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Posts by G Deitsch

IRS Refund Audit Blog

Why your IRS refund is getting delayed? Will IRS hold the Refund if you are being Audited?

Tax season is over and now the waiting for tax refund.  Tax refund is issued when you pay more to the state government or federal government than the amount you actually owed.  Taxpayers those who over paid their taxes can expect to get tax refund.  Tax refund is not free money; it’s already paid by the taxpayers.  The IRS says that most of the tax refunds are delivered within 21 days of filing.  Tax filers can be able to track their status of the refund to know when their refund will arrive by using “Where’s My Refund?” tool at IRS.gov or by using the IRS2Go app.

If it has been more than 21 days or more than six weeks since you have filed for the tax refund, then you can contact IRS.  In certain times, IRS may hold onto your refund if you have certain outstanding debts.  Paying those outstanding debts on time will ensure that you get your entire refund on time.  According to IRS, if you use e-file or direct deposit you will get your refund faster.

What factors can delay your tax refunds?

Your tax refund may get delay for any of the following reasons.

  • The numerical errors and mistakes in your tax return can slow down the process of tax refund. This will add days or weeks to the refund processing time by the IRS
  • IRS wouldn’t be able to process your tax return, if you miss to enter any information. This incomplete tax return also will make you to wait for a long time for the tax refund
  • When someone uses your personal information to file a fraudulent tax return and claim refund in your name. In the case of tax fraud you are encouraged to contact the IRS to report the fraud
  • If you transposed a digit in your account number then the refund will be sent to the wrong account. In this cases IRS can’t compel the bank to turn over the money to you
  • If IRS thinks your tax deductions and credits are manipulated or inaccurate, refund will be hold and IRS can initiate a tax audit. You may require a professional or tax attorney to represent you in the audit.

Deadline to claim the Tax Refund

To claim any refund from the IRS you will get three years of time from the date of original deadline of your tax return.  Your refund will expire and goes away forever if you wait longer than the deadline because the statute limitations for refund claiming will be closed.  When a refund expires, the federal government will keep the money and consider it as an ‘excess collection’.  That excess money can’t be sent to the taxpayer but it can be used as a payment toward a future tax year.

It is important to research your IRS account when the IRS takes or holds your refund.  This will help you to get the reasons of the issue and clear up any confusion with the IRS.

If you are facing issues with your tax refund due to IRS audit, it is important to contact a tax lawyer to understand your rights and seek solution accordingly.  IRS Audit Group tax professionals can help you by dealing directly with the IRS to solve the tax refund issues.  Our tax professionals will review your account transcripts to complete the tax history.  Contact us 1-888-300-6670 for free consultation or email us at info@irs-audit-group.com.

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Tax free health car Plan from IRS

Tax-free Health Care Plans from IRS for 2020– Health Savings Account and Flexible Spending Arrangement – IRS Audit Group

Now it’s the time for employers to initiate discussion about 2020 healthcare plans.  Thus it is important to choose the best health care plan that suits you and your tax saving plans.  There are two types for tax-free health care plans that are provided by IRS as HSA (health savings account) and FSA (flexible spending account or arrangement).  Both have the benefits of tax savings but in different ways.

What is Health Savings Account (HSA)?

HSA plans are provided by the employers or through banks and other financial institutions, if your employer does not provide health insurance.  Therefore, both working persons and self-employed individual are eligible to contribute to HSA. HSA is not owned by the employer.  Both working and self-employed individuals need to sign in for HDHP (High Deductible Health Plan) to become eligible to contribute to HSA.  HDHP are types of health insurance plans that has low premium with high deductibles.  Many insurance companies offer such plans along with the option to open HSA.

The HSA’s contribution is eligible for tax deduction while filing for returns if you are opening the account from private insurance companies.  If your employer offers an HSA, you’d likely fund it pretax from your paycheck but it can be tax-deductibles also.  Also, the HSA contribution can be used for other investments like stocks, bonds etc.  which are also tax-free.

For the year 2020, one can contribute up to $3,550 for self-only coverage, and up to $7,100 for family coverage into an HSA.  The minimum deductible for an HDHP is $1,400 for an individual and $2,800 for a family for the year 2020.  This is an increase of $50 and $100 respectively from the year 2019.  Further, HSA dollars are carry-forwarded year-after-years if it is not spend.

What is Flexible Spending Arrangements?

This type of account is only available to the working people under an organization and not eligible for self-employed individuals.  Flexible spending is provided through employers and cannot be transferred when you leave that company.  It is not mandatory for all the employers to offer FSA.  Employers deduct the FSA contribution from the paychecks before taxes in regular increments.

IRS set the FSA contribution for the year 2020 as $2,750 which is not subject to federal income tax, Social Security tax or Medicare tax.  The FSA contribution can be used for own medical expenses, child care and dependent care.

The FSA amount cannot be rolled over to the next year plan, and hence it has to be used in the same year.  However, IRS offers two options as grace period and carry-over option.  The grace period let you to incur eligible expenses for two and half months from the end of the current year plan.  The carry-over option allows the employee to carry-over unused money with maximum of $500 to the following year.  But individuals can only available either of one option or none.

Choosing between HSA and FSA can become stressful if one does not pay attention to the real benefits both offers.  HSA seems a flexible plan but the HDHP will have high out-of-pocket limits whereas FSA have limited options.  It is important for any individual to choose the right health care plans based on the availability from your employers, your health conditions, planned amount for contribution etc.

Both HSA and FSA are subjected to IRS audit.  Therefore it is advisable to keep all the receipts that are spent using HSA and FSA money.  IRS Audit Group is the tax audit representation firm in California that defends you in front of the IRS for any tax audit disputes.  We are enrolled agents, CPAs and tax attorneys offering tax audit and state audit representation services.  Contact us for free consultation – info@irs-audit-group.com/1-888-300-6670.

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Types of IRS Tax credits

IRS Tax Credit for Individuals – What is IRS Tax Credit for Individuals and Who is eligible?

The tax owe to the IRS can be reduced using the tax credits available. These tax credits are given as a refund or it can be reduced from the tax payable to IRS.  But not all tax payers are eligible for such credits. There are different tax credits that suit every tax payers and it is important to choose the right credits wisely to avail this benefit.  Let us see the tax credits one by one below and its eligibility criteria as defined by the IRS.

Earned Income tax credit (EITC)

This type of credit is for individuals working under any organization with low to moderate income. This credit is refundable and so you may get refundable money back as a check if your credits are more than the tax you owe to the IRS. The eligibility criterion depends on qualifying children, annual income, investment income etc. The tax amount varies based on this criterion with the minimum amount being $529 to maximum of $6,431.  To eligible for EITC, one needs to keep an investment income less than or equal to $3,500. IRS has provided much simpler booklet which helps us to find the eligibility for EITC by answering few questions.

Tax Credit for individuals with kids and dependent

This type of credit is refundable and it is for the individuals with at least one or more children under the age of 17. Dependents are any person (not your spouse) as your relative who wasn’t physically or mentally able to care for him or herself. They also must meet the eligibility of annual income earned as less than $4,150 to become a dependent. The percentage of credit depends on the annual income earned by the individual who is filing for the tax i.e. more income less credit. One can get as high as $2,000 per child as credit. Each kid or the dependent should have a valid social security number issued before the tax filing due date i.e. for 2019 tax year, before Apr 15 2020 or Oct 15 2020 (if approved for tax-filing extension).   To qualify for child care credit, one must file Form 1040 or Form 1040NR, not Form 1040NR-EZ and pass all the tests which are mention in the IRS website.

Child adoption tax credits

Adoption tax credits are non-refundable, and therefore it is deducted from the tax liable based on the expenses filed but up to a maximum of $14,080. Therefore, IRS will not be sending any check if your tax liability is less than the expenses mentioned for adoption credits. But, if you are adopting a special–needs child, the full credit amount will be refunded irrespective of the expenses filed for taxes. To find out if you are eligible to file for adoption credits, take the test from IRS in this link.

Education Credits

The education credits have two types – American Opportunity Credit and Lifetime Learning Credit.

  • American Opportunity Credit – This is partially refundable credit, and applicable for each eligible student for the first four years of higher education. One can get a maximum annual credit of $2,500 per eligible student. If the partial credit amount equals the tax you owe to zero, then 40% of the remaining credit (maximum $1,000) will be refunded through checks. The students must have modified adjusted gross income less than $90,000 as single filer or $180,000 as joint filer and not have any felony drug conviction at the end of the tax year. Students must get the Form 1090-T and Tuition Statement from their educational institution for claiming through Form 8863.
  • Lifetime Learning Credit – This credit is based on the number of tax returns and not on the number of students. One can claim up to $2,000 per tax return for any eligible students who are enrolled in undergraduate, graduate and professional degree courses that are taken to acquire or improve job skills. The four years criterion (American Opportunity Credit) is forfeited as the claim is based on every tax return. One must have income less than $67,000 as a single filer or $134,000 as a joint filer. The other eligibility criteria are listed out in the IRS website

One cannot claim American Opportunity Credit if you are applying for Lifetime Learning Credit or vice versa. Also it is important to make sure you are eligible for these credits, if IRS audit your returns and found not eligible, you may be banned from getting such credits for two to ten years.

Retirement Credit

This credit is known as saver’s credit, and offers a maximum of $2,000 for making eligible contributions to your IRA (Individual Retirement Arrangements) or employer-sponsored retirement plan. These credits are based on the income from 10 to 50% of the contribution to your retirement plan. One must have an adjusted gross income less than $48,000 if he/she is the head of the household, and less than $32,000 for other filers. More information is available in the IRS website for 2019 saver’s credit eligibility and how to apply.

The IRS recommends every taxpayer to use its Interactive Tax Assistant (ITA) tools in order to find if they qualify for any of the credits. This tool also provides answers to general tax law questions and help in determine the income is taxable, documents required etc. Without proper documentations and eligibility, IRS can suspects the tax filed and conduct tax audits to verify the facts provided in the returns are correct. Therefore it is important to understand your eligibility and gather all the documents for filing.

As the tax season for 2019 is nearing, it is important for the taxpayers to make use of every credit that you qualify to fully benefit from the IRS offers.

If you have received any notice from the IRS for tax audits, don’t panic, We offer tax audit representation services with first time free consultation. Contact us:- info@irs-audit-group.com /1-888-300-6670.

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How IRS Audit Group Help Taxpayers in Tax Audit Representation? – Highlights of Services Offered by IRS Audit Group

IRS Audit Group consists of lawyers, CPA’s and enrolled agents who are specialized exclusively in “Tax Audit Representation”.  With a track record of about 16 years, IRS Audit Group helps taxpayers in facing complex audit situations.

 

IRS Audit Group renders its services in all the part of the United States.  The services offered by the IRS Audit Group include tax audit, tax consultation tax payment plans, tax relief, and Tax Audit Representation.  Beyond these services, the firm is providing services for individual income taxes, business income taxes, offshore accounts and foreign bank account reporting, tax penalties, employment taxes, estate and gift taxes, payroll taxes and employee versus independent contractor classification. Also, the Group specializes in issues related to California state tax and other tax debt-related matters.  Another important highlight about the Group is that it extends free consultation with their attorney.  The benefit of a free consultation helps taxpayers to understand the scope of their tax problems with the IRS.

 

The tax professionals of IRS Audit Group have expertise in tax auditing and tax consulting.  They are dedicated to resolving tax problems and committed to offering their best service to clients including 24/7 live support to their clients.  To facilitate client interaction, the Group has set up in Beverly Hills and Newport Beach.  IRS Audit Group believes that it is the right of a taxpayer to be represented by a competent tax attorney.  The tax attorney helps taxpayers to avoid the penalties and interests by understanding the scope and issues on tax returns.

 

IRS Audit Group helps tax audit representation by adopting the right communication with IRS authorities.  With a deep knowledge of the law, the partner’s fight for the right of taxpayers, and associated benefits.  The firm helps in resolving issues emanated out of tax audit, and provide solutions to prevent the recurrence of such audit.  The firm facilitates in getting an Offer in Compromise which means the individual qualify to settle the tax debt in a lesser amount than the original total due they owed.   IRS Audit Group is friendly and easily approachable to its customers.  The reviews about the services of IRS Audit Group mentions that IRS Audit Group helps customers to understand their rights and fights for them with IRS.

 

IRS Audit Group provides service in State audit representation against governmental agencies.  The experienced tax professionals of the firm help taxpayers even in extremely rare cases.   In tax audit cases, IRS Audit Group has helped many customers to reduce the tax liability including business expenses and deductions.  IRS Audit Group makes the audit process stress-free for them. Before going for the consultation, it is advisable to list out all your receipts and documents in order.  Thereafter, you can book a free consultation with IRS Audit Group can make your audit process stress-free.  They will appoint a tax attorney for your case to represent you in the IRS.  In every step of the process, they will communicate properly with their clients.

 

The IRS Audit Group provides different payment options for the taxpayers those who are financially unable to pay their tax debt in full.  IRS Audit Group will help you to find the best payment option in order to reduce your tax burden. By understanding the financial situations of its customers IRS Audit Group will suggest the best payment option fits for their needs.

Contact us – info@irs-audit-group.com /1-888-300-6670

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Tax Filing Due Date Oct 15 2019

Tax Filing Due Date on Oct 15 2019 for Individuals and C-Corporations who filed for 6-Month Automatic Extension

If you wonder what it’s all about filing an extension, it’s really a simple process.  Your income tax returns will normally due on April of every year, but applying for a 6-month automatic extension allows you more time to file.  This extended deadline for the tax return is October 15 now, but only for individuals and C-corporations who applied using IRS Form 4868.  This extended deadline applies only if you filed or e-filed a tax extension by April 15, 2019.  Before filing your tax it is important to educate yourself about the tax situation to avoid complications later.

Does IRS Reject Your Tax Extension Application?

The tax extension request might be rejected under certain circumstances for the following common reasons.

  • Misspelling, errors in numbers or other errors on the extension form
  • Out of date information provided in the extension form

IRS will notify through email or letter if extension request is rejected.  Such instances, IRS will provide five days of time to fix the issues, and correct the errors in order to file again.

The tax extension has several advantages.  It is easy to get the extension for your tax filing.  Here are some of the benefits of filing for an extension.

  • Having more time to file your taxes will make the process to complete without feeling stressed
  • The chances of making errors will get low with this extended time
  • If you are looking for a tax professional to handle your tax audit, this extended time will be helpful to find the right tax attorney for your needs

If any taxpayers fails to file the tax returns even by Oct 15 due date, you will be subjected to IRS penalties and interests.  Here’s how the IRS penalties could add up:

Penalty for non-filing: If you don’t file the taxes, for every month the penalty will be 5% monthly of the net tax due.

Penalty for non-payment: If you don’t pay your taxes, for every month the penalty will be 0.5% monthly of the net tax due.

The penalty for failure to file tax returns is more than failure to pay the taxes itself.  Act immediately and file your taxes on or before Oct 15 2019.

IRS Repayment Plans

For those who are unable to pay taxes on time, the IRS is offering different repayment options for the tax payers.

Full-payment agreement: You can apply for this payment option if you are able to pay your entire tax debt within 120 days.  You will get the IRS notification once you applied whether your payment option is approved.

Installment agreement: Sometimes you may not be eligible to pay the full tax debt in 12 months.  Certain times you can choose this option for the repayment.  The main advantage of this option is avoiding accruing additional interest and penalties.

Offer in compromise:  This repayment option may allow you to pay less than you owe only if you meet certain qualifications.  IRS will consider taxpayers unique set of facts and circumstances for approving this option.  This option is not for everyone.  Before approving this repayment option IRS will check your ability to pay, income, expenses and asset equity.

If you’re struggling to complete your tax return, don’t hesitate to seek a tax professional’s assistance that can help you get it completed properly and on time.  IRS Audit Group specializes in tax audit representation can help you facilitate your tax filing process.  Our Tax attorneys, CPA’s and enrolled agents are able to offer options that best fits your case to reduce any tax debt, eliminate disputes etc.  Contact Us Now for Free Consultation:-

info@irs-audit-group.com / 1-888-300-6670

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IRS Tax filing due date Oct 15 2019

For C-Corporations and Individuals Opted For Automatic Extension – Tax Filing Due Date on Oct 15 2019

We can avoid penalties associated with tax filling by taking action in time.  The general option is to seek another date for tax filing.  The benefit of seeking an extension is that it can improve the accuracy of your tax return.  Tax extension time is essential if you are still preparing your tax documents to be organized.   In fact, the deadline for filing the 2018 tax returns was April 15, 2019.  However, by filing IRS Form 4868, individual people and businesses may extend the tax filing deadline to six months i.e. September 15, 2019. Now, the Tax filing due date has been extended up to Oct 15, 2019.

But getting an extension doesn’t offer you more time to pay — it only provides you more time to file return.  Here are the common reasons why you might need to push your deadline back:

  • You may need more time to track down your missing documents
  • Any unexpected life event or
  • Your busy life

Filing for a tax extension is simple, free and automatic.  Just submit Form 4868 electronically or on paper before the original filing deadline.  But if you fail to submit your tax return by the updated Tax filing due date, there are chances that you may end up paying higher penalties.

What happens if you miss October 15, extended tax filing due date?

Now, if you miss October 15 Tax filing due date for tax filing, you will not get any refund that IRS owe.  Moreover, the IRS will deduct any interest and penalty you owed from the refund.  If you wish to receive the refund you are entitled to, the necessary returns need to be filed in time.  The IRS will compile a substitute return, and then notify you how much tax you owe to the federal government.  The IRS will begin the collection activity against you once it compiles and notify you about the substitute return.  These may include the collection and seizure of your property, including:

  • Bank account
  • Retirement savings
  • Real estate
  • Secondary car or home
  • Life insurance policies

IRS will notify you in writing a mail about the seizure or levy of your assets through US Postal service once they find that you failed in complying with the Tax filing due date.  You will be getting 30 days’ time to convey the intention or resolve your debt in order to avoid it.  If you want to protect the assets that you own you should not ignore the written notice from the IRS.

Individuals or corporations sometimes file for an extension because they owe taxes, but they are unable to pay them.  This is the worst reason for applying for a tax extension.  IRS will offer some payment plans if you can’t pay the tax return instead of filing an extension.  IRS also offers some installment agreements for tax payers who are unable to pay the taxes when they are due.

IRS Fresh Start Program is available, if you are not able to pay the tax in one time, it will allow you to pay in installment.  IRS may provide more options like settling the tax debt for a lower amount or allowing you extra time to file and pay.  But this extension is mainly reserved for military personnel and taxpayers living abroad.

IRS Audit Group analyzes any individual or businesses’ tax situation and provides the payment options that best fit you and the IRS.  If you receive any notice in mail from the IRS, contact a professional or tax attorney immediately to know your options.  Our IRS Audit Group’s members are experts in tax audit representation services who can bring best solutions for your tax problems.

Contact Us: – info@irs-audit-group.com/1-888-300-6670.

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Let Us talk To the IRS - Importance of Tax Audit Representation

Let us talk to the IRS for you – Importance of Tax Audit Representation

IRS Audit is the process of examining an organization or individual account and financial information.  The main objective of IRS audit is to ensure that the financial information given by organizations or individuals is correct according to the tax laws.  Several methods are used by the IRS to select the assessment files for audit.  Such audits are completed by examining the records either by mail or through an in-person interview.  It is important to note that IRS audit will not initiate the audit process by phone.

Types of IRS audit

Knowing the type of audit will make the tax payers to feel stress-free for the audit process.  It is always better to contact the tax professionals once you receive the audit notice.  They will analyze your options and make contact with the IRS agents for Tax Audit Representation.

There are four types of IRS audits:

  1. Correspondence Audit

This is the lowest level and least severe type of audit.  In this IRS will be sending letter in mail requesting more information about part of a tax return.  If you have the necessary receipts or information, you can easily handle this audit by your own without the need of tax attorney.  If you don’t have the receipts or information then you will need a tax professional to handle the IRS because you could face fines, penalties and interest if you end up owing money.

  1. Office Audit

The office audit is more serious than the correspondence audit.  If IRS needs more information and documents then they will send letter in mail inviting you to visit IRS office for audit.  For this type of audit, one needs to bring their office audit preparer and tax attorney for audit representation.  IRS prefers to discuss with the Tax Audit Representation Professional who can understand the audit process and make the entire audit seamless.

  1. Field Audit

During a field audit, the IRS professionals will directly visit your home or office.  If the IRS is coming out to you then they are looking for more information.  Most of this type of audit will end up in favor of IRS.

  1. Random Audits

In this audit the IRS agents will not be looking for something in particular.  They make comprehensive audit to find a way in increasing the taxes.  If you do not have proper receipts or other documents, it is advisable to contact a tax lawyer who can help you with different options based on the case.

The time taken for the IRS audit depends on the issues involved and how quickly and completely we respond to the audit letter.  It also depends on the type of audit.  Correspondence audits are usually quick and straightforward than the other audits.  Mail audits will generally complete within three to six months.  Office audit will also take the duration of three to six months.  But it will get delay if you are not providing complete information or the IRS auditors finding more issues.

The chances of getting audited

There are several reasons for the IRS to audit an organization or an individual.  Here is a summary of a few such reasons;

  • Math mistakes, hiding income, deduction overkill and round numbers are the most common reasons for getting audited by IRS.
  • While filing your own taxes, avoid math errors otherwise you will be fined regardless of whether your mistake was intentional. You can use tax preparation software or a tax professional to avoid such math mistakes.
  • If you fail to report any part of your income then you will definitely audited by the IRS.
  • If you report false donations without having any proper documents then it will surely lead you to the IRS audit.
  • If you are a business owner and hide your income by filing personal expenses as business expenses then the IRS will begin to review your returns for audit.

Can the IRS audit you after a refund?

The IRS can audit the tax returns even after it has issued a tax refund to the tax payer.  A tax refund means that the IRS has reviewed your returns and agreed with your calculations.  Yet, if significant errors are identified, the IRS can audit the tax returns filed in the last three years but not more than the previous six years.

Who can represent a taxpayer in IRS Audit?

An Enrolled Agent (EA), a licensed CPA or a tax attorney can represent a tax payer in IRS Audit.  These individuals are able to represent you by arguing points of law with the IRS.  IRS Audit Group has professionals with CPA, enrolled agents and tax lawyers who can involve in the Tax Audit Representation.  Let us talk to the IRS for you to help solve the issues faster and in favor of you.  We not only serve in California, regardless of your location our certified tax lawyers are experts in state tax and federal tax law.

Contact us immediately: info@irs-audit-group.com/ 1-888-300-6670.

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Due Date for S Corporations, LLC & Partnership for Tax Filing is on September 15, 2019

The tax rule for S Corporations, LLC and partnership are the same under the tax code.  The due date for S Corporation taxes for the financial year 2018 -2019 was March 15, 2019.  However, one can opt for extension of six months by filing Form 7004. With such extended option, now the due date for S Corporation taxes is September 15 2019.

S Corporation exists in order to avoid double-taxation on earned income.  S Corporations pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S Corporation report the flow-through of income and losses on their personal tax returns, and are assessed tax at their individual income tax rates.

What If You Miss the Tax Final Filing Date?

If S Corporation owes taxes from a 1040 or 1120 Form that is filed after 15th April (without filing for the extension), the penalty for the S Corporation is 5% of the taxes owed for every  month from the tax return is late for filing, and can exceed up to a penalty of 25% of the tax due.  If S Corporation is in financial difficulties, and is not able to make the tax payment then it needs to apply for an installment option.  With that and it makes an agreement with IRS stating that it would make the tax payment in a periodical installment.  The S Corporation can e-file the tax and the IRS will accept e-filed tax returns up to 15th October 2019.

Forms and S Corporations

Below is a list of forms to be filed by S Corporation before 15th September 2019.

  • Form 1120-S for The United States Income tax for S Corporations
  • Schedule K-1 for Shareholder’s share of Income, Deductions, credits etc.
  • Form 940 to be filed for employers annual Federal Unemployment Tax Return (FUTA)
  • Form 941 for employers quarterly federal tax return
  • Form 1099 for non-employment compensation
  • Form W2 for the wages and the tax statement

The S Corporation needs to submit supporting documents for each form or schedule as needed.

 

Advantages of S Corporation Taxes

  • S  Corporations avoids double taxation of corporate income
  • No self-employment taxes for S  Corporation net earnings
  • S  Corporation losses can reduce the owner’s taxes

 

Disadvantages of S Corporation Taxes

  • S Corporation to pay salaries to shareholders who work for the business.  That means taxes need to be withheld from the owner’s pay, payroll returns filed, and W-2 forms issued.
  • S Corporation status can be lost if it exceeds 100 shareholders, or if it takes on investors who are non-resident aliens, Corporations, or partnerships.
  • If the S Corporation used to be a C Corporation, the S Corporation may have to pay tax if it generates passive investment income or if it sells a highly appreciated asset that it acquired when it was a C Corporations.

 

File Form 2553 before the Due Date to maintain S Corporations status

 

  • If a newly formed Corporation wants to be an S Corporation from its date of in Corporation, the Corporation has to submit form 2553 to the IRS no later than two months and 15 days from the date of in Corporation.
  • If already existing C Corporation wants to become an S Corporation then it needs to submit Form 2553 any time during the current year and no later than two months and 15 days into the next year.
  • If the already existing Corporation that forgot to file Form 2553 and wants to request retroactive S Corporation status then it needs to submit Form 2553 no later than three years and 75 days from the date the owners intended for S Corporations status to take effect.  The shareholders will need to explain why they are late in filing the election.

 

In spite of possibilities to being audited for S Corporation are low, the IRS still tracks the K1 with companies’ EIN and further to W2 and from W2’s social security number to corresponding K-1.  Therefore if you do not have K-1 and W2 with corresponding values, the risk of being audited is increasing.  Consult with tax experts like IRS Audit Group to know your risk of being audited and be ready to face them with one of our representatives.  We are a team of IRS Attorneys, CPAs and Tax Attorneys with expertise in IRS Tax Audit representations.  Contact us: info@irs-audit-group.com/ 1-888-300-6670.

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S Corporation, LLC & Partnership September 15, 2019 – Extended Due Date for S Corporation, LLC & Partnership

Generally, S Corporation, LLC & Partnership are required to file tax return before March 15 2019 for the calendar year 2018-2019.  While filing such return, S corporation needs to file Form 1120S and attach Schedule K-1 for its shareholders.  An S-corporation also need to file payroll tax returns, including Form 940, Form 941, and other informational returns such as Form 1099 while filing its return.

In the case of LLC, it has four different ways to file its tax returns as given below;

  • LLCs as a Sole Proprietorship – file Schedule C on the owner’s personal tax return.
  • LLCs as a partnership – file partnership tax return using form 1065.
  • LLCs that choose corporate tax treatment – file either an S-corporation tax return (Form 1120S) or a C-corporation tax return (Form 1120).

Also all partnerships are required to report its revenue and expenses by using Internal Revenue Service Form 1065 every year.  The due date for filing Form 1065 used to be April 15th of every year.

Extended due dates for S Corporation, LLC & Partnership

There are situations where certain businesses cannot file the tax return before the due date.   The IRS provides extension in such situations.  However, such extensions should be properly availed using Form 7004 before the tax filing due date.

S-corporations and LLC can request additional six months to file its Form 1120S using Form 7004.  With such extension the due date for S-corporation is now Sep 15 2019.  Partnerships can also request an automatic five-month extension by filing Form 7004 before the due date of Form 1065 i.e. April 15 2019.

Remember, the IRS will never send letter if the extension is approved. However IRS will send a notice only if it is disallowed.  uring such automatic extension, the IRS has all the rights to terminate the extension at any time by sending a letter 10 days before the termination date mentioned in the letter.

How to file for extension?

Before filing the Form 7004, it is advisable to arrive at tentative tax amount and the amount you like to pay immediately.  This will be useful to fill the balance amount to be paid before Sep 15 2019 in the Form 7004.

There is an option to file Form 7004 through US postal service or electronically.  It is advisable to use registered post to secure receipt as acknowledgment or proof.  If you are an S-corporation, LLC and Partnership, then the Form 7004 for 1120S and 1065 can be sent to IRS Center, UTAH.

Penalties for Late Payment of Tax

There are certain penalties for late payment of tax as follows;

  • If S-corporations do not file Form 1120S by the due date or by the extended due date, then the IRS will impose a minimum penalty of $195 for each month or part of the month the return is late multiplied by the number of shareholders
  • When the S-corporation fails to file Form 941, and it has any unpaid tax balance, a penalty of 5 to 25% may be assessed on the balance for each month or partial month the tax is late
  • Similar penalties apply to filing Form 940 after the due date as well.

S-corporations can get audited by IRS mainly for minimizing the payroll taxes.  During the audit the IRS will always try to re-structure portion or all of the profit distributions as salary compensation, thus allowing them to collect payroll taxes on the salary side.  If you have received a letter from IRS for an S-corporation audit, know your rights and act accordingly.  Consulting an IRS expert is what should be your next step.  IRS Audit Group can help you with your tax audit representation.  Contact us for free consultation with one of our Tax attorney team members.

E-mail to: – info@irs-audit-group.com/ Call Us @1-888-300-6670

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Tax Filing Due Date for S- Corporation, LLC & Partnership – September 15, 2019 is the Extended Due Date for Filing

S-corporation and LLCs can opt for the extended due date for tax filing till September 15, 2019.  Per rule, S corporations to file tax on March 15, and they can seek for extension by filing Form 7004 and deposit what they estimate to owe.  This extension is valid for six months and the extended due date for S-corporation is Sep 15 2019 for 2018 calendar tax filing. Single member LLC’s or sole proprietors’ need to document Personal Online Tax Extension or the paper variant of IRS Form 4868 and mail it by means of the U.S. Postal Service for such extension.

S-corporation stands for Subchapter Corporation or small business corporation.  It is a special tax designation granted by the IRS in which S corporations do not pay any income taxes.  Instead, the S corporations can elect to pass corporate income, losses, deductions, and credits to their shareholders for federal tax purposes.  Shareholders of S corporations report the flow-through of income and losses on their personal tax filings and are evaluated at their individual income tax rates.

To be eligible for S corporation status, one must meet the following prerequisites:

  • Be a domestic corporation
  • Have only allowable shareholders
  • like individuals, certain trusts, and estates
  • cannot be partnerships, corporations or non-resident alien shareholders
  • should not have more than 100 shareholders
  • Have only one class of stock
  • Certain financial institutions, insurance companies, and domestic international sales corporations are not eligible.

A limited liability company (LLC) is a corporate structure to protect the business owners’ personal assets from being liable to their business losses.  Limited liability companies are hybrid entities with combination of a corporation’s characteristics with those of a partnership or sole ownership.

LLCs provide flexibility to business owners in taxation.  The IRS does not treat an LLC as a separate tax entity but depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership.

Difference between S-corporation and LLC

  • The owners of LLCs are not personally responsible for business debts and liabilities.  The owner of the business of S corp is responsible for its debts and liabilities.
  • In S-corporation type of ownership will be Stock, and only one class. S-corporation and LLC are separate legal entities created by a state filing.
  • S-corporation and LLC are pass-through tax entities. Therefore, income taxes are not paid at business level but are passed-through owners’ personal tax returns.
  • LLC is taxed as an S-corporation means the owner’s salary will be business expense so the owner will report salary and other business profit in their personal income tax return. Their salary is taxable.
  • The time of dissolving of LLC is specified in the Operating Agreement, or upon the loss of a member, unless other members agree to continue. But, in S-corporation it is specified as indefinitely.

 

The Due Date for S-corporation to file tax returns is 15th of March every year.  Form 1120S needs to be used by the corporation to report all financial activity.  It has to attach Schedule K-1 for each shareholder that will provide information about shareholder’s share of taxable income.  The corporations which failed file tax returns by March 15 need to seek extension by filing appropriate forms.  Such extension is valid for six month and the extended due date for S-corporation is Sep 15 2019 for 2018 calendar tax filing.  The shareholders who pay tax on the corporate income are subject to the same deadlines the IRS imposes on individual taxpayers, which in most cases is April 15 every year.

 

The IRS never acknowledges receipt or approval of your tax extension but they notify through US postal mail in case the filing is rejected.

 

IRS Audit Group is a team of tax experts primarily specialized in Internal Revenue Services (IRS) Tax Audit Representation.  If you have missed your tax filings or payments and received letter from the IRS for tax audits, don’t hesitate to call us, our certified professional cooperate and work with all IRS offices nationwide and can help you to solve your tax issues.

Call Us: – 1-888-300-6670 or email us:- info@irs-audit-group.com

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IRS Audit Group

Tax attorney in Beverly Hills, California

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