Tax News By Mike McVay, Tax Accountant
Volume 7, Issue 6
Failure to File and Failure to Pay: Are You Headed for T-R-O-U-B-L-E?
The old saying goes, “There are only two certainties in life: death and taxes.” Have you ever wondered what would happen if you filed your tax return late or worse, did not file at all? Well, you are looking for trouble if you do not file your tax return.
If you do not file an income tax return, the IRS will gather all the transmitted tax documents and create a “substitute return” for you. If they show you are due a refund, nothing further will be done. Surprised? If they show you owe money, they will begin sending you collection letters.
And, if that is not bad enough, there will be a penalty for not filing your return equaling five percent per month up to 25 percent of the tax due. Then, there is another penalty of .5 percent per month up to 25 percent of the tax due for failure to pay the tax. An example is if you owe $1000, it will cost you $250 penalty for not filing, but only a $5 penalty for not paying. And then, don’t forget they tack on interest to that number!
If you qualify for a refund and wait more than three years to file your return, the IRS will take that refund away, because the statute of limitations expires. Don’t expect them to send you a reminder letter!
In addition to the penalties you are charged for not filing your return, you also increase your chances of being audited. For example, if you file on time, you have a 3 percent chance of an audit. If you don’t file on time, your chance of being audited increases to 50 percent...Yikes!
There have been many high profile cases about celebrities not filing or paying their taxes. Here is a short list of people that owe or have owed the IRS:
The general rule is to file on time (it’s okay to file up to the extension deadline) since the consequences are harsher for not filing than not paying the tax due. However, be proactive to pay any tax due by the deadline, not the extension deadline.
Be aware of the new filing deadlines:
Mike McVay, Tax and Small Business Accountant
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Everyone will be benefiting from the new Tax Cuts. However 2018 could be the year of audits. Within the bill they have doubled the budget for audits. If you want to find out how to avoid or pass an I.R.S. audit. Look me up. I am a S-Corp, LLC and Personal Tax Expert. I teach my clients how to avoid or pass these audits. Mike@MikeMcVay.com. www.PensacolaFLTax.com
Final Tax Plan is out - 12/15/17
The completed version of the GOP tax bill will have seven tax brackets, sources told FOX Business on Friday.
As Republicans in the House and Senate prepared to release the details of the joint bill agreed upon by lawmakers across both chambers, sources said the GOP decided to stick with a seven-tier bracket system. The rates fall at 10%, 12%, 22%, 24%, 32%, 35% and 37%. The House had initially proposed collapsing the number of brackets into just three or four, an initiative the administration supported in an effort to simplify the tax code.
While the number of federal-income brackets remains the same, the thresholds and percentages are different. Here’s a look at the new tax brackets.
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This rate applies to:
Single individuals with income up to $9,525
Married couples filing jointly with income levels up to $19,050
This rate applies to:
Single individuals with incomes between $9,525 and $38,700
Married couples filing jointly with incomes between $19,050 and $77,400
Single individuals: $38,700 to $70,000
Married couples filing jointly: $77,400 to $165,000
Single individuals: $70,000 to $160,000
Married couples filing jointly: $165,000 to $315,000
Single individuals: $160,000 to $200,000
Married couples filing jointly: $315,000 to $400,000
Single individuals: $200,000 to $500,000
Married couples filing jointly: $400,000 to $600,000
Single individuals: $500,000 and above
Married couples filing jointly: $600,000 and above
These are the existing rates: 10%, 15%, 25%, 28%, 33%, and 39.6%. Currently, the top rate applies to those with incomes in excess of $470,700. Plans put forth by both chambers initially included people with household incomes between $600,000 and $1 million in a 35% bracket.
State and local tax deductions, otherwise known as SALT, have been a big source of controversy for Republicans throughout the tax reform debate. FOX Business confirmed on Friday that the new plan will cap state and local income and property deductions at $10,000.
Mike McVay, Tax Accountant
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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