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Offer In Compromise (“OIC”) is a type of IRS tax resolution that greatly benefits individuals that are eligible for a “Fresh Start”. In this booklet, IRS Form 656B, you will learn about who is eligible for an OIC, who can benefit for an OIC, how taxpayers pay their tax debt back with an OIC and how to submit an application to get an OIC. Many taxpayers are not eligible for an Offer in Compromise, however the tax debt resolution greatly does greatly help those that are able to qualify. Learn more about this IRS program by downloading the booklet. Contact Community Tax for further information.
IRS Form 56 must be filled out by those who want to represent another taxpayer as a fiduciary. The difference between filing IRS Form 56 and a Power of Attorney is that when one is a fiduciary, one can make decisions as if they were the taxpayer whereas with a Power of Attorney, one can only carry out instructions issued by the taxpayer. Those who are taking over a decedent’s estate must fill out IRS Form 56, which allows them to manage the tax affairs of a deceased taxpayer, whether they are appointed by the court or by a will.
IRS Form 433-A is a form filled out by a taxpayer who has been asked by the IRS to provide financial information in order that the IRS can begin to calculate how that taxpayer can pay off an outstanding tax debt. Certain sections of IRS Form 433-A are filled out only by taxpayers who are self-employed. Usually, IRS Form 433-A is filled out when applying to the IRS for a tax debt repayment plan, such as an Installment Agreement (IA), an Offer in Compromise (OIC), or when applying for a Currently not Collectible (CNC) status, and has no other impact.
IRS Form 433-D is one of the many forms used to set taxpayers up with a tax resolution. This particular form is used to apply for an Installment Agreement, which breaks up an overdue tax balance into smaller monthly payments. Filing Form 433-D carefully and accurately is very important, as it can impact whether an individual’s settlement plan is accepted. It is important for any taxpayer to note that they need to submit an amount they could afford to pay each month. Additionally, anyone filing Form 433-D should make themselves aware of the terms of their installment agreement before signing.
IRS Form 843 is used by taxpayers who are trying to seek penalty abatement, or removal, from the IRS due to a mistake made by the agency. Filling out and filing IRS Form 843 allows taxpayers to make a claim to a refund that they are entitled to, although this requires making a good case as to why they believe that the IRS is in error. There are no penalties associated with not filing an IRS Form 843 but there is a penalty if a taxpayer asks for a larger refund of withheld tax than they are entitled to receive.
IRS Form 940 is a form primarily used by employers to pay the Federal Unemployment Tax Act (FUTA) tax when they pay more than $1,500 of wages to employees during a calendar quarter. Those who had more than one employee for more than 20 total weeks in a calendar year must also file IRS Form 940. Payments toward the FUTA tax balance must be made via the Electronic Federal Tax Payment System (EFTPS). Filing late, not filing, or making late payments will result in penalties at a predetermined rate. One can amend this form by filing another IRS Form 940.
IRS Form 944 is a form filled out by employers to submit their annual federal tax returns to the government. This form must be filed by businesses that have been notified by the IRS in writing. Other businesses can file their taxes quarterly through Form 941. Proper recordkeeping can make this process simple, considering Form 944 is only sent to the IRS once a year. Most of the companies that get the notice about filing Form 944 are small employers. These businesses typically report a liability of approximately $1,000 or less in Medicare, federal income taxes and social security annually.
IRS Form 1040 is the standard individual income tax return form for United States taxpayers. While this is one of the most common forms taxpayers encounter, it can be complicated to manage. Form 1040 tends to undergo many changes each year as the complex tax code faces new legislation. It is important to stay on top of these alterations as they can impact the amount of income taxes owed to or refunds received from the IRS. Form 1040 has to be filed by most citizens of the U.S. The IRS recommends filing the form even if it is not required.
IRS Form 1040-SS is a tax return form that is filed by those that are self-employed in the United States. Form 1040-SS impacts taxpayers residing in the U.S. Virgin Islands, American Samoa, Puerto Rico, the Commonwealth of the Northern Mariana Islands and Guam that are not required by law to file standard U.S. income tax returns. For taxpayers that are bona fide residents of Puerto Rico, this form also includes the Additional Child Tax Credit. One of the main purposes of Form 1040-SS is to report the total wages earned from self-employment so the appropriate income taxes can be paid.
IRS Form 1040X is used to correct mistakes on tax forms such as not including income from a W-2 or a 1099 form. This form can amend IRS Forms 1040, 1040A, 1040EZ, 1040NR and 1040NR-EZ. Small math mistakes are not a good reason to use IRS Form 1040X since the IRS catches those. If a taxpayer realized that they could have claimed a deduction or credit, they can use IRS Form 1040X to include them. Other uses of the form include changing filing status, number or dependents, or number of exemptions. There is a three year limit to amend returns.
IRS Form 1098 must be used by those who, in their business, receive $600 of mortgage interest or more during the course of a calendar year. Those who receive this amount or more for a personal residence or for a former personal residence do not file IRS Form 1098. For the purposes of filing IRS Form 1098, the payment of points must also be included along with and added to mortgage interest. Penalties for late filing vary according to how late one files with the minimum fines ranging from $30 to $100 and maximums ranging from $250,000 to over $500,000.
IRS Form 1098-T is a common form used by students to report finances related to their tuition. This form is used to inform the student and the IRS of any money received that is earmarked for tuition and expenses and the bills charged to the student for the same financial categories. Scholarships and grants that were awarded to a student are also reported on Form 1098-T. This statement is issued by educational institutions and insurers involved in education expenses. The finances reported on Form 1098-T may be eligible for education credits that can be claimed on Form 1040 or 1040A
IRS Form 1099-R is meant for reporting any income received in the form of distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts and other similar financial programs. These distributions must be greater than or equal to $10. Death benefit payments and disability payments from employers or retirement plans are also included on Form 1099-R. Payments that are subject to withholding should not be reported. Updates to Form 1099-R by the IRS instruct taxpayers to use the distribution code “K” for any reported distributions of assets from any IRAs that do not have a defined Fair Market Value.
IRS Form 2555, which should always been attached to form 1040, is intended for the reporting of Foreign Earned Income. Among other information, taxpayers using this form need to submit information about where they are currently living, overseas employment and may need to determine whether they qualify for this consideration under the Bona Fide Residence Test. The main purpose of Form 2555 is to help taxpayers determine their exclusions relating to foreign earned income and housing. Anyone filing Form 2555 can only deduct or exclude as much money as the foreign income they earned overseas within a given tax year.
IRS Form 2555-EZ can be used by qualifying taxpayers who would otherwise have to use IRS Form 2555 to exclude part of their earned foreign income from IRS Form 1040. To be able to use IRS Form 2555-EZ, a taxpayer has to live outside of the US for a full tax year, beginning January 1 to December 31 or be from a country with an income tax treaty with the US. Taxpayers may be eligible to exclude up to $99,200 of their earned foreign income each year by filing IRS Form 2555-EZ, although the self-employment taxes must still be paid.
IRS Form 8821 is best used by taxpayers wishing to authorize release of tax information to any entity, company or person. That person or entity should have a Centralized Authorization File (CAF) number to enter in IRS Form 8821, unless the specific tax issue is not recorded on the CAF system. Otherwise, a new CAF number will be issued. For those authorizations relating to those special uses, the IRS Form 8821 has to be sent to the IRS office that handles those issues. The IRS only authorizes two entities at a time so filing may be interferedby Form 2848.
IRS Form 8863 is used to claim the American opportunity education credit and/or the lifetime leaning credit. The first education credit on IRS Form 8863 is a refundable credit which means that if the credit exceeds tax owed, one can receive the difference in their tax refund. The lifetime learning credit is nonrefundable, which means it only covers up to the amount of tax owed. While one can use IRS Form 8863 to claim both credits on the same form, it cannot be for the same student. There are different eligibility requirements for each education credit making a comparisonvital.
IRS Form W-2 is one of the most common tax forms an individual may receive. This form is sent to taxpayers after the fiscal year ends if they have earned income from a W-2 employer. Form W-2, or the Wage and Tax Statement, is sent by employers that pay an individual at least $600 in noncash income if income, Medicare or social security taxes were withheld. Taxpayers report this income and the associated withholdings on their income tax returns, such as Form 1040. Form W-2 will be used to report withheld taxes if the individual meets the right exemption criteria.
Schedule 8812 is used by taxpayers who wish to claim a child tax credit on their tax return. Schedule 8812 cannot be filed by itself and must be filed with either of IRS Forms 1040, 1040A or 1040NR. The first part of the form is used exclusively for children who are non-residents and do not have their social security number but an Individual Taxpayer Identification Number (ITIN). Parts II and III are for additional children. Schedule 8812 offers a refundable credit which may give out a refund for qualified child dependents even if the taxpayer does not owe any tax.