Don't Face IRS Tax Problems Alone

The IRS announced that “Tax Day for individuals extended to May 17”. The U.S. Treasury and the IRS extend the filing and payment deadline for tax year 2020.

Here is an excerpt from the announcement linked above from the IRS that we think will be of particular interest to taxpayers in Washington State:
“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest, and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

The announcement does point out that this decision does not postpone estimated tax payments for the tax year 2021:

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony, or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

The IRS said the extended deadline is only for federal returns and that taxpayers may still have to file their state taxes by April 15. While several states have already extended their deadline to match the federal deadline, the IRS advises taxpayers to check with their state to ensure they don’t pay their taxes a month late. Oregon extended the filing deadline for state taxes to May 17th. At this time, Idaho hasn’t extended the deadlines for the any taxes due in 2021.

Related to the IRS filing delay, the IRS has a backlog on processing 2019 returns as tax changes related to the pandemic have made filing more complicated. The IRS is behind in processing over seven million tax returns and is now sending out another round of stimulus checks to Americans. The IRS said it has already sent out about 90 million payments totaling $242 billion. An example of the complications involved in filing taxes for the tax year 2020, the stimulus bill passed into law earlier in March 2021 exempted the first $10,200 in unemployment aid from federal income taxes. When this newsletter was prepared, the IRS has yet to issue guidance to taxpayers who already filed their returns on how to handle this. The taxpayer’s individual tax return for the tax year 2020, Form 1040, is also the mechanism for people to claim any missing $1,200 or $600 stimulus payments from last year. The $1,400 stimulus payments are not taxable, nor were the stimulus payments that came before. They will not adversely affect tax returns or refunds from last year or this year.

So, What Does All This Mean to Me?

With a new administration and a new Congress taking office next year, we should expect more changes to both policies and the IRS tax code. We should expect that the complexities of the law to continue to be difficult for individuals to understand and to act on without making potentially serious mistakes. Moreover, for individuals with IRS tax problems, having the guidance and representation of a widely acknowledged expert in IRS law and tax policies with years of experience and relationships with key contacts to help streamline delays is more important than ever, especially given the very difficult times that we are all facing today.

If All This Seems Confusing or Too Complicated, Please Call Us for Help

IRS tax problems or long neglected debts can be complex and overwhelming. The team at the Law Offices of John A. Sterbick may be able to help you understand your situation; We can certainly help you by discussing certain trade-offs and options concerning your situation with your debts, the IRS, and bankruptcy.

The Sterbick team does our best to give each client the best, unbiased advice that we can provide in every case. We do not automatically recommend bankruptcy; we tailor our advice to each person’s circumstances. We would never advise a client to take actions that would worsen their circumstances and increase their debts. Our goal is always to design a plan and carefully explain the plan to our client in order to help our clients work towards rebuilding a sound financial future.

Financial stress is not a healthy state, and it does not cost you anything to check out your options. Please contact my office to make an appointment for a free, confidential, personal consultation to review your circumstances together.

The federal income tax deadline was postponed this year from April 15^th to July 15^th to provide relief for individuals and businesses affected by the COVID-19 pandemic. However, the Internal Revenue Service determined that no further delay is necessary, and Tax Day for Tax Year 2019 is …tomorrow, July 15^th.

Don’t panic. It is still possible to request an extension if you’re not quite ready to file. However, the deadline for filing taxes after requesting an extension is still October 15^th, as in previous years.

Here are a few added points for last-minute tax filers.

Taxpayers have up to three years to file a 1040 tax return in order to receive a refund. If you are a taxpayer who expects to receive a refund for tax year 2016, you must file your 2016 form 1040 by tomorrow, July 15^th. Otherwise, it will be too late.

There is an exception for taxpayers who expect to receive a refund for tax year 2016: if the taxpayer filed an extension to file their form 1040 for the tax year 2016. In that case, the taxpayer must file their tax year 2016 form 1040 return by October 15^th to receive their refund.

The IRS provides complete details on a variety of special conditions for filers at this link.

Don’t Panic. Put Our Decades of Experience And Know-How to Work for You.

If you have IRS tax problems and need expert help, please call the Law Offices of John A. Sterbick at (253) 383-0140 or click to contact us.

The usual payroll tax debt relief story begins like this: a small business owner misses a single payroll tax deposit, then another and another, until he reaches a point where he gets so anxious about how much he owes that he stops filing payroll tax returns. It isn’t because he wanted to: it’s because he didn’t know what else to do.

Many small businesses get into cash flow problems for all kinds of reasons. The problem that causes your cash flow shortfall can be something completely outside your control. For instance, James, a drywall sub-contractor, was given notice that the general contractor filed bankruptcy. It’s how you handle the problems – especially when payroll taxes are involved – that usually determines whether you’ll be able to remain in business.

Another example is William, a plumbing sub-contractor, who frequently hears the “retention” excuse from his general contractor. Consequently, he must wait several months to get paid. In the meantime, he must pay wages, materials etc. for his next project out of his own pocket. IRS Form 941 obligations – those listed on the employer’s quarterly federal tax return – don’t get paid. Failure to make FTD (Federal Tax Deposits) revenue means failure to pay penalties and interest will accrue. Some employers get scared and compound the problem by making an even worse mistake: they fail to file the 941 return and incur failure to file penalties which are really stiff!

If you own a small business and have IRS payroll tax problems, you’re in danger of losing your business every day. To be sure, the IRS takes an iron-fisted position on payroll tax violations. They would rather close a business and sell off its assets rather than work out a deal with the business owner. In my professional opinion, this is probably because higher management gives every IRS agent too many cases to work on at once, so the agents are forced to close many small businesses simply to keep up with the agents’ caseload.

Nancy ran a successful Servpro business for several years when she fell victim to embezzlement. The employee paid himself instead of paying the FTDs. She sold assets, laid off employees, and borrowed money to pay a chunk of the IRS debt. An installment contract was set up but unfortunately, Nancy missed a payment. The IRS agent swiftly levied her accounts receivable. She lost two vendors which eventually forced her out of business. The agent simply assumed she would keep running up liabilities. The point is that she begged for another installment agreement. However, the IRS bureaucratic agent didn’t want to take the risk of granting an installment contract that will probably result in making him look bad in the eyes of management.

To add insult to injury, the IRS pursued Nancy personally and raided her personal accounts to pay off the payroll debt. Unfortunately, she didn’t set up her business under a corporation to protect herself from third party liability.

The worst thing about business payroll taxes is that the IRS can collect them from anyone they deem responsible for not having paid them. For example, the business owner or any check signer on the business bank account can be singled out for collection activity.

They will do everything they deem appropriate to recoup payroll taxes; usually a visit to your home or workplace kick-starts the collection process. Every weapon in their arsenal can be used (levies, liens, seizure) until the taxpayer agrees to some type of repayment.

The IRS is aggressive in collecting payroll debt because they consider the failure to make FTDs as “theft.” The payroll tax withheld by the employer on behalf of the employee belongs to the employee. Employers who fail to file IRS Form 941’s and to make FTDs are risking IRS criminal prosecution.

If you’re in a deep, dark place right now because you owe unpaid payroll taxes, email us or call the Law Offices of John A. Sterbick at (253) 383-0140 right now to find out about payroll tax debt relief. You’ll sleep better tonight knowing that you have a reputable, well-tested Tacoma-based IRS tax attorney in your corner figuring out your best next move.