Tax Tips
Back tax options

By Howard Abrams, PBS Tax & Bookkeeping

Q. I have not filed my tax returns for the past four years? Should I file the 2011 return first or the 2008?

A. Good question and a tough call. The answer to that will have a lot to do with whether you are or are not receiving letters from the IRS and whether you are a sole proprietor or company driver.

If you are receiving IRS letters, contact them and they will help decide the order of filing the returns. If you are a sole proprietor and own equipment, you should start filing the oldest return first and go forward from there because of depreciation considerations.

The important thing to remember is you are not alone. However, it does matter if you are receiving letters from the IRS because they need to be contacted as soon as possible.

If you have not received any IRS letters or, in the case of over-the-road drivers, you have not been home to receive the letters or you have moved and failed to notify the IRS, you still need to get current with your tax filing. Why? If nothing else, to be able to sleep at night and get back into the system. Other reasons to be current with the IRS:

  1. To finance bank or equipment loans.
  2. To buy a home.
  3. To receive tax refunds – yes, believe it or not, you might be in a refund situation.
  4. To prevent a levy or garnishment of your income by entering into a collection program.

Q. What if I prepare my past returns and/or the IRS prepared them for me, and I find I do owe past income taxes. What hope do I have now?

A. You can negotiate with the IRS. The good news is they have created a new “Fresh Start Initiative,” which helps taxpayers who owe taxes.

1. The penalty relief is available to two categories of taxpayers:

  • Wage earners who have been unemployed at least
  • 30 consecutive days during 2011 or in 2012 up to this year’s April 17 tax deadline.
  • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

Qualified taxpayers must complete Form 1127A to request the 2011 penalty relief.

2. Installment agreements. An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use installment agreements to catch up on back taxes and also more time to pay.

The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for installment agreements has been raised to six years from the current five-year maximum.

You will pay fewer penalties, but interest continues to accrue. To qualify for the newly expanded installment agreement, you will have to agree to direct monthly debit payments.

3. Offer in Compromise. Under the first round of Fresh Start in 2011, the IRS expanded the Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. LL

 


This article is written by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter-century. If you would like further information, please contact PBS at 800-697-5153 or visit their website at pbstax.com.

Please remember everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.

March/April
Digital Edition