for taxpayers.
With current macroeconomic conditions having the propensity to make rapid changes in a taxpayer’s finances, enrolled agent job opportunities are growing each year. EA familiarity with all types of tax matters is a real plus for an individual in rough straights with the IRS. An enrolled agent knows that an IRS examination of a tax return often allows for request of an on-the-spot meeting with the examiner’s supervisor in order to provide an explanation for reaching quick resolution of the case.
However, many examinations take place by mail. In these situations, a professional with an EA license explains a taxpayer’s position in writing to the IRS. A case is not final when the findings of the IRS examiner do not agree with the taxpayer. The next step is an IRS Appeals Office. These are separate and independent from the IRS offices of enforcement activity.
Tax dispute conferences with an Appeals Office are informal but require some preparation. That is where EA study becomes of significant value to taxpayers. An appeal must consider incorrect IRS interpretation of the law or IRS misunderstanding of the facts. Appeals are presented in writing, by telephone, or in personal meetings. But they all share the common requirement of clarity and documentary support.
Each properly presented appeals case cites specific IRS decisions. General complaints about IRS treatment are not grounds for appeal. Neither are objections to IRS actions based upon moral, religious, political, or constitutional arguments. Because of the emotional attachment a taxpayer may have to the case, representation by an enrolled agent is usually the best avenue for an IRS appeal.
An IRS Appeals Office usually settles most tax disputes. However, if that level does not adequately satisfy a taxpayer, the case is eligible for presentation to the independent office of the Taxpayer Advocate. When all of the dispute resolute channels are exhausted, the last resort is federal court.
Taxes for the Rich Set to Go Even Higher
Posted on June 13, 2011 | Tax Studies.
One of the major campaign promises that President Obama offered to U.S. citizens was that he would ensure equitable taxation for all so that those who earned more would pay the lion’s share of taxes. The President criticized the Bush Administration for offering tax holidays to the rich, who he felt, did not need any tax advantages (because they were financially comfortable). True to their word, the Obama Administration and the Democrats in Congress has gone a long way in ensuring that the rich will be removed of tax cuts and will bear the largest share of taxes. They have come up with several bills and proposals to have the rich taxed more:
The Three Percent Surtax Proposal
One of the more recent tax moves targeted at the rich is the 3% surtax proposal by Democratic Senate members. If passed, the surtax will be loaded onto high income earners. The Senators are seeking to introduce a bill to have a surtax charge on individuals who earn an income of $1,000,000.00 and above. The proposed tax is part of the attempts to narrow a widening tax deficit in the government.
Democrats Seeking Removal of Bush Tax Cuts
There have been talks from the Democratic politicians in the past two years to have tax cuts removed for high income earners. The Obama Administration has been keen to have the tax cuts removed, but they have compromised their stand owing to various negotiations with the Republicans. However, the removal of the Bush Tax cuts for the rich now seems to be a matter of time. The proposal is to remove the tax cuts for any taxpayer who earns more than $250,000.00 a year. Removal of the Bush tax cuts will raise the effective tax rate for the top income tax bracket by about 6.5%.
0.9% Surtax on Medicare
In 2010, Congress passed a bill to make changes on the Medicare Law. These changes were an attempt to solve the Medicare situation, whereby more retiring citizens are seeking to get free Medicare from the program. As part of the Medicare Law, Congress introduced a 0.9% Medicare Surtax for income earners in the top tax brackets. The Medicare Surtax is to be levied on all taxpayers who earn more than $200,000.00 a year and for couples who file taxes jointly who earned more than $250,000.00 annually.
Proposal to Remove Tax Ceiling on Social Security
In May 2010, President Obama mentioned that the government was seeking to make a proposal to remove the ceiling on Social Security taxes. Presently, Social Security taxes are applied to a maximum of $106,800.00 a year and any amounts above this maximum are not levied for Social Security. If the change is made to have no cap on Social Security payments, tax experts project that the move will effectively raise the taxation on the top income earners by about 10%.
Given that the top income earners are currently taxed at a top rate of 35%, with the addition of these new taxes and the aforementioned proposed tax changes, some tax analysts say that this may result in the top income earners paying an effective tax rate of over 60%.