In case you ever get audited, it’s better to store your tax records, rather than throwing them away. Unfortunately, this can result to saving more documents and papers than you really need to save. But many people don’t know how long they need to store tax records before disposing of them. The constant fear that once the old tax records are discarded, the IRS might come knocking. So when it comes to keeping tax records, what is the honest truth? How long before you can discard them and not worry about IRS problems?

The statute of limitations officially implemented by the Internal Revenue Service is the first criteria. The IRS can audit your tax records within ten years. They can no longer collect those taxes or audit those returns after that. Essentially, records can get lost; therefore, the implementation of the statute of limitations. So even if you can no longer pursue refunds beyond this 10-year period, your IRS problems also basically disappear.

Beginning on the date of the filing of the original tax return is the 3-year assessment for additional taxes as the second criteria. As an exception to this rule, claiming a loss on worthless security increases the statute of limitations to 7 years. As another exception, the statute of limitations is extended to 6 years when unreported percentages of your total gross income amount to 25%. Finally, if you file a fraudulent tax return, or don’t file one at all, there is no statute of limitations.

When deciding which documents to save and which ones you have to discard, you should conduct an honest examination of your chances of being audited. In the event of an IRS audit, these documents will back up your case. You will need to keep documents like business records, employment, bank, and brokerage statements, tax returns, expenses on your home, and capital losses and gains if you believe, for whatever reason, that you might be audited. When battling an IRS audit, these documents are the center of your case. If you feel that you have a good chance of being audited by the IRS, then by all means, save these documents for the entire 10-year period of the statute of limitations so that you are prepared against any IRS problems.

An OIC (Offer in Compromise) is a method that enables you to settle your tax debt by paying just a small amount to the IRS, as little as 1% of the tax due. In order to qualify for this, strict requirements should be satisfied.

Though taxpayers have no right to get a tax debt lowered, doing so is still at the IRS’s discretion. The chances of getting an OIC accepted is slim, but the IRS are still obliged to give it a just amount of consideration as long as it’s submitted properly. Moreover, if your OIC gets rejected, you can get the IRS Appeals Office review it further.

Submitting an OIC is a considerable strict process. The Form 656, Offer in Compromise, must be accomplished with a $150 application fee. If you can prove that you qualify under the guidelines of poverty by filing the Application Fee Worksheet included in the Form 656 booklet, you can be exempt from this fee.

It’s best to determine if your case justifies the effort and time needed to submit the OIC because the process is stringent. Along with your form, you’ll be requested to submit large quantities of documentation such as pay stubs, vehicle registrations, and bank records, which could provide the IRS with more information to use against you if your OIC gets rejected.

To qualify for OIC consideration, you must meet any of 3 conditions. One condition states that there needs to be doubt as to collectability, meaning there is considerable doubt that the IRS can collect the tax debt from you at present or in the future. Another qualification is doubt as to liability. This would entail giving sufficient proof to doubt if you are truly responsible for the tax debt. The last concept says that paying your tax debt in full is unjust as it will place you at an extreme economic hardship.

You may not be aware of how to file your taxes if you’re an American citizen working and living abroad. You may not even realize that the US government and the IRS actually require that you file your taxes, even if you’re outside of the country. Although it is a different method, it’s definitely a better choice than not filing at all because it is relatively simple and you can steer clear of bigger IRS issues.

Many people believe that they’re spared from paying and filing their taxes if they live in another country. This isn’t true, unfortunately. No matter where you’re working, you’re obliged to file your tax returns as an American citizen to avoid IRS problems.

When living in a foreign country, citizens and residents of the United States of America can use two types of tax forms. These forms are the Foreign Earned Income (Form 2555) and Form 2555-EZ.

What applies are similar general rules. Your tax return needs to be filed at the 15th of April each year, and an automatic extension is offered if you require more time. As a matter of fact, you will be granted an automatic 2-month extension, providing you more time to pay the correct tax debts due and file the right forms. However, if you want to utilize the 2-month extension, you need to actually attach an official statement explaining and confirming that you essentially qualify for the extension.

Among the issues that many people who have recently relocated to another country is that they didn’t bring all of their tax information with them, or they relocated before they could get all of their W-2 forms from their employers and they were actually sent to the old address in the United States. It’s your responsibility to obtain those documents. It must be accomplished, whether that takes having your company to send a new copy or getting a good friend to track down your mail. Another option is getting the official copies sent via the regular mail while electronic copies are sent to you via email. This will allow you to complete your tax returns in a timely manner and avoid an IRS problem.

If your spouse isn’t an American citizen, there are several options to choose from when filing your taxes. You can choose to file as Married Filing Separately wherein you only must report your own income for the year. You can file as Head of Household if you have children. You can also file as Married Filing Jointly by identifying your spouse as a resident alien.

There are numerous differences and slight nuances when it comes to filing taxes while you are working and living in another country. To prevent an IRS problem, consulting a professional tax preparer is advised.

There’s a horror tale that every tax advisor can tell about the IRS committing errors in the thousands of dollars. In 1986, $890 million of the $2.5 billion in penalties the IRS assessed were cancelled. The manager for tax policy of the US Chamber of Commerce, David R. Burton, gathered these figures.

Unfortunately, this isn’t the only substantial error regularly experienced from the IRS. The initial notices which notify taxpayers that they’ve filed late or somehow underpaid the correct amount are usually wrong about 15 to 20 percent of the time. This shows that millions of people are battling unjustified bills from the IRS who’s demanding that they pay their tax debt. So what do you do when you receive a notice and you know that the IRS typically makes errors which end up being your IRS issue?

Jo Carole Klepack, a tax manager from New York states, “The first rule in replying to an IRS notice is not to assume that they are correct.” IRS notices always include a phone number to call for any concerns, but says Israeloff, Trattner, & Company’s Robert Israeloff, “We found that accomplished very little because when you call, you speak with a clerk who isn’t familiar with the case.”

Writing a letter is the best method. You need to ensure that you send only copies of legal documents and make sure you utilize certified mail or some other form of delivery where it can be verified that the mail was received by the IRS. Before your issue is resolved, you will most probably get more notices because these are issued by the IRS computers. However, resolved through the mail are most problems.

If the IRS mistake involves a considerable sum of money, it is best to pay them a visit to deal with an IRS agent face to face. This way, you do not have to wait for your letter to be read. Seeking tax advice from a professional is also advised.

Most people think that their tax records will be further assessed if they visit an IRS office. This is false. As a matter of fact, you might be able to stop the proceedings faster by bringing the error to their attention. Any enforcement effort can be stopped at once.

Though it is an uncommon occurence, a few people may also benefit from errors made by the IRS. A bigger refund than what is entitled might be had. However, it’s recommended not cash in these checks as these may lead to more serious IRS problems. Indeed, when handline issues with the IRS, it’s advised to be patient.

Retirement is normally the time for relaxation, leaving worries behind and accomplishing all of the things you want to do. Unfortunately for most people, it’s also the time for living on a fixed income, and any income you make is generally a bit lower than what you warned while working full time in your job. So each retiree is trying to pay the IRS as little as they possibly can. A few examine their tax returns with a microscope and look for any deduction they can legally claim. Others simply decide to move somewhere else. But you can simply relocate to a different state and not a different country. They can go for one of the nine tax-friendly states that do not charge income taxes. And if they really wish to leave IRS problems behind and steer clear of more taxes, there are no sales taxes in 5 states.

One of the states that fit into both of these categories is Alaska. Alaska is the perfect state to relocate to using these 2 requirements. Of course, the climate is a considerable adjustment for numerous people. The 49th state might look like the ideal state to retire in if you can get over the climate.  Actually, Alaska is not as totally tax-free as it seems to be at first glance, and could likely lead to IRS issues, or simply a financial problem.

Though the state does not charge sales tax, some of its boroughs actually collect property taxes. Only your first $150,000 will be exempted if you are at least 65 years old. Furthermore, if you’re concerned about the inheritance that you will be leaving your children, you must be aware that Alaska also has an estate tax.

Obviously, it is not recommended to select a place to retire based on taxes. But because you’ll be existing on a fixed income, it’s normal to be worried about income and real estate taxes. You must understand that real estate taxes tend to increase when your income decreases, meaning you’ll be receiving less money but paying more for your home. Also, to prevent IRS issues, you might wish to find out how your property taxes will increase if you renovate your home.

You can opt to live in an apartment to avoid the burden of property taxes. But if you get significant income from other sources like pensions, you might end up having to pay higher income tax rates. This is because of where your money comes from, not where you opt to live.

Income tax are not collected in states such as Texas, Washington, South Dakota, Nevada, Wyoming, Florida, Tennessee, Alaska, and New Hampshire. But some states such as Tennessee and New Hampshire charge taxes on income derived from bonds or stocks. As soon as people quit their jobs to retire, these are two of their most common income sources.