Understanding Federal Tax Amnesty Programs and Their Conditions

Tax amnesty, although not rule, are the occasional exception. The way it works is simple, for a specified limited time, taxpayers can pay a predefined amount in exchange for forgiveness of a tax debt, including interest and penalties. These are offered without any criminal prosecution. However, harsher penalties for those who qualify but don’t take the amnesty, often accompany the amnesty legislation.

Although bills have been proposed, there are currently no federal tax amnesty programs. The last one was in 2009, under President Bush. The program granted almost 15,000 taxpayers amnesty. The need for federal tax amnesty is apparent, so says many tax experts and legislators. When someone has a tax debt but can’t possibly pay it, the penalties and interesting can quickly drive the total debt due. By offering federal amnesty, these debts could be relieved and save years of costs trying to collect them.

Offshore Voluntary Disclosure Program

The IRS began an open-ended offshore voluntary disclosure program (OVDP) in January 2012 on the heels of strong interest in the 2011 and 2009 programs. The IRS may end the 2012 program at any time in the future. The IRS is offering people with undisclosed income from offshore accounts another opportunity to get current with their tax returns. The 2012 OVDP has a higher penalty rate than the previous program but offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk detection by the IRS and possible criminal prosecution.

State Amnesties

States within the United States have and still often do offer amnesty programs. The state of Louisiana, for example, brought in $450 million from its 2009 tax amnesty program, three times more than what was expected, according to Governor Jindal.

In 2010, Pennsylvania held a tax amnesty, during which state tax collectors waived 100 percent of penalties and half of the interest for tax delinquents who came forward.

Kentucky, Maine, Rhode Island and Texas all offered tax amnesties of one sort or another in 2012.

EFTPS is a system offered by the U.S. Department of Treasury for paying federal taxes electronically via the internet, over the phone or through special channels designated for tax professionals, payroll services and financial institutions. You can use EFTPS to make all federal tax payments, including income, employment, estimated and excise taxes. Anyone can use it and it’s absolutely free.

You can make payments whenever it’s convenient for you, 24 hours a day, 7 days a week. Businesses can schedule payments up to 120 days in advance and individuals can set up payments up to 365 days in advance. Be aware that payments must be scheduled at least one calendar day prior to the date the taxes are due and the payment must be scheduled by 8:00pm ET.

You can schedule payments months in advance knowing that your instructions will be executed on the day you choose and your records will be updated with the IRS. As soon as the funds are transferred from your account to the Treasury’s account, you’ll immediately receive an acknowledgement that your payment has been made.

Before you can use the online system to make tax payments, you’ll need to enroll. To do so, you’ll need your tax identification number if you are making a business payment or your social security number if you are making a payment as an individual. You’ll also need a bank account number and the routing number. It takes about a week to receive your PIN in the mail.

Each online transaction requires authentication through both your PIN and password. Without both of these pieces of information, you will be unable to use most of the online EFTPS functions. As with all passwords, keep them in a safe place and don’t divulge this information to anyone.

Because the system retains sixteen months of your EFTPS online payment history, you can retrieve payments data with ease.

The bottom line is that the system is fast and you can make a payment in minutes. You can review all of the payment information for accuracy before sending the payment. It’s convenient because you can access the system from just about anywhere at any time. Lastly, provided you keep your login information private, the system is safe.

Like death, taxes are unavoidable. With proper planning you can make things easier on yourself and your family. Your annual tax liability can be very uncertain but there are several online calculators to help determine your estimated tax liability along with your average and marginal tax rates.

Money Chimp

This calculator from MoneyChimp is straightforward and easy to use. You don’t need to be a CPA to figure this out.

http://www.moneychimp.com/features/tax_brackets.htm

Calc XML

This one is more complicated because you need to know the amounts of your IRA contribution, itemized deductions and personal exemptions. However, because this calculator requires those additional pieces of information, the end result is likely to be more accurate.

http://www.calcxml.com/calculators/federal-income-tax-estimator

Complete Tax

This calculator hosted by CompleteTax has several steps and requires you to input quite a bit of information in order to calculate your estimated federal income tax. It’s part of a system for filing your taxes online but you can use the calculator without using their filing system.

http://www.completetax.com/income-tax/calculators/federal.asp

e-File

Efile is another website for filing income taxes online but you can use their calculator without buying any of their other services. Again, you need to have a lot of information at your fingertips or this calculator will be of no use.

http://www.efile.com/tax-service/tax-calculator/

Taxpayers should keep copies of their tax returns, but if they cannot be located or have been destroyed during natural disasters or by fire, the IRS can help. Whether you need your prior year’s tax return to apply for a loan or for legal reasons, you can obtain copies or transcripts from the IRS.

Here are 10 things to know if you need federal tax return information from a previously filed tax return.

1. Get copies of your federal tax return via the web, phone or by mail.

2. Transcripts are free and are available for the current and past three tax years.

3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.

4. A tax account transcript shows any later adjustments either you or the IRS made after you filed your tax return. This transcript shows basic data including marital status, type of return filed, adjusted gross income and taxable income.

5. To request either type of transcript online, go to IRS.gov and use the online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.

6. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use Form 4506-T, Request for Transcript of Tax Return.

7. If you order online or by phone, you should receive your tax return transcript within five to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail.

8. If you need an actual copy of a previously filed and processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area.  Copies are generally available for the current year and past six years. Please allow 60 days for delivery.

9. The fee for copies of tax returns may be waived if you are in an area that is declared a federal disaster by the President. Visit IRS.gov, keyword “disaster,” for more guidance on disaster relief.

10. Forms 4506, 4506-T and 4506T-EZ are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Advocate News

Most Recent

• So, You Didn’t Send in the Payroll Tax

• Claiming Gambling Winnings and Losses

• Can I Deduct Job Search Expenses?

• Innocent Spouse Tax Relief

• Take the Income Tax Credit for Your Retirement Fund

Most Read

• What is “Earned Income Credit”?

• How to Get a Transcript or Copy of a Prior Year’s Tax Return from the IRS

• If I Don’t Make Enough, Do I Have to File a Tax Return?

• Is Income Tax Legal?

• Removing an IRS Tax Levy