YES! To encourage the prompt payment of withheld income and employment taxes, Congress passed a law which provides for the Trust Fund Recovery Penalty. The IRS may assess this penalty against anyone in a business who is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and who willfully fails to collect or pay them. For willfulness to exist, the responsible person must have known about the unpaid taxes and have used the funds to keep the business going or allowed available funds to be paid to other creditors. This penalty may be applied whether or not the business is out of business. Once this penalty is assessed against the individual responsible person(s), the IRS will proceed with collection efforts against the individual.
James L. Hintzke, CPA of Rhinelander offers tax services to reduce or fix tax problems common in business. If you are looking for business tax or financial advice which will keep your business on track, talk to James L. Hintzke today.
- Doubt as to Collectability
- Doubt as to Liability
- Effective Tax Administration
- IRS Form 656 - Offer in Compromise Booklet and Form
- IRS Form 656-A - Income Certification for Offer in Compromise. Application Fee and Payment
- Form 433-A - Collection Information Statement for Wage Earners & Self-Employed Individuals
- Form 433-B - Collection Information Statement for Businesses
- Various Others: You will need three months of documentation on just about every expense and income you have. This includes pay stubs, credit card statements, housing, investments, transportation, tax returns, etc.
What is the most common reason for the large tax liabilities that force taxpayers to file an Offer in Compromise?
Large tax liabilities are generally caused by unpaid withholding taxes. Owners and other responsible parties within a business are personally assessed the unpaid trust portion, or taxes actually deducted from the employees. This is called the 100 percent penalty assessment.
If business owners cannot pay the full withholding tax, they should at least pay the trust account portion, i.e. the amount of money which is withheld from employees, and designate the payment be applied only to the trust portion liability. The business will owe its share of the payroll taxes due, but its officers and other responsible parties will have no personal liability. Other common reasons for filing an Offer in Compromise include extensive audits, not filing for a number of years or tax shelter investments that are disallowed. For business tax problem resolution or financial advice, talk to James L. Hintzke, Rhinelander CPA. With years of experience managing business finance and account processes, our Northern WI Certified Public Accountant can help you resolve your business’ unique tax problems.
- Failure to file penalty of 5% per month on any unpaid balance (no more than 25%)
- Cannot receive a refund
- Cannot carry losses over to next year
- Cannot start the statute of limitations on when the IRS can audit
- Possible additional penalties and interest
- Before the IRS can assess a penalty, the taxpayer can file a penalty no assertion request with a paper return to request that the IRS not automatically assess a penalty.
- After the IRS has assessed a penalty, the taxpayer can request penalty abatement, typically by writing a penalty abatement letter or calling the IRS. Tax Professionals can also request abatement using IRS e-services.
- After the taxpayer has paid the penalty, the taxpayer can request a refund using Form 843, Claim for Refund and Request for Abatement. The taxpayer must file the claim within three years of the return due date or filing date, or within two years of the date the penalty was paid.
Submit your tax return by the date due or extension date, even if you can’t pay the tax. You will be charged interest and penalty on your late payment, but avoid a hefty late-filing penalty. Whether or not you expect to eventually pay the tax, do file on time.
It is also important to file on time because the IRS has only 10 years from the date of assessment to collect your delinquent taxes, and taxes are not assessed until after you file or after the IRS files for you. If you have not filed a tax return, you have not started the statute of limitations for that particular tax year. This means there is no limit to the amount of time the IRS can pursue you. In addition, if you have any delinquent tax returns, the IRS will not negotiate with you. You must be current with your filing for the IRS to consider an Offer in Compromise or an Installment Agreement.
If you are concerned about your individual tax preparation or tax filing deadline, talking to an experienced and professional Wisconsin CPA will help ease your anxiety and find an alternative which works for your individual needs. Talk to James L. Hintzke, CPA of Rhinelander for assistance with your unique tax preparation needs.
- You failed to file subsequent tax returns
- Your Collection Information Statement was inaccurate (Form 433)
- Your total tax liability since you began your Installment Agreement has increased
- You missed a payment
- You failed to pay future tax return obligations in full
I received an inheritance. Do I have to report it as income on my Federal or Wisconsin income tax return?
An inheritance is generally not subject to Federal or Wisconsin income tax, since the deceased has already paid income tax on the money. Any income earned after the taxpayer’s death would be taxable to the estate. If the inheritance or part of the inheritance is subject to income tax, you will receive a form Schedule K-1 from the estate reporting to you how much income to report. Examples of inherited property not subject to income tax include stock, bank accounts, life insurance proceeds and real estate.
Examples of inherited property which may be subject to income tax include individual retirement accounts (IRAs), dividends paid on stock, interest paid on bank accounts or installment payments on a land contract received after death. If you need assistance with individual tax preparation in cases of major life changes, it is advisable to enlist the assistance of a Rhinelander CPA. James L. Hintzke has the experience and expertise to assist with a wide range of tax preparation services, making filing your taxes efficient.
What are the Personal Representative’s responsibilities and are they compensated for doing this job?
Serving as a personal representative carries responsibilities. You will be required to take an oath you will uphold the law and you may be required to post a bond to protect the assets in the estate. You must keep all interested parties informed of the status of the Wisconsin estate proceedings and complete the estate within statutory time limits.
A personal representative is acting in place of the decedent. You are expected to handle the assets of the decedent just as any prudent person would handle their own assets. Responsibilities include:
- Taking possession of all the decedent’s assets and filing an inventory including the date of death values of all assets you have in your control
- Opening a checking account so accurate records of income and expenses can be kept
- Giving notice to creditors and may give notice to interested persons by the publication in the newspaper
- Converting assets to cash, selling real estate, running a business, insuring and keeping the property in good repair
- Collecting income due to the decedent like interest, dividends, rent
- Paying bills, settle proper claims or object to claims that are not appropriate
- Completion of any fiduciary income tax returns as required
- Distributing assets according to the Will and/or statutes and secure receipts from those receiving assets
- Filing a Personal Representative’s statement to close the estate
Informal probate is the administration of the decedent’s estate, intestate (without a will) or testate (with a will), without the exercise of continued supervision by the Court. Informal administration proceedings are Circuit Court proceedings under probate jurisdiction and administered by the Probate Registrar.
Informal Probate may be used if there is $50,000 or more of assets, and the Will does not prohibit its use. An attorney is not required but may be used. All parties must agree to use this procedure, and any party at any time may petition the court for Formal Administration (an attorney must be hired and all hearings are held in front of the Circuit Court Judge).
An Inventory must be completed and a notice is published in the newspaper. There may be fiduciary income tax returns to complete. You will be required to file a Closing Certificate for Fiduciaries, which is received from the Wisconsin Department of Revenue. Utilizing the services of a competent tax preparer, accountant or attorney to help you with this aspect of the estate is suggested.
Enlisting the help of a Northern Wisconsin CPA with extensive experience ensures the informal probate process goes as smoothly and efficiently as possible. James L. Hintzke, CPA of Northern WI, MI, and surrounding areas will help you through the informal probate process and the ever changing world of tax law.
More than one type of return may be required for a deceased taxpayer. If you need assistance determining what Wisconsin tax returns are required for a deceased taxpayer, read below for help or contact our Rhinelander CPA for professional tax services.
Wisconsin Individual Income Tax Return
A personal representative must file an individual tax return, Form 1, 1A, 1NPR or WI-EZ, for a decedent from the beginning of the year to date of death, if the decedent had a filing requirement. A personal representative is also responsible for filing returns for any years prior for which the decedent had a filing requirement and did not file a return.
Wisconsin Fiduciary Income Tax Return
A personal representative of an estate of a Wisconsin decedent must file a Wisconsin fiduciary tax return, Form 2, if the gross income of the estate is $600 or more. Nonresident estates must file Wisconsin fiduciary returns if they have gross income of $600 or more from Wisconsin sources. Gross income means all income, before deducting expenses, reportable to Wisconsin which is received in the form of money, property or services.
The first fiduciary income tax return filed by a personal representative or petitioner of an estate covers the period from date of death of the decedent to the end of the first year selected by the fiduciary. The taxable year cannot be longer than 12 months, must end on the last day of the month, and must coincide with the year selected for filing the federal return. The return is due on the fifteenth day of the fourth month after the close of the taxable year of the estate.
I have extensive expertise in assisting individual taxpayers, businesses, and seniors with the following issues when dealing with the Internal Revenue Service and Wisconsin Department of Revenue:
- Stop wage garnishments and bank levies
- Remove or Reduce tax penalties
- File tax returns for multiple tax years
- Negotiate tax repayment settlements
- Appeal unacceptable audit or collection outcomes
- Resolve tax identity Theft issues
- Out of State tax return issues
- AUDIT Representation