• We assess the liability;
• We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
• You neglect or refuse to fully pay the debt within 10 days after we notify you about it.

Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).

Caution!
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.

For information regarding the collection process (http://www.irs.gov/newsroom/article/0,,id=151965,00.html) please visit IRS.gov.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

To discourage the use of pension funds for purposes other than normal retirement, the law imposes an additional 10% tax on certain early distributions of these funds. Early distributions are those you receive from a qualified retirement plan or deferred annuity contract before reaching age 59 1/2. The term "qualified retirement plan" means:

• A qualified employee plan such as a 401(k) plan,
• A qualified employee annuity plan,
• A tax–sheltered annuity plan for employees of public schools or tax–exempt organizations,
• An IRA other than an education IRA, or
• If you have an early distribution from a SIMPLE IRA plan within the first 2 years of participation in the plan, the additional tax is 25%.

   

Distributions that are not taxable such as distributions that you roll over to another qualified retirement plan are not subject to this 10% tax. For more information on rollovers, refer to Topic 413.

There are certain exceptions to this penalty. The following five exceptions apply to distributions from any qualified retirement plan:

• Distributions made to your beneficiary or estate on or after your death.
• Distributions made because you are totally and permanently disabled.
• Distributions made as part of a series of substantially equal periodic payments over the life expectancy of the owner or life expectancies of the owner and the beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
• Distributions that are equal to or less than your deductible medical expenses, that is, the amount of your medical expenses that is more than 7.5% of your adjusted gross income. You do not have to itemize to meet this exception. For more information on medical expenses, refer to Topic 502.
• Distributions made due to an IRS levy of the plan.

The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:

• Distributions made to you after you separated from service with your employer, if the separation occurred in or after the year you reached age 55,
• Distributions made to an alternate payee under a qualified domestic relations order, and
• Distributions of dividends from employee stock ownership plans.

   

Distributions from a qualified retirement plan are subject to federal income tax withholding; however, if your distribution is subject to the 10% additional tax, your withholding may not be enough. You may have to make estimated tax payments. For more information on estimated tax payments, refer to Topic 355, or Publication 505, Tax Withholding and Estimated Tax.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

Generally, the payments must usually have been in approximately four equal amounts to avoid a penalty. However, if you made unequal payments because your income was received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income. Use Form 2210 (PDF), Underpayment of Estimated Tax by Individuals and Fiduciaries, to see if annualizing would reduce or eliminate the penalty.

The penalty may be waived if:

1. The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

Should the IRS determine that a taxpayer is unable to pay the liability in a lump sum or through an installment agreement and has exhausted the search for other payment arrangements the last option would be to file an Offer in Compromise (OIC).

An OIC allows taxpayers to settle their tax liabilities for less than the full amount. Taxpayers should use the checklist in the Form 656, Offer in Compromise, package to determine if they are eligible for an offer in compromise. The objective of the OIC program is to accept a compromise when it is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements. See IRS Policy Statement P-5-100 for the complete OIC policy statement.

For additional information on OIC please visit us at http://www.irs.gov/businesses/small/article/0,,id=109622,00.html.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

Generally, the payments must usually have been in approximately four equal amounts to avoid a penalty. However, if you made unequal payments because your income was received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income. Use Form 2210 , Underpayment of Estimated Tax by Individuals and Fiduciaries, to see if annualizing would reduce or eliminate the penalty.

The penalty may be waived if:

1. The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period.

See section 1.708-1(b) of the regulations for more information on the termination of a partnership. For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1.708-1(c) and 1.708-1(d) of the regulations.

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Electronic Resources at IRS.gov

Small Business and Self-Employed One-Stop Resource (http://www.irs.gov/businesses/small/index.html)
This section offers a broad range of resources across federal and state agencies, as well as industry/profession specific information for self-employed entrepreneurs, employers and businesses.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

The dependency exemption can not be split. Refer to Publication 501, Exemption, Standard Deduction, and Filing Information or Publication 504, Divorced or Separated Individuals, for more information on the special rule for children of divorced or separated parents. These publications can be found at IRS.gov.

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Electronic resources at IRS.gov... IRS Withholding Calculator (http://www.irs.gov/individuals/article/0,,id=96196,00.html)
This easy-to-use calculator can help you figure your Federal income tax withholding so your employer can withhold the correct amount from your pay. This is particularly helpful if you've had too much or too little withheld in the past, your situation has changed, or you are starting a new job.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

Please carefully review Publication 536 (2006), Net Operating Losses (NOLs) for Individuals, Estates, and Trusts

PDF - http://www.irs.gov/pub/irs-pdf/p536.pdf

HTML - http://www.irs.gov/publications/p536/index.html

Generally, if you have an NOL for a tax year ending in 2006, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). You can, however, choose not to carry back an NOL and only carry it forward. You cannot deduct any part of the NOL remaining after the 20-year carryforward period.

NOL year.   This is the year in which the NOL occurred.

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The Internal Revenue Service is alerting taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division.

The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Tax Board. Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers.

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

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Missing Your Form W-2?

IRS TAX TIP 2007-22

You should receive a Form W-2, Wage and Tax Statement, from each of your employers for use in preparing your federal tax return. Employers have until January 31, 2007 to furnish a record of 2006 earnings statement either electronically or in paper form.  Allow two weeks for 2006 earning statements mailed from employers via United States Postal Service (USPS).

If you do not receive your Form W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to your employer because of an incorrect or incomplete address.  After contacting your employer, allow a reasonable amount of time for your employer to resend or to issue the W-2.

If you still do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

Employer's name, address, city, and state, including zip code.

Your name, address, city and state, including zip code, and Social Security number

If you misplaced your W-2, contact your employer. Your employer can replace the lost form with a “reissued statement.”  Be aware that your employer is allowed to charge you a fee for providing you with a new W-2.

You still must file your tax return on time even if you do not receive your Form W-2. If you do not receive the missing information in time to file, you may file you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement.  Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

If you receive a Form W-2 or W-2C (corrected form) after you have filed your return using Form 4852, and the information differs from what you reported on your return, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Form 4852, Substitute for Form W-2, Wage and Tax Statement (PDF 29K)

Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)

Instructions for Form 1040X (PDF 43K)  

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This response does not represent a legal opinion from the IRS. To address your specific circumstances consult with a tax professional.

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