Tag: Tax Terms


Understanding Notices From IRS

Sanjiv Gupta CPA - 8 years ago
Here you can learn more about the tax notices from Internal Revenue Services (IRS).  On the left side, you can see the notice number and you can find the description of the notice on right.   You can also contact our office to learn more about the notice you may receive.  We recommend you make an appointment and bring your notice along with any other records that you may have. Notice NumberDescriptionTopicCP02HYou owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma.Balance DueCP03AYou received a tax credit (called the First-Time Homebuyer Credit) for a home you purchased. This notice informs you of how to repay it.CP03BYou received a tax credit (called the First-Time Homebuyer Credit) for a home you purchased. This notice informs you that you don’t have to repay the credit as long as the home remains your main home for at least three years after you purchase it. It also explains situations where a home stops being the main home.CP08You may qualify for the Additional Child Tax Credit and be entitled to some additional money.Additional Child Tax CreditCP10We made a change(s) to your return because we believe there’s a miscalculation. This change(s) affected the estimated tax payment you wanted to be applied to your taxes for next year.Change To Your Estimated Tax Credit AmountCP10AWe made a change(s) to your return because we believe there’s a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted to be applied to your taxes for next year.Change To Your Estimated Tax Credit AmountCP11We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes.Balance DueCP11AWe made changes to your return because we believe there’s a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes.Balance DueCP11MWe made changes to your return involving the Making Work Pay and Government Retiree Credit. You owe money on your taxes as a result of these changes.Balance DueCP21AWe made the change(s) you requested for your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).Balance DueCP21BWe made the change(s) you requested for your tax return for the tax year specified on the notice. You should receive your refund within 2-3 weeks of your notice.RefundCP21CWe made the change(s) you requested for your tax return for the tax year specified on the notice. You’re not due a refund nor do you owe any additional amount. Your account balance for this tax form and tax year is zero.Even BalanceCP21EAs a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes.Balance DueCP21IWe made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes.Balance DueCP22AWe made the change(s) you requested for your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).Balance DueCP22EAs a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes.Balance DueCP22IWe made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes.Balance DueCP31Your refund check was returned to us, so you need to update your address.RefundCP45We were unable to apply your overpayment to your estimated tax as you requested.OverpaymentCP53We can’t provide your refund through direct deposit, so we’re sending you a refund check by mail.Direct DepositsCP120You need to send us documentation of your tax-exempt status.Tax ExemptionsCP130Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax.Filing RequirementsCP139Your tax return filing requirements may have changed: You may no longer need to file Form 941 and Form 940.Filing RequirementsCP152We have received your return.Confirmation of Return ReceiptCP153We can’t provide you with your refund through a direct deposit, so we’re sending you a refund check/credit payment by mail.RefundCP166We were unable to process your monthly payment because there were insufficient funds in your bank account.Payment ProcessCP178Your tax return filing requirements may have changed: You may no longer owe excise tax.Filing RequirementsCP231Your refund or credit payment was returned to us and we need you to update your current address.Address Update NeededCP276AWe didn’t receive a correctly completed tax liability schedule. We normally charge a Federal Tax Deposit (FTD) penalty when this happens. We decided not to do so this time.FTD PenaltyCP276BWe didn’t receive the correct amount of tax deposits. We normally charge a Federal Tax Deposit penalty when this happens. We decided not to do so this time.FTD PenaltyOther Notices and LettersNotice or Letter NumberTitleCP 12Changes to Tax Return, OverpaymentCP 14Balance DueCP 23Estimated Tax Discrepancy, Balance DueCP 49Overpaid Tax Applied to Other Taxes You OweCP 57Notice of Insufficient FundsCP 88Delinquent Return Refund HoldCP 90/CP 297Final Notice – Notice of Intent to Levy and Notice of Your Right to a HearingCP 297ANotice of Levy and Notice of Your Right to a HearingCP 91/CP 298Final Notice Before Levy on Social Security BenefitsCP 161Request for Payment or Notice of Unpaid Balance, Balance DueCP 501Reminder Notice – Balance DueCP 503Second Request Notice – Balance DueCP 504Final Notice – Balance DueCP 521Installment Agreement Reminder NoticeCP 523Notice of Default on Installment AgreementCP 2000Notice of Proposed Adjustment for Underpayment/OverpaymentLetter 0484CCollection Information Statement Requested (Form 433F/433D); Inability to Pay/TransferLetter 0549CBalance Due on Account is PaidLetter 668D(LP 68)We released the taxpayer’s levy.Letter 0681CProposal to Pay AcceptedLetter 0757CInstallment Privilege TerminatedLetter 1058 (LT 11)Final Notice prior to levy; your right to a hearingLetter 1615 (LT 18)Mail us your overdue tax returns.Letter 1731 (LP 64)Please help us locate a taxpayer.Letter 1737 (LT 27)Please complete and site Form 433F, Collection Information Statement.Letter 1961CInstallment Agreement for Direct Debit 433-GLetter 1962CInstallment Agreement Reply to TaxpayerLetter 2050 (LT 16)Please call us about your overdue taxes or tax return.Letter 2257CBalance Due Total to TaxpayerLetter 2271CInstallment Agreement for Direct Debit RevisionsLetter 2272CInstallment Agreement Cannot Be ConsideredLetter 2273CInstallment Agreement Accepted: Terms ExplainedLetter 2318CInstallment Agreement: Payroll Deduction (F2159) IncompleteLetter 2357CAbatement of Penalties and InterestLetter 2603CInstallment Agreement Accepted – Notice of Federal Tax Lien Will be FiledLetter 2604CPre-assessed Installment AgreementLetter 2761CRequest for Combat Zone Service DatesLetter 2789CTaxpayer Response to Reminder of Balance DueLetter 2840CCC IAPND Installment Agreement ConfirmationLetter 3030CBalance Due Explained: Tax/Interest Not PaidLetter 3127CRevision to Installment AgreementLetter 3217CInstallment Agreement Accepted: Terms ExplainedLetter 3228 (LT 39)Reminder notice.Letter 4903 (LT 26)We have no record of receiving your tax returns.Letter LP 47Address Information RequestLetter LP 59Please contact us about the taxpayer levy.

2012 and 2013 Tax Tips

Sanjiv Gupta CPA - 9 years ago
Considering the uncertain global conditions and economic downturn, federal tax rules in the US have not been formulated beyond the year 2012. In this context, it has become very difficult to prepare a final layout for estate and gift tax. In the face of such a situation, some important tax tips have been discussed below, which can efficiently help plan income tax propositions.In the first case, it is suggested that income should be deferred to the subsequent year, secondly, tax deductions should be enjoyed and last of all if there is any such tax provision that has expired, it must be taken into account. In the following passage, we have discussed the federal tax rules, which have been implemented by the U.S. government in the year 2012 and the proposals, which have found a place in the 2013 US budget.Transfer tax rules in effect for the year 2012The transfer tax rules, which have been put into effect for the year 2012, are as follows:1. In the event of a person’s death in 2012, an exemption limit of $5,120,000 has been set which is a revised and adjusted figure compared to the one that had been fixed in 2011. Other than the exemption limit, the landed properties will be taxed at a 35% rate.2. A tax enactment plan for married couples implies that if in the event of the death of one spouse the other person can utilize the unused portion of the dead partner’s deduced amount. Such a provision is called portability and this will remain in operation only for the year 2012. To get the fullest advantage of portability or deceased spousal unused exclusion amount, as it is technically known as there is the need to produce federal estate tax return of the dead partner’s estate. It does not matter even if the gross value of the estate is marked below $5,120,000 because whatever the case may be the estate tax return of the deceased person’s estate has to be filed.3. There are other spheres, which are subjected to the same amount of exemption limit and are known as lifetime gift tax and generation-skipping transfer tax. The exemption amount stands at $5,120,000 and like in the first two cases and the taxable amount for the lifetime and generation-skipping transfers remains the same at a flat 35% tax rate.4. The deductible amount remains the same at $5,120,000, which is applicable for lifetime gift tax. Like in the earlier cases, a 35% tax rate has been decided for all taxable gifts over the exemption amount. On a whole, the gift tax and the estate tax have been brought under a single section.New tax proposals indicated by President Obama in the 2013 budget If the tax proposals, planned for the 2013 US budget are finally implemented and brought into effect then there will be notable changes in estate tax payments, generation-skipping transfer, and gift taxes.1. Talking about exemption limit the new exemption amounts that have been fixed for estate and generation-skipping transfer tax are kept at $3.5 million and $1 million respectively.2. The new taxable amount has been increased from the earlier 35% to a new flat 45% tax rate.3. Coming to the section, which talks about the provision of portability where the earlier facility that allowed a surviving spouse to utilize a deceased partner’s unused exempted amount, has been made permanent.4. Valuation discounts have also been talked about in the 2013 budget plan. In the present scenario due to the absence of good control and proper marketing techniques, the interests of business organizations suffer heavily. However, according to the 2013 plan module, the value of interests will only be discounted in the case of family businesses.5. Grantor retained annuity trusts will face several changes as per 2013 tax rules. Going by the present condition laid down in the rule book, a person can save that extra money which he has to shell out for paying transfer tax costs by using grantor retained annuity trust. Two different conditions have been mentioned in the 2013 budget plan, which will bring the earlier provision of zeroing out the gift in the trusts to a permanent stop.Some other significant changes that have been noted in the tax evaluation rules applicable for grantor trust are that unlike before landed property owned by the grantor trusts will be included at the time of evaluating the grantor’s total estate under his possession. In addition, all kinds of distributions that will be made in the lifetime of the grantor will be indicated as gift tax.

What Are The Available Medical Deduction Plans?

Sanjiv Gupta CPA - 8 years ago
A medical deduction plan helps to reduce tax on medical expenses.  This type of plan is beneficial for one who has to spend excessively on medical issues.   Medical deduction plans allow a person to qualify for tax exemptions. However, to file a tax return on medical expenses it is essential for an individual to present all supporting medical documents.Tax Deductible ExpensesTax deduction for medical expenses is available for a large number of issues. One can get a deduction on diagnosis cost, cost of treatments and even cost of medical supplies. Medical deduction plans are available for the following issues generally. Fees payable to doctors and dentistsExpenses that one has to pay for medicines that are prescribed by a doctor.For medical aids and equipment like pacemakers, wheelchairs, hearing aids and dental equipment.Charges of weight loss program which is prescribed by a doctor.  However, the charges of low-calorie foods can not be tax-deductable.Travel expenses due to medical treatment. The cost of any type of surgery including eye surgery and cosmetic surgery.However, one point to remember is that medical expenses that improve general health such as vitamin deficiency are not tax-deductible.Who can have the benefits of a tax deduction?A taxpayer can deduct medical expenses for his/her own medical treatment, cost of equipment and surgery.A taxpayer can receive tax deduction for the treatment of a spouse.A taxpayer can claim a tax deduction for the medical issues of a person who is dependant on him/her.  Is there any exposure for non-dependant?IRS generally offers no tax deduction offers for the non-dependants. However, in some special cases tax deduction rules can be changed.IRS does not offer any coverage for a non-dependant even if it is one’s, own child. But if the child is a non-dependable according to the law of divorce or separation. A taxpayer can not claim a person as a dependent if he/she gets $3,700 and more. How to apply for tax deduction? A taxpayer can claim a deduction of medical and dental expenses if the services were made during the tax year.  An applicant can apply for a tax deduction when the payment is complete. This is applicable for each type of payment, such as online payment, payment by phone or credit card.Deduction plans for long term medical expensesIRS offers a tax deduction for long term medical expenses.  If a person suffers a long time from a severe medical issue, he/she can claim a tax deduction for diagnostic, therapeutic, treatment and personal care costs. In order to avail of a long-term medical deduction, one must meet all criteria as specified by the IRS.Medical issues must be of chronic type:  a person can be diagnosed as a chronic sufferer if he /she has been suffering for one year or more and is unable to perform daily activities without substantial cooperation.  if the mentioned person requires extensive care to maintain personal care andDiagnosis, treatment and all other necessary medical services should be executed under the supervision of a recognized doctor or medical practitioner. What should be included in long term medical deduction plans?A tax deduction can also be granted for the following issues. Expenses of meals that a person takes at a hospital or nursing home. However, such meals must be part of medical care. Charges paid for the medical conferences including transportation and admission costs. The time of the conference must involve medical sessions. A person is not capable to claim a tax deduction for food and lodging charges that he/she has to pay during the medical conference. IRS offers a tax deduction for medicines, injections and other medical supplies that are prescribed by a certified medical practitioner. For diabetes patients, the charge of insulin is deductable without prescription. A chronic patient some times requires additional nursing services to perform regular activities. In such a case, the cost to appoint a nurse or an attendant or a caregiver is deductable. Cost of operation, eye surgery can be tax-deductible. On the other hand, IRS does deduct amounts that are spent due to unnecessary surgical treatments such as some kind of cosmetic surgery, artificial implantation, etc.IRS offers a tax deduction for certain issues. These are mentioned in the following points.Stop smoking programPsychoanalysisSterilizationPregnancy test kitsSpecial educationWeight loss programIssues that do not tax deductableChildcare services for a healthy babyCosmetic Surgery except for a medical requirement.The weight loss program is only for general health and appearance improvement.Household serviceElectrolysisExpenses for funeralHair TransplantIllegal surgical treatmentsCost of Insurance PremiumsImported drugs and medicinesNutritional SupplementsFees for Veterinary treatmentDiaper Service

2012 Year End Tax Implications

Sanjiv Gupta CPA - 8 years ago
The fat lady is almost singing to signal the end of the current gift and estate tax exemptions and rates. To start with, the so-called “fiscal cliff”, which is the estate tax exemption, is on course to fall precipitously in 2013 while at the same time the maximum estate tax rate is expected to rise. The net result of all these changes in tax thresholds is that many high net worth clients are being requested to consider giving away part of their wealth in order to take advantage of the current exemption just before this period lapses. The thing is with most of the exemption strategies in gift-giving often the least effective means is to give the gifts as cash. On the other hand, one can also use some of the other strategies such as the use of Family Limited Partnership (FLP) to acquire a valuation discount for the assets being gifted may be used. Some of the other ways to give away gifts include using the Intentionally Defective Grantor Trust (IDGT) and then use the trust as seed money to purchase different assets from the estate.However, this is not usually the situation in most cases as there are different things that come into play when gifting away part of your estate. For instance, there are many important caveats that include the risk of an estate tax clawback as well as the affordability of the gift itself. You must also take care of the state estate tax laws that may be due on the estate. As such, it is very important for the high-end members of the population to determine whether they would rather give away part of their wealth or simply sit back and endure the tax burden that will be coming at the turn of the year.Taking Advantage of the Current Gift Exemption: To start with, for a person to take advantage of the gifting it is important to know a few things. In essence, the basic principle that is behind gifting is to start by making a gift while the exemption is currently at $5.12 million. At the end of the year, the exemption will drop from $5.12 million to only $1 million. While, the exemptions that are set to expire at the end of the year, it is quite possible that the tax burden that an individual will have at the start of the next year will be very huge. Gifting is a way through which individual spread their wealth, not only to the people around them but also help themselves take care of the financial aspect of their estates. Gifting can also be done to a member of the family as well as to charities and other less fortunate members of the community.While on the case of gifting away wealth, it is usually advisable to gift away pieces of property instead of cash. This is because it is a better way of spreading the wealth to future generations who may not be old enough to handle huge sums of money.

IRS Response to Identity Theft Lawsuits

Sanjiv Gupta CPA - 8 years ago
Like any government office that deals with refunds, the norm has been that those seeking refunds are given the run around until such a moment that they give up. In fact, for years those seeking refunds especially after suffering from identity theft normally end spending more on the follow-up process than the amount that they actually stand to gain from the refund. That has been the IRS and its way of dealing with the identity theft tax refunds that they are required to give. Until the other day when they were sued for the costs of the refund, little had changed at the IRS. However, right now the tide seems to be turning in favor of those looking for their refunds after suffering from identity theft. The IRS seems to have adopted a new policy in which these cases are expedited and solved within a reasonable time. A few of the people we contacted have pointed out the fact that the IRS seems to be more willing to settle the tax issues that they have been facing for a while now. Some people in this category have tax refunds that go as far back as the year 2007.The main question that seems to bug pundits and observers in tax issues is what exactly has changed the tide of things at the IRS? Well, a look at the bulk of the cases now being expedited seems to show a trend in which the IRS is responding to suits from the courts of law. A large number of the people being assisted by the IRS to get their refunds to seem to have at one point sued the IRS for these amounts. As such, it can easily be pointed out that this appears to be the jolting card that changed the tide at the IRS.Do you have to sue them to get your to refund? Bluntly speaking NO; you are not required to sue the IRS before you can be assisted to get your tax refund after a period of identity theft. At least, in theory, this is the law of the land. Those seeking refunds only have to provide the proper documentation and the refunds would be submitted to their accounts of choice within the scheduled time. However, the reality on the ground is a whole different matter. Most of the people who simply fill in the requisite forms and submit them often have to wait for long before such applications are taken care of. Some of them have to make a number of follow-ups before they can be attended to. In some cases, the applicants have resorted to using the court system in order to assure themselves of quick response and in essence, justice for themselves. This option, those in most cases spared for extreme cases, was taken by 16 plaintiffs recently ad of the 16, at least 3 have already received their refunds. A few other refunds were still being processes to be delivered before mid-December.

Tax Terms You Should Understand

Sanjiv Gupta CPA - 4 years ago
We do not want you to look at the jargons associated with filling of tax returns and think however are you going to understand all of the important and basic tax terms. Instead, we want to prepare you to file your tax returns with ease without getting intimidated. Even though the tax terms might be complex in nature, they are not as difficult to comprehend, especially now, since you have this book to refer to when tax season rolls around.After a while, assuming that your visit to the United States is a permanent one, you will only have to rack through your brain to remember the meaning behind each one. However, for now, it is pertinent that you have a clear and comprehensive understanding of the tax terms, at least the important one that you should remember and know by heart. Here is the list of the following tax terms you need to know:TermDefinition1040 FormThe basic IRS form that people needs to submit their income tax return. 1040A and 1040EZ are two other names for this form. Adjusted Gross Income or AGIThis is taxable income, which consists of gross income from chargeable sources minus allowable adjustments. Alternative Minimum Tax or AMTA tax computation that includes items labeled for tax-deductible items into the adjusted gross income. If the alternative minimum tax is higher than the regular tax liability for that year, the regular tax and the amount exceeding it are payable. The reason behind the creation of the alternative minimum tax was to force taxpayers to pay their tax liability. Capital GainWhen the value of a capital asset increases such as a type of investment, the price of the property, in this instance, increases. The owner will earn more money when it is time to sell it, as the price increased from the original buying price. Taxpayers can classify this type of capital gain as a short-term or long-term and must clam it on their next income tax return. Child Tax CreditTaxpayers can claim taxes on children who are dependent on them and are under the age of seventeen at the end of the tax season. DeductionTaxpayers need to subtract all expenditures and allowable items from the adjusted gross income. In doing so, it decreases the amount of income that qualifies for taxation. DependentDependent is a spouse, parent, child, or a relative to whom a taxpayer provides for with a large chunk of their salary going towards their care. Earned IncomeThe taxpayer earns income thorough his/her business or trade, and this includes salary, wages, commissions, bonuses, and tips. Earned Income CreditTaxpayers can refund earned income credit. For people who only earn a meager or low-income, the earned income credit decrease and at times, eliminate their taxes. Sometimes, earned income credit acts as a wage subsidy, allowing the taxpayer to pay a decreased amount of tax owed. Estate TaxAn estate tax is the amount of levied tax on a person who has passed away but has left behind taxable assets. The value in estate tax is set above the exemption total of the gross estate minus allowable deductions. However, the deceased individual’s spouse, if alive, will not be subject to pay estate tax. ExemptionThe tax law defines exemption as a deduction used to decrease the entire amount of payable income. However, an exemption to decrease payable income is only granted by looking at the circumstances and status of the taxpayer. Filing StatusFiling status consists of five categories, single, married, but filing individually, married and filing together, head of the house, widow or widower with a dependent child. Itemized DeductionItemized deduction is subtracted from a taxpayer’s adjusted gross income. It consists of money spend on particular services and good that year. The IRS has outlined specific deductions a taxpayer is qualified to ask for include deductions on local and state taxes, interest on a mortgage, medical expenses, and gift tax. You can find them in the FORM 1040 Schedule A. Non-Refundable Tax CreditA non-refundable tax credit cannot decrease the amount of tax an individual owes to less than a zero. In the event, the amount of tax the taxpayer owes could lower to less than a zero; the IRS would need to pay them. Passive IncomePassive income is classified as earnings acquired from a limited partnership, rental property, or an enterprise in which the taxpayer does not play an active role in the activities. Property TaxLocal government bodies evaluate the property of the taxpayer, assessing its value along with the value of the land it sits upon. On the basis of their evaluation, the taxpayer will be required to property tax. Self-Employment TaxTaxpayers who work for themselves, meaning they run their own business, will have to pay self-employment tax, as this is the only way for them to receive social security benefits when they retire. However, the amount they are required to pay may be decreased if they pay Medicare and Social Security Taxes thorough another individual. Standard DeductionThe standard deduction is referred to as the base value of the income, which is not taxable. The taxpayer can use the base value to reduce their taxes, specifically reduce their adjusted gross income, but only if he/she does not select the itemized deduction technique of computing taxable income. The taxpayer’s status, disability, age, or if he/she is dependent on another taxpayer for support is taken into account when computing the value of the standard deduction. Tax CreditThe tax credit reduces the actual amount owed taxes. Taxable IncomeTaxable income is the value of the net income—deductions, gross income without all the adjustments, and exemptions—used to compute the amount of income tax a taxpayer owes.  Whenever you see a term you do not know the definition of, at least you will not have to search the entire web for it, as they will be right here in this book. Immigrants who are coming to the United States to start a new life will not have trouble understanding the terms and concepts related to taxes in the country. However, your lesson of learning all about the United States tax laws is not over yet. So, keep reading!
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