Interest Rates Remain the Same for the Third Quarter of 2013

Posted on May 24, 2013 by Camron Hoorfar

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2013, as in the prior quarter.  The rates will be:

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during April 2013 to take effect May 1, 2013, based on daily compounding.

Courtesy of the Internal Revenue Service.
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How to Pick a Bankruptcy Attorney

Posted on May 23, 2013 by Camron Hoorfar

That’s it, you’re done. After struggling to pay your debts, you’re ready to  consider bankruptcy. It’s time to contact a bankruptcy lawyer, but which  one?  Some advertise on TV and radio, others on billboards and bus stops.  They seem fine, but you can’t tell for sure. Asking friends for a recommendation  is rather awkward. A discrete online search, maybe?

Filing for bankruptcy is a serious step, requiring excellent advice and the  right representation. Here’s how to find, and then choose, the best bankruptcy  attorney for you.

Signals of professionalism

To get started, check the National Association of Consumer  Bankruptcy Attorneys,  says Philadelphia lawyer Michael Duffy. Membership in this organization  indicates that the firm or lawyer is “dedicated to the practice of bankruptcy,  stays up to date on the latest developments, and provides competent  representation.”

Once you find members in your area, visit your state bar’s website to find  out if they’re certified. “Most states have specialist certifications for  bankruptcy,” says NACBA President Edward Boltz. This certification means the  lawyer has been practicing law for a minimum number of years, spends at least  half his or her time working with bankruptcy cases, is peer reviewed and has  passed a written examination in that specialty.

Such associations and credentials provide assurance that the lawyer has  practical knowledge and will know what to do in case something goes wrong. “It’s  insurance,” says Boltz. “A lot of cases are straightforward, but no one realizes  how fast they can go south until they’re going through it.”

Prepare to meet with a few

After you’ve identified a few lawyers or firms you’d like to explore further,  view their websites. They should contain clearly written educational information  and downloadable financial forms that you can fill out that to help you  determine if you qualify for bankruptcy.

Then, start to schedule some appointments. “Most lawyers will give a free  consultation,” says Boltz. “It’s helpful to go to see more than one. Not to  price shop, but to gauge how comfortable you are with them.”

Before you meet, complete the forms available on the website (if they offer  them) and bring them with you. Write down any questions you might have and bring  them, too.

Qualities to look for in a bankruptcy lawyer

Personality and professionalism matter, and — like anyone — a lawyer who  appears terrific on paper can fall short in person. It’s critical that you trust  that the person you hire will be working in your best interest.  Look for  the following three qualities during your consultation.

1. They discuss alternate resolutions. Chapter 7, a  complete cancellation of eligible debts, might not be the best or only way to  deal with your financial problems. If there are other options, an ethical lawyer  will present them.

“With each case, I always weigh the options,” says San Francisco bankruptcy  lawyer Jeena Cho. “Sometimes I suggest that a client just pay his bills. This  situation comes up if the client is making too much money or has too many  assets. The other advice I give sometimes is to do nothing. This can happen for  those who are ‘collection proof,’ meaning they have nothing the creditors can  take in case of a judgment.”

Another suggestion might be a credit counselor’s formal debt management plan,  especially if most of your lenders are credit card companies. The interest rate  reduction the agency may be able to secure can translate into lower  payments.

Chapter 13 bankruptcy, a court-supervised payment arrangement, might also be on the table.  A lawyer may recommend it if you have enough income to support at least some of  your liabilities and own property that could be taken in a Chapter 7 or a  lawsuit.

Understanding the full menu of resolutions and then choosing from them  reduces the possibility that you will regret making the decision to file for  bankruptcy.

2.  They display a passion for the process. You wouldn’t have a  heart operation performed by a indifferent surgeon, nor would you want the  person representing you in bankruptcy court to be distant or aloof. Therefore,  the lawyer you’re considering should exude a genuine passion for the occupation  and process. Find out why he or she chose to specialize in bankruptcy law.  Listen carefully to the response. Many lawyers find the work fascinating and  rewarding.

“I got into it over 30 years ago and I still love it,” says Dallas lawyer  Herman Lusky, “When people leave their debts behind, they can become active  members of society again.”

John Hargrave, a lawyer whose firm is located in Barrington, N.J., has a  similar attitude. “By working with people I can make their lives dramatically  better. There are few other areas, if any, where a lawyer can do so much good  for someone in a short amount of time.”

3. They hear and understand you. For most people, declaring bankruptcy  is a painful decision. Because of the emotions involved, you’ll want your  attorney to not just to have the proper credentials, but to exhibit a desire to  understand your specific situation and goals. Your lawyer should possess empathy  and a willingness to take the time to ask probing (sometimes difficult)  questions.

“Only hire someone who wants to know what led to your financial predicament,”  says Hargrove. “Someone who will can address what your biggest worries are.”

Not all lawyers have great bedside (or courtside) manners, so after the  meeting, ask yourself if you’re truly comfortable with that person and if all of  your concerns were addressed. If you feel like a number rather than an  individual, cross that lawyer off your list and move on to the next until you  find one who treats you with some respect.

A fee commensurate with service

And finally, the fee. Lawyers, even those who help you not pay your  creditors, aren’t free. The cost varies by complexity and location, but in  general is between $800 and $2,500 from start to finish.

Avoid ultra-low-rate bankruptcy mills that advertise heavily and crank out  the cases. “They usually only have a few lawyers and a large number of legal  assistants,” says Lusky. “For a simple run-of-the-mill case, they’re probably OK  , but you don’t know when complications may arise. The first time you meet with  your lawyer would be at the creditors meeting, and if  there is a problem, they won’t be prepared to handle it properly.”

Don’t presume you get more for hiring the most expensive lawyer on the block,  however, or less if you scrape the bottom of the price barrel. “Fees are  determined by the market,” says Lusky. “In some areas, caps are set by the  courts. This means that, for the same price, the client can usually get an  experienced, highly qualified lawyer for the same price as a novice.” Be sure to  ask what it covers, though, as some attorneys include court and other costs in  the quoted fee, others don’t.

Once you’ve found the person who possesses the ideal combination of  experience, character and cost, you’re set. If you choose to move forward with  filing, you can do so with assurance that you’re working with a lawyer you can  trust.

Visit our website at www.Hoorfarlaw.com
Courtesy of Fox Business.

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IRS Gives Tax Relief To Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept. 30

Posted on May 22, 2013 by Camron Hoorfar

After Monday’s devastating tornado in Moore and Oklahoma City,  the Internal Revenue Service today provided tax relief to individuals and businesses affected by this and other severe storms occurring in parts of Oklahoma.

Following Monday’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties will receive special tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting on May 18, 2013. As a result, affected individuals and businesses will have until Sept. 30, 2013 to file these returns and pay any taxes due. This includes the June 17 and Sept. 16 deadlines for making estimated tax payments. A variety of business tax deadlines are also affected including the July 31 deadline for second quarter payroll and excise tax returns and the Sept. 3 deadline for truckers filing highway use tax returns.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The agency automatically provides this relief to any taxpayer located in the disaster area. Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who lives outside the disaster area but whose books, records or tax professional are located in the areas affected by these storms. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.  Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either last year’s or this year’s return. Claiming these casualty loss deductions on either an original or amended 2012 return will get the taxpayer an earlier refund but waiting to claim them on a 2013 return could result in greater tax savings depending upon other income factors.

In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after May 18 and before June 3 if the deposits are made by June 3, 2013. Details on available relief can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

The IRS is actively monitoring the situation and will provide additional relief if needed.

Courtesy of the Internal Revenue Service.

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Summer Job Tax Information for Students

Posted on May 17, 2013 by Camron Hoorfar

When summer vacation begins, classroom learning ends for most students. Even so, summer doesn’t have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.

Here are six things about summer jobs that the IRS wants students to know.

1. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at IRS.gov to help you fill out the form.

2. If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer.

3. Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing.

4. You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.

5. If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.

6. If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:

  • You are in the business of delivering newspapers.
  • Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
  • You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.

If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.

Courtesy of the Internal Revenue Service.
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Bankruptcy Filings Down 14 Percent for March 2013

Posted on May 6, 2013 by Camron Hoorfar

Bankruptcy filings for the 12-month period ending March 31, 2013, fell 14.4 percent when compared to bankruptcy filings for the 12-month period ending March 31, 2012, according to statistics released by the Administrative Office of the U.S. Courts. March 2012 bankruptcy filings totaled 1,170,324, compared to 1,367,006 bankruptcy cases filed in the 12-month period ending March 31, 2012.

The following bankruptcy statistics are available:
-F-Table: comparison of the 12-month periods ending March 31, 2012, and 2013
-F-2 Tables: business and nonbusiness bankruptcies by district and by chapter during the 12- month and 3-month periods ending March 31, 2013, by filing month, and for one month periods since January 2013
-Report F-5A: business and nonbusiness filings, by chapter and county

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IRS Offers Tips for Dealing with Notices

Posted on April 29, 2013 by Camron Hoorfar

Each year, the IRS sends millions of letters and notices to taxpayers for a variety of reasons. Here are ten things you should know about IRS notices in case one shows up in your mailbox.

1. Don’t panic. Many of these letters require a simple response.

2. There are many reasons why the IRS sends correspondence. If you receive an IRS notice, it will typically cover a very specific issue about your account or tax return. Notices may require payment, notify you of changes to your account or ask you to provide more information.

3. Each notice offers specific instructions on what you need to do to satisfy the inquiry.

4. If you receive a notice advising you that the IRS has corrected your tax return, you should review the correspondence and compare it with the information on your return.

5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree. Include any information and documents you want the IRS to consider with your response. Mail your reply with the bottom tear-off portion of the IRS letter to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7. You should be able to resolve most notices that you receive without calling or visiting an IRS office. If you do have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the notice with you when you call. This will help the IRS answer your inquiry.

8. Remember to keep copies of any notices you receive with your other income tax records.

9. The IRS sends notices and letters by mail. The agency never contacts taxpayers about their tax account or tax return by email.

10. For more information about IRS notices and bills, visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom left of the home page. Also, see Publication 594, The IRS Collection Process. The publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Courtesy of the Internal Revenue Service.
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Tips to Start Planning Next Year’s Tax Return

Posted on April 26, 2013 by Camron Hoorfar

For most taxpayers, the tax deadline has passed. But planning for next year can start now. The IRS reminds taxpayers that being organized and planning ahead can save time and money in 2014. Here are six things you can do now to make next April 15 easier.

1. Adjust your withholding.  Each year, millions of American workers have far more taxes withheld from their pay than is required. Now is a good time to review your withholding to make the taxes withheld from your pay closer to the taxes you’ll owe for this year. This is especially true if you normally get a large refund and you would like more money in your paycheck. If you owed tax when you filed, you may need to increase the federal income tax withheld from your wages. Use the IRS Withholding Calculator at IRS.gov to complete a new Form W-4, Employee’s Withholding Allowance Certificate.

2. Store your return in a safe place.  Put your 2012 tax return and supporting documents somewhere safe. If you need to refer to your return in the future, you’ll know where to find it. For example, you may need a copy of your return when applying for a home loan or financial aid. You can also use it as a helpful guide for next year’s return.

3. Organize your records.  Establish one location where everyone in your household can put tax-related records during the year. This will avoid a scramble for misplaced mileage logs or charity receipts come tax time.

4. Shop for a tax professional.  If you use a tax professional to help you with tax planning, start your search now. You’ll have more time when you’re not up against a deadline or anxious to receive your tax refund. Choose a tax professional wisely. You’re ultimately responsible for the accuracy of your own return regardless of who prepares it. Find tips for choosing a preparer at IRS.gov.

5. Consider itemizing deductions.  If you usually claim a standard deduction, you may be able to reduce your taxes if you itemize deductions instead. If your itemized deductions typically fall just below your standard deduction, you can ‘bundle’ your deductions. For example, an early or extra mortgage payment or property tax payment, or a planned donation to charity could equal some tax savings. See the Schedule A, Itemized Deductions, instructions for the list of items you can deduct. Planning an approach now that works best for you can pay off at tax time next year.

6. Keep up with changes.  Find out about tax law changes, helpful tips and IRS announcements all year by subscribing to IRS Tax Tips through IRS.gov or IRS2Go, the mobile app from the IRS. The IRS issues tips regularly during the summer and tax filing season.

Courtesy of the Internal Revenue Service.
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IRS to Furlough All 90,000 Employees

Posted on April 24, 2013 by Camron Hoorfar

The head of the National Treasury Employees Union (NTEU) said today the Internal Revenue Service (IRS) will send out furlough notices on Monday to the entire IRS workforce, identifying five furlough days where the agency will shut down entirely. The 30-day notices to employees also leave open the possibility of another two unpaid furlough days.

“Implementation of any furlough days is a disappointing development,” said NTEU President Colleen M. Kelley. “Furloughing IRS employees is further evidence of the ongoing damage sequestration is causing across the country.” Kelley emphasized that NTEU is continuing its discussions with the IRS over the furlough process with the goal of mitigating the impact on employees.

The IRS has informed employees that the five identified furlough days are: May 24, June 14, July 5, July 22, and Aug. 30. On those days all public operations of the IRS will be shut down, leaving taxpayers without access to information and assistance from frontline workers.

President Kelley noted that considerable tax-filing goes on throughout the year, including by small businesses, taxpayers who make quarterly payments, businesses operating on a fiscal year basis, estates, government entities and others. “On these days, phones calls to the IRS will go unanswered and Taxpayer Assistance Centers across the country will have ‘closed’ signs in their windows,” Kelley said. “I believe this is an unprecedented event that leaves taxpayers out in the cold.”

The furloughs are being driven by the ongoing sequestration that is forcing federal agencies, including the IRS, to severely slash their budgets.

“It is clear that the best course for federal employees, their agencies and the nation would be for Congress to end the sequester,” said Kelley, who has been a vocal advocate ending sequestration.

“Like all federal employees, those at the IRS are well into the third year of a pay freeze,” President Kelley said, “and now they face the unwelcome prospect of a pay cut resulting from unpaid furlough days.”

Courtesy of My Federal Retirement.
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Six Facts on Tax Refunds and Offsets

Posted on April 23, 2013 by Camron Hoorfar

Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other federal or state debts that you owe.

Here are six facts from the IRS that you should know about tax refund ‘offsets.’

  1. A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
  2. The Treasury Department’s Financial Management Service is the agency that issues tax refunds and conducts the Treasury Offset Program.
  3. If you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt.
  4. You will receive a notice from FMS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
  5. If you believe you do not owe the debt or you want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
  6. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation. Form 8379 is available on IRS.gov or by calling 1-800-829-3676.

Courtesy of the Internal Revenue Service.
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Eight Facts on Late Filing and Late Payment Penalties

Posted on April 22, 2013 by Camron Hoorfar

April 15 is the annual deadline for most people to file their federal income tax return and pay any taxes they owe. By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline.

Here are eight important points about penalties for filing or paying late.

1. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should  explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you.

3. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.

4. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.

5. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.

6. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.

7. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

8. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time.

Courtesy of the Internal Revenue Service.

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