This week I am writing about the first step you need to take in order to solve your tax problems, which is to get into “tax compliance”.
Before you can enter into any agreement with the IRS regarding your delinquent taxes such as an Installment Payment Agreement, Offer-in-Compromise or Currently Not Collectible Status, you must first be in “tax compliance”.
What is tax compliance? It comes in two forms, being current on the filing of your tax returns and being current in your tax payments.
For the filing of your tax returns, the IRS defines compliance as having returns filed for the last six (6) tax years. If you have unfiled returns during this period, get them filed!
For tax payments, there are three (3) measurables:
- W-2 withholding for employees
- Estimated payments for the self-employed and
- Payroll tax filings and payments for businesses with employees
W-2 employees need to have at least 90% of their current year tax liability paid through withholding or 100% of last year’s liability withheld in the current year (110% of last year’s number if their income exceeds $150,000).
There will be no underpayment penalty if a taxpayer owes < $1,000 in federal income tax upon the filing of their current year tax return.
Self-employed taxpayers (like real estate agents and brokers) must make quarterly estimated tax payments on the 15th of April, June and September in the current year and January of the next year (2019) to be in compliance for 2018.
Businesses must file and pay payroll taxes on a quarterly basis.
The penalties are steep (like criminal) for withholding payroll taxes from employees and not filing the returns or making the payments quarterly.
If you have any questions or need help, please call me.