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More than 50% of Americans Pay Taxes – Just Not Federal Income Tax

Debra Dragon — Fri, 14 May 2010 14:23:16 +0000

For some, federal taxes are the bane of their existence. With ever-changing rules and the economy still struggling to get back up to par, taxpayers are undoubtedly outraged when they feel someone else isn’t holding up their end of the deal. Hard-working citizens who are shelling out tax dollars often gripe about those who are not contributing their fair share to the taxman. It’s easy to point the finger at the low income sector of society or those wealthy citizens who seem to receive unending tax breaks but things are not always as they appear at first glance.

In an interesting statistic, it is noted that about half of taxpayers paid no federal income tax last year. While that sounds like a very high percentage of people not required to pay Uncle Sam, the statistic does not mean that these same people paid no taxes at all. Many still had to pay out for Social Security and Medicare payroll taxes. Property taxes were also paid plus a variety of sales tax had to be paid out as well.

Who’s Not Paying?

Those quick to criticize this statistical statement also claim that only the hard working Americans are paying taxes and those who are on welfare or even the mega-wealthy folks don’t pay out a dime. This is serious misconception. In reality, those people who pay no federal income tax are typically the elderly and those who do not make much money at all. Those families earning incomes of less that $20,000 will likely not pay out in federal taxes.

As we are still struggling to beat back the recession, it should be noted that there was a tremendous amount of job loss during the last few years. Along with no income or less income after taking a new job, the amount of income tax due also goes down. As time goes by, the number of Americans not paying federal income taxes will also decrease. As jobs become more plentiful and wages increase, so will tax responsibilities.

Tax Relief Measures

One of the biggest reason people have not had to pay out much, if at all, in federal income taxes is due to the Earned Income Tax Credit. This credit was brought about in 1975 and over the years has been expanded under different Presidents. People who are working at low wages can use the credit from low wages to cancel out their liability for income taxes. The Earned Income Tax Credit and the child care credit were established to encourage people to keep working.

Not a New Concept

Historically, not owing federal income taxes is not a new concept. Before World War II, rarely did an American pay income tax. In the 1950’s, most only paid a very small percentage in Social Security tax. Medicare taxes were not yet established then. Today, workers are actually paying more in payroll taxes than they are in federal income taxes.

While the 50% statistic can be startling to people at first glance, the percentage certainly dwindles down to near nothing when you consider all of the other taxes being paid out by both working and non-working individuals. It is easy for some to feed off the notion they are being cheated in the tax arena but for decades, the government has been making decisions based on removing low-income working families from the income tax lists. Right now the policy is working as it was meant to work. As income levels pick back up, the percentage of those not paying federal taxes will begin to decline rather quickly.

Tax Installment Agreement: What You Need to Know

Debra Dragon — Fri, 26 Mar 2010 16:30:33 +0000

It is not uncommon in this day and age for consumers to simply assume any debts owed will be eligible for some sort of tax installment agreement. Americans routinely pay credit card debt in monthly payments and the same can be true for variety of other debts that qualify for repayment through installment plans. For example, if you are lacking in health insurance and incur a large hospital bill, in many cases they will accept smaller partial payments until the debt is repaid. While this option is available for some debts, not all debts are eligible for installment agreements. This may be the case with back taxes that are owed to the IRS. For this reason it is important all taxpayers who owe a debt to the IRS understand how tax installment agreements work in regards to tax bills. Here are a few things you should consider before assuming you will be able to repay the IRS via an installment plan.

Not all back taxes are eligible for tax installment agreements – The IRS is unlike creditors or lenders. They are not obligated to accept an installment plan agreement and in many cases they exercise this right. If information on your IRS forms are incorrect or incomplete, a request for an installment plan agreement may be denied. It is important that you provide all the requested documentation and that the information provided is correct, as the IRS will check with public records to verify submitted information. Another reason installment agreements are often denied is the IRS feels you will not make timely payments based on past history or “fudged” information on required documentation. If your application has been denied, you can appeal the decision or enlist the help of a tax professional for further assistance.
You will end up paying more - Like any other installment plan, you will always end up paying more money in the end for the privilege of paying over time instead of a lump sum payment paid at once. Interest is applied to money owed and will increase the overall amount of money paid on your tax bill. Unfortunately many taxpayers are not in the position to pay their tax bill without the help of an installment plan. If this is the case, it is always better to work with the IRS to set up payments versus ignoring the tax bill all together, which will definitely cost you more money due to penalties and other fees that result from an unpaid tax bill.
On-time payments are required – If you have successfully applied for and have been granted an installment plan with the IRS, it is imperative you make all agreed upon payments on or before the date due. As previously mentioned, the IRS is not a creditor or lender and will not respond as such when dealing with a taxpayer who fails to meet the terms of an installment plan. Before beginning an installment plan for taxes owed, be sure you will be able to make each payment in full, on time. If for any reason your financial situation changes and you are unable to meet the required payments, contact the IRS immediately to discuss your situation.

The most important thing to remember when dealing with the IRS and unpaid taxes is the need to be upfront and honest. You cannot hide from the IRS and attempting to do so will only serve to increase your financial problems.

Why You Can’t Get Away With Not Paying Your Taxes

Manny Davis — Fri, 22 Jan 2010 13:55:48 +0000

With recent decreases in tax revenues the IRS is stepping up collection efforts more than ever, so you can be sure that the IRS will collect from you what is owed. The IRS has created an automated collection system that ensures that they will get what they want. Because of this system the IRS is known as the harshest (legal) debt collector in the United States.

Once the IRS gets wind of the fact that you failed to pay your taxes the their collection process starts. The IRS collection process is a very automated process and it is starts with being subtle about what is owed and will continue to get harsher and harsher until your taxes have been paid or enough assets have been seized to fulfill the outstanding tax liability. This collection process is very similar for most individuals but it can deviate course a bit depending upon your assets, financial situation, and past run ins with the IRS. Below are the standard steps the IRS collection system will follow.

Receive Series of Tax Assessment Letters: These letters will start off by simply stating what you owe in taxes and that you must pay. Each letter following the original will get a bit harsher in tone and a bit more threatening each time. Each time an IRS letter goes ignored you can expect the IRS to increase the severity of their next letter or action. Typically you will receive about 4 different letters that assess tax amounts owed before any actual action is taken by the IRS. These threatening letters will last for a period of 4-6 months before the IRS moves to their next collection tactic.
Receive an Notice of Federal Tax Lien: A tax lien gives the IRS legal claim to your assets in order to secure payment. This should not be taken lightly because it is very unlikely you will be able to get any company to lend you money since the IRS has first dibs on proceeds from your assets over other creditors. Many people do ignore the tax lien because it may not effect their everyday life, but if you continue to ignore it you can be assured the IRS will move to a harsher collection mechanism. (Sometimes this step can be skipped and the IRS moves right to #3 if they are dealing with a lot of money or think they are dealing with a very unresponsive taxpayer)
Receive notice of intent to levy: A tax levy is the final collection mechanism used by the IRS where they will forcefully seize your assets against your will. Once they issue a tax levy they have already labeled you as an unresponsive taxpayer and take collections into their own hands since you have failed to work with them to pay back the taxes. The IRS has several levy methods they use and they will choose the one that is easiest for them to collect taxes. The three forms of levy they will use are the following:
- Wage Levy: They will contact your employer and require that they withhold amounts from your paycheck in order to pay down the tax liability.
- Bank Levy: The IRS will contact your bank and require that they freeze funds in their in order for them to seize what funds are in there to satisfy the tax liability.
- Asset Seizure: The IRS will seize assets of yours and sell them in order to satisfy the outstanding tax liability.

As you can see the IRS will not stop until they get what is owed to them. Hiding from the IRS and trying to prevent them from getting the taxes owed is extremely difficult. If you cannot pay your taxes it is a good idea to work with the IRS and pay back the taxes you owe on your terms instead of on their terms.

Many Philadelphians Who Work for the City Owe Back Taxes

Manny Davis — Thu, 14 Jan 2010 13:00:23 +0000

Everybody has to pay their fair share of taxes while living by the tax code. This holds true for all Americans, even those who work for the government. There are thousands of Philadelphians with unpaid taxes. Among them are roughly 400 city employees and this is not uncommon as we reported in December how 276,000 federal employees owed back taxes. While they may think they are getting off easy because they work for the city, nothing could be further from the truth. Starting at the beginning of January 2010 these employees will have money taken from their paycheck to satisfy the debt — also known as tax wage garnishment.

Do you think this is an unfair practice? Well, during the fall of 2009 approximately 900 employees were told that they either have to pay their back taxes or risk having the money taken from their paychecks starting in 2010. Although more than 50% complied, the rest missed the boat and are now paying the price.

Alan Butkovitz, City Controller stated that most tax deadbeats will experience wage garnishment between ten and fifteen percent of their salary. As you can see, this is no small amount. Of course, once the debt is satisfied no more money will be withheld from their paycheck.

Believe it or not, this plan is set to bring in close to $2.6 million. If you currently owe the IRS, State, or city back taxes or you are experiencing wage garnishment, give us a call and we can begin the process of have your wage garnishment stopped.

IRS Seizes & Auctions Crow Creek Sioux Land to Recoup Back Taxes

Manny Davis — Tue, 08 Dec 2009 19:40:23 +0000

Last Thursday, the IRS auctioned off 7k acres of land in South Dakota (Part of Crow Creek Indian Reservation) that the Crow Creek Sioux Tribe owned because Crow Creek Tribal Farms (A corp formed under tribal laws) owed about $3+ million in back taxes, penalties and interest for unpaid employment taxes. The buyer has not been identified but it is someone by the name of Klein in the South Dakota. An IRS spokesman stated that these 11.1 square miles were sold for about $2.57 million dollars, which is less than the Pierre Appraisal of $4.63 million.

Around the end of March, a trial will be held on the matter according to the Crow Creek’s Tribal Farm, as the tribal attorneys filed a notice of “lis pendens” which means that the sale cannot be finalized until the lawsuit is completed.Typically, Federally recognized tribes are typically not subject to taxes, and this is what the US Bureau of Indian Affairs told them. The Fort Laramie Treaty is supposed to prevent the tribe from being taxed. But for corporations affiliated with certain tribes (corp formed as separate entity from tribe), the laws are hazy. Brandon Sazue stated that tribal accounts have experienced tax levies up to the day this sale was completed. In order to get the land back they 180 days to pay 20% more than the buyer paid.

Here is another example of the IRS yet again using its might to recover back taxes. Many companies and individuals out there have foreign accounts or have unpaid taxes that is in their best interests to pay now as Federal tax revenues decline exacerbated by weakened economy and high unemployment.

Oakland Mayor Ron Dellums Owes $239K in IRS Back Taxes

Manny Davis — Thu, 05 Nov 2009 03:39:46 +0000

Oakland Mayor, Ron Dellums, owes the IRS $239,000 for taxes he failed to pay in 2005, 2006 and 2007, according to public records and confirmed by news reports. A public tax lien was placed on his residence. Here is yet another politician who, like Charlie Rangel, has been caught with tax problems.

The San Francisco Chronicle broke down Dellum’s unpaid taxes and IRS tax liabilities by year:

$124,198 in unpaid taxes from 2005
$66,554 in unpaid taxes from 2006
$48,246 in unpaid taxes from 2007

Dellums has stated that he is committed to resolving these tax problems or unpaid taxes. As a taxpayer, the IRS does not care who you are, or what you do, with declining tax revenues it is in your best interest to pay taxes owed now rather than later because tax interest and penalties will only add to your balance.

Nas Owes the IRS $2.5 Million in Back Taxes

Manny Davis — Mon, 19 Oct 2009 20:13:59 +0000

NAS, who real birth name is, Nasir bin Olu Dara Jones, was hit with a $2.5 million dollar tax for unpaid taxes between 2006-2007. According to the IRS, who filed a tax lien against the rapper, he did not pay taxes for 2006 and 2007.

This recent rapper joins the ranks of Method Man, who was recently reported to be in trouble with taxing authorities.