Even though the tax deadline has passed, there are still some who need IRS tax relief either because they didn’t file or are afraid to face their IRS debt. If this is you – don’t panic – you have options. There is light at the end of the tunnel, but you must act soon. As mentioned on a recent Big Biz Show episode, the IRS is growing and so is its ability to collect from taxpayers wherever they reside in the world. Here are some highlights from previous shows that not only aim to avoid IRS problems in the first place, but give information on what to do when they do.

IRS Reach is Worldwide

While a “kinder IRS” public relations promotion is going on, taxpayers need to understand that the IRS is not on this planet to be nice; they’re here to collect your back taxes. The current need for revenue is so great that the President has requested more funding for IRS enforcement in particular for efforts regarding Offshore Tax Evasion. Meanwhile on Capitol Hill, recent legislation has been introduced that would revoke your passport should you owe back taxes. This increased funding means an increase in size and scale with more “boots on the ground” to continue aggressive collection efforts with a vengeance.

Here are some areas where the government is setting its sights:

• Non-filers with delinquent tax returns
• Tax liens and tax levies
• International Business Tax Code Compliance
• Offshore Tax Evasion

IRS Audits on the Rise

Facing an IRS audit is one time where it pays to be average.  Here are some statistics:

• Only about 1.1 percent of taxpayers who filed a 1040 tax return for the 2010 tax year were audited. That equates to about 1.5 million taxpayers.
• In 2010, earn $1 million or more and the audit rate is 12.5 %. That’s a 100% increase over 2009!

These figures show just how aggressively the IRS is going after this segment of the population – because it’s where the money is. Certain actions trigger an audit, for example, a small business is making large cash deposits can trigger an IRS business audit, even though they were doing nothing wrong. In many cases, however, audits signify a lack of professional tax guidance from a CPA or a bookkeeper who could assist with the business entries that keep a business or individual tax compliant.

IRS Audit Means Hiring Expert Representation

It’s a bad idea to deal with the IRS on your own in an IRS audit because you are way out of your “league.” The IRS audit process is lengthy and intimidating on purpose. You will need expert tax representation to win your case.

Here are some things to know:

• The IRS asks around 54 interview questions at the initial meeting – answer them wrong and you’re doomed for the rest of the Exam.
• Trick: answer all questions truthfully AND not raise any red flags. Without expert representation, most people mess up by not being “truthful” in their responses or “talk too much” and incriminate themselves and need even more tax help.
  

Did Not File or Pay Taxes? You Have Tax Relief Options

If you still have yet to file, or request a filing extension here are some tax tips to get you started:

The penalties are more severe for non-filing than for non-payment. The quicker you file, the less you pay in penalties and fines. Important Tax tip: If you have IRS debt, file your return and send it with a check for as much as you can pay even if it’s $5.00. This action will show the IRS you made a good faith effort to pay something that’s due. While the IRS says it cannot waive interest charges, they are more willing to give your case consideration for IRS penalty reduction if you can prove good reason for late filing and payment.

Rule of Thumb: Consumers are legally obligated to file their tax returns; not filing means facing significant IRS tax issues.

Ways to pay IRS Debt: Credit or Installment Agreement

If you aren’t able to pay the entire tax debt amount, the IRS allows the use of all major credit cards (American Express, Discover, MasterCard or Visa) to pay federal tax debt. Consider the following five points to paying with plastic:

• Credit cards use third-party services but convenience costs. The fees range from 2 % and 3% of the balance owed. This amount could be significant. Note: you are able to deduct this fee on next year’s tax return.
• Gaining airline miles or points is often cancelled out by the third-party service charges.
• Interest on a credit card holding significant IRS debt could have a taxpayer paying more overall and also impact your credit to debt ratio resulting in less access to credit.
• Promotional credit card rates can work to your advantage but make sure of the following:
• Late payments don’t result in that “low” or promotional interest rate skyrocketing.
  

Sometimes an IRS installment agreement or IRS payment plan is a better option, financially.

Here are some reasons why:

• Typically, taxpayers get five years to pay off a debt.
• Owe $25,000 or less and you may be able to set your own monthly payment as long as the balance can be paid off in 60 months.
• The IRS will automatically accept requests for installment agreements of up to $50,000.
• The interest rate is only 3% — way below current credit card rates.
• An installment agreement doesn’t impact your credit.

Some additional considerations to factor in:

• You still must pay interest and late IRS penalties
• Failure to file taxes on-time results in an IRS penalty of 5% of the amount owed for each month the return is late up to five months.
• One time set up fee for installment agreement = $105. Automatic payments deducted from your bank account=$52.
• Participating in the Installment Agreement means any future tax refunds will be applied to your tax debt until it’s paid off in full.

I also want to give my thanks for the creation of the Tax Man TV show on Biz Television; a show that morphed out of my guest appearances on the Big Biz Show for five years. The Tax Man Show is unique because it combines my 30 plus years in the tax business including running Tax Resolution Services, Co. for 15, to gives taxpayers an inside view to how the IRS works in a no-nonsense, easy-to-understand way to resolve tax debt issues with a bit of humor thrown in.

About Michael Rozbruch, CEO and Founder of Tax Resolution Services, Co.

Michael Rozbruch is one the nation’s leading experts on solving individual and business IRS tax problems. As a Certified Tax Resolution Specialist (CTRS), CPA (licensed in the state of Maryland), and member of the American Society of IRS Problem Solvers, he and his company have represented thousands of taxpayers who owe the IRS, but simply cannot afford to pay. Michael has been a guest speaker on over 200 radio stations across the country and has been interviewed on numerous TV news programs as a nationally recognized expert guest speaker. You will also find the latest IRS news and tax tips by following:  @taxresolution on Twitter, Facebook and Michael’s blog, Tax Resolution University. You can reach Michael toll free, at (866) 477-7762.

What are some tips to reduce tax liability for next year?
It’s important to note that several tax laws are set to expire at the end of 2012 and into 2013; one of the major ones is capital gains. Capital gains is income on passive investments like stocks, bonds and real estate that must be paid anytime you sell something and make money. The rate for capital gains is generally taxed at 15% as opposed to 35.9% (presently the highest income tax bracket) . The top two income tax brackets for 2013 are set to increase from 33% & 35%, to 36% & 39.6%. Next year, if you fall into the highest two tax brackets, capital gains will be taxed as if it is ordinary income at these much higher rates.

Important Note: Bush tax cuts from 2001 and 2003 set to expire at the end of 2012. Advanced planning this year can help a taxpayer consider their best financial strategies such as passive income rate investing, capital gains tax as they are currently in the tax code. Thinking about these changes now can bring the most options to the table and put you in a better position to reap the tax rewards. For example, 2012/2013 tax planning should take into account, that due to the income highest two income tax brackets, one should accelerate income into 2012 and defer deductions to 2013. You’ll pay less in tax on income in 2012 vs. that of 2013.

What constitutes taxable income?
This is a very important question, and understanding the differences between taxable income and non-taxable income is crucial.  Consider the following taxable items:

• Wages, tips, commission, bonuses
• Foreign income (see my comments below)
• Sale of Property
• Capital Gains

As mentioned on the show, the IRS makes exceptions. The following are considered non-taxable income:

• Child support payments
• Adopting children, especially if getting reimbursed for adoption expenses
• Welfare benefits
• Cash rebates from retailers and manufacturers

How can I avoid an IRS audit of my personal or business tax returns?
Independent contractors and small business owners are subject to closer scrutiny by the IRS. One of the quickest ways to trigger an IRS audit is to not completely separate personal and business expenses; this is a number-one red flag for audits on a Schedule C, Gain or Loss from Business or Profession.   A business has many facets to it and keeping your deductions reasonable and your records organized is challenging but worth the effort should you ever have to present them to the IRS.

Rule of Thumb: if it has nothing to do with the production of income, it is not a necessary expense for the business and cannot be fully deducted.

What exactly is this “Tax Gap” we always hear about?
The “tax gap” is something many self-employed and small business people out there should become aware of as they prepare their tax returns. The tax gap is the difference between the amount of taxes reported and what the government has yet to collect. Recent (2006 is considered recent in the IRS universe) IRS information calculates the current tax gap to be at $450 billion, up from the last estimate of $345 billion in 2001.

Independent contractors and small business owners currently hold the dubious distinction of being the largest contributors to the tax gap and are more highly scrutinized by the IRS. The current Administration has resolved to reduce the “tax gap” and intends to hire 1,700 new IRS agents to work in IRS Collection and Audit division.

About Michael Rozbruch, CEO and Founder of Tax Resolution Services, Co.

Michael Rozbruch is one the nation’s leading experts on solving individual and business IRS tax problems. As a Certified Tax Resolution Specialist (CTRS), CPA (licensed in the state of Maryland), and member of the American Society of IRS Problem Solvers, he and his company have represented thousands of taxpayers who owe the IRS, but simply cannot afford to pay. Michael has been a guest speaker on over 200 radio stations across the country and has been interviewed on numerous TV news programs as a nationally recognized expert guest speaker. You will also find the latest IRS news and tax tips by following  @taxresolution in Twitter and Micheal’s blog, Tax Resolution University. You can reach Michael toll free, at (866) 477-7762.

1.     Incorrect or missing SSNs
2.    Incorrect or misspelled dependents last name
3.    Filing status error
4.    Math errors
5.    Computation errors
6.    Incorrect bank account numbers for DD
7.    Forgetting to sign and date the return
8.    Incorrect AGI

1. GOVERNMENT OVER-REGULATION KILLS JOBS.

The Facts:

• Just when the United States needs businesses to expand, grow, and invest, Obamacare is piling on the costs and regulations–making it more difficult for businesses to create new jobs.

• After paying the new health premiums, the minimum wage, payroll taxes, and unemployment insurance taxes, hiring a full-time worker will cost employers at least $10.03 per hour. Full-time workers with family health plans will cost $13.75 per hour.

• Fewer full-time jobs in favor of more part-time positions is not what America needs, particularly as it struggles with a stagnant economy, 15% TRUE unemployment, and 14 million people out of work.

• Employers who hire workers with productivity below the $13.75/hour will lose money and businesses will absolutely respond by dumping their employees onto the federally subsidized health care exchanges and replacing full-time positions with part-time jobs.

2. GOVERNMENT MANDATES KILL ECONOMIC RECOVERY.

The Facts:

WITHIN A MONTH OF PASSING OBAMACARE, the economy was on track for a steady recovery. We gained 229,000 jobs in April 2010…

• Within a month of Obamacare’s passing, the recovery stalled, the job situation stopped improving.

• From May 2010 onward, private job growth improved by only 6,500 jobs per month–less than one-tenth the previous rate.

• Get $2000 bucks and put it under the mattress and get 3 months savings in the bank!
• You should subtract 40 from your age to determine your ‘bond’ percentage of your portfolio

2. Find mutual funds (or other investments) you can believe in

• Get into Mutual Funds or ETF’s – unless you are a day-trader -avoid individual stocks!

3. Have a solid concept of your time horizon

• Short-term needs don’t belong at risk in the stock market. If you need the money, you should watch it like a hawk to make sure it will be available.

4. Have a willingness to save until it hurts

• There is a difference between having the market help you save and depending on the market to save for you.

5. DO NOT HAVE A “Plan B” !!!!

Investing requires commitment. If you open your eyes, get scared and make a change, you’re too late

SAVE AND INVEST AS IF YOU HAVE NO OTHER CHOICE!!!!

No, it’s not the pick-up line that our Assistant Directot Millionaire Curtiss asks all female guests of  the program….

It’s a fantasy we’ve all had. Leaving a job without another one lined up. Not necessarily to enter an early retirement and never work again – but a hiatus of sorts, to take a break from the daily grind, wake up without an alarm, start a business, spend more time with friends and family.

It doesn’t have to, BUT this daydream assumes an unexpected windfall or a lucky day at the casino. And in this CRAPVILLE economy – with the REAL national unemployment rate north of 18% – giving up a paycheck without knowing where the next one’s coming from seems downright foolish.

Without like six figures? a year’s pay? a cool million? – there’s no way you can pick up and quit and still make the mortgage payments, the car payments, pay for groceries. And forget about socking a few dollars away for the kids’ college tuition or retirement.

But how much does it really take to reach the quitting point?

How much money do you need to pay the bills and maintain your current lifestyle for, say, a year?

BY THE WAY…Upgrading to an extravagant standard of living isn’t the aim here, after all.

It might be lower than you think.

The number is different for everyone. For some, it’s the bare minimum, just enough to pay the bills. For others, it includes enough to support a retirement filled with travel or getting out from under an unprofitable business.

Yahoo! Axed their Contributor Network members to do some back-of-the-envelope math to figure out what size financial cushion would give them the confidence to take the leap.

Per Yahoo – “This isn’t meant as an instructional guide for disgruntled workers, but rather a look at what goes into a ‘walk-away’ number. Consider it an exercise in financial caution – if you were to unexpectedly lose your job, this is how much you’d need to get by.”

What would your own ‘walk-away’ number be? Giddy up.

Did you know that the purchasing power of the dollar has declined over 90% since the creation of The Federal Reserve (which was created to insure we never had another “Great Depression”)?

As an American, if your income is not increasing at a rate that is higher than inflation, you are actually earning less, year after year.

That is the root cause of the global recession. Millions of people around the world wanted a higher “standard of living”. Rather than earn more real income, they borrowed the money to live a more lavish lifestyle. Everything went along smoothly until inflated housing prices made mortgages unaffordable. Banks couldn’t approve mortgages for people who had tens of thousands in credit card debt, on top of car loans and student loans.

At the same time, millions of mortgage holders were living paycheck to paycheck, over-extended due to multiple loans and mortgages. They weren’t saving anything, and were literally spending more than they earned every month. A few missed payments and they were in trouble.

If they tried to sell their house they found that the supply of buyers had dried up. Fewer buyers forced prices down – down below the outstanding loan balance. Hundreds of thousands of these mortgages were actually written for 90% or MORE of the home value (some as high as 110% of the purchase price!)

Now roll this out on a global scale. Did you know that about 95% of the dollars in existence are held outside of the US? Foreign banks, corporations, and individuals “have” the vast majority of dollars – at least on their balance sheets.

So at the same time the world is enduring a recession (that is, purchasing and economic activity is declining) the US government is flooding the world with more currency through bail outs, buy outs, and stimulus plans.

GIDDY UP.

The IRS assigns a much higher priority to the collection of payroll taxes mainly because at the end of the year, most employees can claim the taxes deducted on their W-2s as a credit and get a refund for their money. All the while, the employer may have never sent out the tax payments to the IRS which means the government is out of their money on a double-whammy.

So what can you do as a small business owner to avoid the wrath of the IRS? Here are 7 tips for business owners to avoid costly payroll tax problems:

1. Budget at least 10% of an employee’s annual salary for payroll taxes. If you’re also paying health insurance costs to your employees, you need to budget about 22-23%.

2. Use a payroll service to handle the payroll. I strongly recommend this for a number of reasons:
(1)You won’t be tempted to dip into your payroll tax fund when you’re strapped for cash;
(2) You as a business owner do not have the expertise to handle your own payroll taxes—chances are, you don’t know all the filing requirements, deadlines, and so forth. So hire a payroll service—it will be the best investment you can make. And make sure you get on tax filing service with that payroll.

3. Take a look at your head count. It’s possible that you can use independent contractors instead of employees. Check out the IRS’s website for criteria for independent contractors versus employees and see if you pass that test. If you do, it would behoove you to use independent contractors instead of employees so you can save the payroll taxes.

4. Beware of the IRS “Cascading Penalties.” This means if you’re late on a payroll tax and miss a $10,000 deposit, you get slammed with a $1,000 failure to pay deposit penalty. Every week after that when you submit your $10,000 payroll tax deposits, the IRS is always applying it to the quarter you missed. So for the next 7 times you submit your payroll tax deposit, the IRS is assessing that $1,000 penalty for the next 7 weeks. All of the sudden you have a $7,000 penalty and all this time you thought you were paying your payroll taxes on time. Make sure that when you miss a payment that you designate those federal tax deposits to the right period.

5. Beware of the corporate veil. The IRS is a very special creditor when it comes to payroll taxes for corporations. They can pierce the corporate veil if the corporation does not pay payroll taxes. That means they can assess payroll tax against your individual social security number. So you can find yourself suddenly personally owing the payroll taxes of the entire corporation. So don’t think that because you have a “corp.” that you’re protected or shielded from the IRS—you are not.

6. Get professional help if you owe more than $20k or $25k in payroll taxes. A well-qualified tax expert can help you keep your doors open, the lights on, and customers paying their bills to YOU instead of to the IRS. Since the IRS has the power to circumvent your accounts receivable and and take the money from your customers who owe money to you, it is important that you don’t let the IRS get this far.

7. Consider a properly structured payment plan. You may qualify for an Offer in Compromise or penalty abatement because the penalties are going to be huge with payroll tax deposits. [Note: after you’re late 16 days on a payroll tax deposit, the penalties are at 33%.]

IF….she could stage a design intervention on our Twitter profile @bigbizradio.  (dang, cracking the web marketing whip!)

So, we gave this web marketing “she geek” our Twitter account access and she didn’t waste any time “pimping our profile!”  Web Marketing Therapy’s “Wild Web MAN”, Wil Thomas performed the Twitter facelift.  CHECK IT:

Our @BigBizRadio Twitter look BEFORE the Intervention

Our @BigBizRadio Twitter look AFTER the Intervention - grr baby, grrr!

Follow Lorrie Thomas Ross on Twitter @webtherapist and on our show every Friday.