IRS Using Private Debt Collection Agencies

In 2015, President Obama signed into law the Fixing America’s Surface Transportation Act, known as the FAST Act. It provides long-term funding for transportation projects. Buried in the bill is a requirement that the IRS must use private debt collection companies.

Starting in 2016, the IRS is required to use private debt collection companies to collect “inactive tax receivables” (i.e., any outstanding assessment that the IRS includes in potentially collectible inventory). Traditionally, this debt has been hard to collect tax.

IRS Collections Program: When the IRS first began using private tax collectors, it assured taxpayers that they would know they are in the program before being contacted by a private collection agency. This way, taxpayers could be wary of any bill collectors who claim to be working on behalf of the IRS.

Contact By Letter: Private tax collectors will usually contact a taxpayer by letter. If the taxpayer’s last known address is incorrect, the private collector searches for the correct address. Next, the private collector will telephone the taxpayer to request full payment.

Payment Directly to the IRS: If the taxpayer cannot pay in full right away, the private collector offers an installment deal for up to five years. Please note, private collectors cannot accept payments. Do not pay them directly! All checks will still be made payable to the U.S. Treasury—not to an individual or firm. The collection agency will provide the appropriate IRS mailing address for payments. The collection agencies will never request that cash or checks be sent to individuals.

There is some speculation that this requirement may result in additional attempts by fraudsters to collect payments. If you receive a letter or phone call, please do not hesitate to contact Green FS immediately so that we can help you determine if this is a legitimate debt collection.

Extended Tax Provisions

Late in December, Congress renewed a number of “extender” provisions that expired at the end of 2015. These provisions may affect some individuals and businesses so it is important to keep track of them for your 2016 filings. . Extended individual provisions include:

1.  $250 educator expense deduction. Made permanent, and adjusting for inflating going forward, teachers can claim this deduction for supplies they’ve purchased for their classrooms.

2. Tuition and fees deduction. Reduce the amount of your income subject to tax by up to $4,000 of qualified education expenses incurred. This provision was extended through December 31, 2016.

3. Itemized deduction for state and local general sales tax. Made permanent, this option is valuable to taxpayers who don’t pay state and local income tax.

4.Itemized deduction for mortgage insurance premiums (PMI). A PMI policy is coverage paid for by the homebuyer, but it protects the lender in case of default on the loan. This provision was extended through December 31, 2016.

5.Qualified principal residence indebtedness exclusion for debt discharge income. This provision, extended through December 31, 2016, applies to most homeowners who default on their loans, and prevents the forgiveness of debt from being included as income on the tax return.

6.Section 529 education plans now allow expenditures for computers, peripheral equipment and software. These tools must be used primarily by the beneficiary during years of academic study.

7. The American Opportunity Credit. Made permanent, this credit covers up to $2,500 of education expenses and was set to expire in 2018.

8.Charitable distributions from IRAs are now permanently tax free. Taxpayers age 701/2 (or older) can make up to $100,000 of annual charitable contributions from an IRA. These contributions are not included as income, nor are they deductible as charitable contributions.

5 Tips for Late Tax Filers

Now that the tax deadline has passed, if you didn’t file a tax return or an extension, take action now. Here are a few things to consider:

  1. File and pay soon. If you owe taxes, you should file and pay as soon as you can, which will stop the interest and penalties that you will owe. The IRS offers  IRS Direct Pay, a secure and easy way to pay directly from your checking or savings account. The IRS does not charge a penalty for filing a late return if you are due a refund.
  2. E-file: No matter who prepares your tax return, you can use IRS e-file through Oct. 17. The IRS will send you electronic confirmation when we receive your tax return, and they issue more than nine out of 10 refunds in less than 21 days.
  3. Pay as much as you can. If you owe but can’t pay in full, you should pay as much as you can when you file your tax return. You should pay what you owe as soon as possible to minimize penalties and interest
  4. Set-up an installment agreement. If you need more time to pay your taxes, you can apply for a direct debit installment agreement. You don’t need to write and mail a check each month with a direct debit plan.
  5. A refund may be waiting. If you are owed a refund, you should file as soon as possible to get it. Even if you are not required to file, you may still get a refund if you had taxes withheld from your wages or you qualify for certain tax credits like the Earned Income Tax Credit. If you don’t file your return within three years, you could lose your right to the refund.




Estimated Taxes Payment Schedule

Who Must Pay Estimated Tax?

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.
If you are filing as a corporation you generally need to make estimated tax payments for your corporation if you expect the corporation to owe tax of $500 or more when you file the tax return.

Due Dates:

Q1 January 1-March 31 – DUE April 18, 2016

Q2 April 1- May 31, 2016 DUE June 15, 2016

Q3 June 1 – August 31, 2016 DUE September 15, 2016

Q4 September 1 – December 31, 2016 DUE January 17, 2017

Missing payments can equal to hefty penalties for you and your business. If you need help filing your estimated taxes please contact us today 888.391.9993 or