Understanding Your IRS Notice or Letter

Understanding Your IRS Notice or Letter

About Your Notice If you receive a letter or notice from the IRS, it will explain the reason for the correspondence and provide instructions. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office. The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax, are due a larger refund, if there is a question about your tax return or a need for additional information. .

IRS Notice Redesign Currently, the IRS is in the process of redesigning and revising its correspondence with taxpayers for clarity, effectiveness and efficiency. To start, the redesign affects nine notices. The new format includes a plain language explanation of the nature of the correspondence, clearly states what action the taxpayer must take and presents a clear, clean design.

Redesigned Notices Notice Number Description Topic CP02H You 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 Due CP08 You may qualify for the Additional Child Tax Credit and be entitled to some additional money. Additional Child Tax Credit CP31 Your refund check was returned to us, so you need to update your address. Refund CP45 We were unable to apply your overpayment to your estimated tax as you requested. Overpayment CP53 We can’t provide your refund through direct deposit, so we’re sending you a refund check by mail. Direct Deposits CP120 You need to send us documentation of your tax-exempt status. Tax Exemptions CP130 Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax. Filing Requirements CP139 Your tax return filing requirements may have changed: You may no longer need to file Form 941 and Form 940. Filing Requirements CP166 We were unable to process your monthly payment because there were insufficient funds in your bank account. Payment Process CP178 Your tax return filing requirements may have changed: You may no longer owe excise tax. Filing Requirements Other Notices and Letters Notice or Letter Number Title CP 11 Changes to Tax Return, Balance Due CP 11A Changes to Tax Return and Earned Income Credit, Balance Due CP 12 Changes to Tax Return, Overpayment CP 14 Balance Due CP 21B Data Processing Adjustment Notice, Overpayment of $1 or more CP 22A Data Processing Adjustment Notice, Bal Due of $5 or more, Balance Due CP 22E Examination Adjustment Notice, Balance Due CP 23 Estimated Tax Discrepancy, Balance Due CP 49 Overpaid Tax Applied to Other Taxes You Owe CP 57 Notice of Insufficient Funds CP 88 Delinquent Return Refund Hold CP 90/CP 297 Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing CP 297A Notice of Levy and Notice of Your Right to a Hearing CP 91/CP 298 Final Notice Before Levy on Social Security Benefits CP 161 Request for Payment or Notice of Unpaid Balance, Balance Due CP 501 Reminder Notice - Balance Due CP 503 Second Request Notice - Balance Due CP 504 Final Notice - Balance Due CP 521 Installment Agreement Reminder Notice CP 523 Notice of Default on Installment Agreement CP 2000 Notice of Proposed Adjustment for Underpayment/Overpayment Letter 0484C Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer Letter 0549C Balance Due on Account is Paid Letter 668D(LP 68) We released the taxpayer's levy. Letter 0681C Proposal to Pay Accepted Letter 0757C Installment Privilege Terminated Letter 1058 (LT 11) Final Notice prior to levy; your right to a hearing Letter 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 1961C Installment Agreement for Direct Debit 433-G Letter 1962C Installment Agreement Reply to Taxpayer Letter 2050 (LT 16) Please call us about your overdue taxes or tax return. Letter 2257C Balance Due Total to Taxpayer Letter 2271C Installment Agreement for Direct Debit Revisions Letter 2272C Installment Agreement Cannot be Considered Letter 2273C Installment Agreement Accepted: Terms Explained Letter 2318C Installment Agreement: Payroll Deduction (F2159) Incomplete Letter 2357C Abatement of Penalties and Interest Letter 2603C Installment Agreement Accepted - Notice of Federal Tax Lien Will be Filed Letter 2604C Pre-assessed Installment Agreement Letter 2761C Request for Combat Zone Service Dates Letter 2789C Taxpayer Response to Reminder of Balance Due Letter 2822C VRU Acceptance of Proposal to Pay (30,60,90, 120 days) Letter 2823C VRU Monthly Payment Plan Confirmation Letter 2840C CC IAPND Installment Agreement Confirmation Letter 3030C Balance Due Explained:Tax/Interest Not Paid Letter 3127C Revision to Installment Agreement Letter 3217C Installment Agreement Accepted: Terms Explained Letter 3228 (LT 39) Reminder notice. Letter 4903 (LT 26) We have no record of receiving your tax returns. Letter LP 47 Address Information Request Letter LP 59 Please contact us about the taxpayer levy. Eight Things to Know If You Receive an IRS Notice or Letter Read about eight things every taxpayer should know about IRS notices. How To Identify Your Notice The notice number prints on the top of the first page of all our notices and on the lower left-hand side of the tear-off stub included with most of them. That number identifies the message we deliver in every notice. While the contents may vary somewhat, every notice with the same number has the same basic purpose. What If My Notice Isn't Listed You'll find useful information here about many of the notices we send, including the purpose of the notice, the reason we send it, and a list of enclosures we might include with it. There's also sample content for each. Since parts of our notices vary depending on account conditions, the samples may not exactly match the notices we mail. The basic message, though, will be the same. Individual Filer Notices Notices we send about Form 1040, 1040A, or 1040EZ, or any schedules, forms, or attachments included with it are Individual Filer Notice. Business Filer Notices Notices we send about business-related tax forms such as Forms 941, 1065, and 1120, are Business Filer Notices. Gustavo A. Viera, CPA CPA in Miami since 1983

        

Lawmakers consider Internet gambling bills

Internet gambling should be legalized and taxed in the United States to raise $42 billion in revenue over a decade and legitimize gamers who bet online, backers argued before a congressional panel on Wednesday.

POLITICS

"We are talking about a decision by adults to do what they want to do with their own money," said Democrat Representative Barney Frank, who sponsors a bill to legalize online gaming, citing John Stuart Mill's essay "On Liberty" to make his point.

Frank spoke at a Ways and Means Committee hearing in the House of Representatives.

The House is considering two Internet gambling bills. One would legalize it. The other would require people to declare winnings from online gambling to U.S. tax authorities and set a 0.25 percent tax on wagers of all federally licensed bets.

While the multibillion-dollar Internet gambling industry is not illegal per se, it soon will be illegal for financial institutions to knowingly accept payment in online gaming transactions, under a law that is set to take effect in June.

That law makes an exception for fantasy football and horse racing.

If all states took part, taxing online gambling could raise about $42 billion over a decade, according to the joint congressional tax committee.

Frank first introduced his proposal several years ago, but it could gain momentum this time as lawmakers hunt for money to balance the $1.4 trillion budget deficit.

Washington Democrat Jim McDermott sponsors the tax bill, but not all Democrats back it. Some Republicans favor it, but others cited moral concerns.

"People sometimes resort to drastic things when they are strapped for cash," Representative Bob Goodlatte, a Virginia Republican, said. Still, he said states should be able to make the decision on their own.

States can opt out of the law if it passes. Utah and Hawaii ban gambling.

Privately held Harrah's Entertainment, the biggest casino company, backs legalizing online gambling, but not the House bill on taxation.

Rival MGM Mirage said it has no position on the tax bill, but supports legalization and taxation in some form.

The Obama Administration has not taken a position.

Gustavo A. Viera, CPA

       

US Senate approves sweeping reforms of Wall Street

The US Senate has passed a bill providing the most sweeping overhaul of financial regulations since the 1930s.

The Senate passed the bill by 59 votes to 39. It must still be merged with a version in the House.

The bill creates new ways to watch for financial risks and makes it easier to liquidate large failing firms.

President Obama said Americans would never again pay "for Wall Street's mistakes" adding that Wall Street had tried but failed to scupper the bill.

President Obama said Americans would never again pay "for Wall Street's mistakes" adding that Wall Street had tried but failed to scupper the bill.

Key points of the bill include:

• the creation of a new watchdog agency
• restraints on larger banks, allowing them to take fewer risks
• requiring borrowers to prove that they can pay back even the most basic of mortgages
• giving the Federal Reserve the power to take control of large firms at risk of collapse - and break them up if necessary
• reform of the complicated derivatives market.

Reconciling the bills

Democratic Party Senate Majority Leader Harry Reid said: "To Wall Street it says, 'No longer can you recklessly gamble away other people's money.'"

The bill must still be reconciled with a version passed in the House of Representatives in December.

Although there is much common ground between the two bills, there are also some differences.

The Senate bill is in some ways more aggressive on issues such as the regulation of derivatives - complex financial instruments that are largely blamed for accelerating the Wall Street crisis - and executive pay.

It says that banks would have to spin off their derivatives business, while the House bill would not require them to do so.

The Senate would also allow the Federal Reserve to set standards on what it deems excessive compensation. Under the House's bill, regulators would have a say on compensation practices, but not on pay itself.

The House bill goes further on consumer protection, calling for an independent Consumer Financial Protection Agency, whereas the Senate would create a Consumer Financial Protection Bureau within the Fed.

Barney Frank, head of a key House panel, said that he thought Mr Obama might be able to sign a bill into law before the 4 July holiday.

The president earlier said the financial industry had repeatedly tried to block the regulatory reforms, using lobbyists, millions of dollars in advertising and special interest "loopholes".

"Today, I think it is fair to say these efforts have failed," he said, in a statement in the Rose Garden of the White House.

'Decades to come'

The bill's progress had been stalled by some Republican leaders who did succeed in making some amendments.

Republican Senator Richard Shelby, who opposed the legislation, said: "The decisions we've made will have an impact on the lives of Americans for decades to come.

"Judgement will not be rendered by self-congratulatory press releases, but, rather, by the marketplace. And the marketplace does not give credit for good intentions."

On Wednesday, Republicans, aided by two Democrats, had blocked a final Senate vote on the bill.

But on Thursday, a vote to end debate on the bill was passed by 60-40, the minimum needed to succeed.

There is widespread public support for tightening the regulation of Wall Street.

European taskforce

Meanwhile, European finance ministers are meeting in Brussels later to discuss ways to prevent another crisis like the one in Greece.

They will look at Germany's unilateral ban on naked short-selling, as well as future co-ordination of such market-moving decisions.

Also on the agenda will be changes to EU budget rules, with one idea being to look at national budget proposals in the first six months of the year instead of the second six months.

Although they will be hoping to reach a consensus, the issue of tightening economic policy co-ordination could prove divisive.

Gustavo A. Viera, CPA

        

How to Start an Online Business

Establishing a business presence on the Internet can be a lucrative way to sell, market, and advertise your business’s goods and services.  The following topics provide details on how to start and manage an online business. 

1. Start a Business
   Regardless of where you choose to operate your business, certain general requirements always apply. Before you can begin completing specific online business steps you must follow the basic rules for starting a business. Use these tools and resources to help take you from preparing your business plan and to becoming a successful business owner.
2. Register a Domain Name
   A domain name is the web address of your online business. Choosing and registering a domain name is the first step to starting an online business. After you've chosen the name you'd like to register, the process is simple and cost-friendly. Where to register your name is up to the discretion of individual businesses.
   • Certified Registering Authorities
   • Internet Domain Name Registration Services
   • Abusive Domain Name Registration
   Be careful to avoid possible security risks by becoming aware of potential scams. The Federal Trade Commission issued a consumer alert about Domain Name Registration Scams.
   The Internet Corporation for Assigned Names and Numbers is the non-profit corporation that has technical oversight of Internet protocol address space allocation, protocol parameter assignment, domain name system management, and root server system management functions. It provides current news on issues surrounding domain names.
   For more information, check out Business.gov's guide to Registering a Domain Name.
3. Select a Web Host
   A web host provides you with the space and support to create your website. Choosing the host that best suits a business is up to the discretion of that business. Costs and abilities, such as site maintenance, search registration, and site development, vary from host to host but it is important for it to be both reliable and secure.
4. Design Your Website
   The website of your online business is extremely important to its success. Because you don't have a physical location, this is considered your "store front". Websites can be designed personally, by hiring someone to work as your site designer, or by using an independent design firm.
   Be sure to comply with U.S. trademark and intellectual property laws. The same laws and regulations apply to online businesses as regular businesses. Search for trademarks currently in use to avoid infringing on another company's rights on your website.
5. Begin Advertising and Marketing
   Similar to the traditional market place, online businesses cannot be successful without customers. For online businesses, these customers come in the form of site visitors or viewers. Generating the highest amount of traffic possible on your website will create the highest chance that those visitors will become customers. Register with search engines and use keywords that will drive the most traffic to your site.
   Advertising and marketing on the internet is regulated very similarly to the real world, and many of the same rules apply. The Federal Trade Commission has created several guides to help online businesses comply with these regulations.
   • Advertising and Marketing on the Internet: Rules of the Road
   • DotCom Disclosures: Information About Online Advertising
   For additional information, visit our guide to Online Advertising Law.
6. Comply with Online Business Regulations
   Online businesses must comply with special laws and regulations that apply only to them. A lawyer that specializes in internet law can assist businesses with all aspects of starting and operating an online business.Contact an expert at the Federal Trade Commission for more information.
   • The Anticybersquatting Consumer Protection Act of 1999
   • Selling on the Internet: Prompt Delivery Rules
   • Children's Online Privacy Protection Act
7. Find State and Local Compliance Information
   In addition to Federal requirements, businesses must know and comply with state and local laws and regulations. Select your state, county, and city to determine what's required of your online business.
8. Learn Federal, State, and Local Tax Requirements
   Online business are required to follow the same federal, state, and local tax laws as regular businesses. If you are operating your online business in a state that charges a sales tax; or levies a gross receipts or excise tax on businesses you may have to apply for a tax permit or otherwise register with your state revenue agency. Online businesses are responsible for collecting state and local sales taxes from their customers when applicable, and paying these taxes to state and local revenue agencies.
9. Understand International Trade Laws
   Operating internationally requires many additional considerations from finding overseas markets and suppliers to shipping and tax regulations. Follow international trade laws for online business to be sure you are in compliance with all regulations.

Gustavo A. Viera, CPA

        

How to Write a Business Plan

Writing The Plan

What goes in a business plan? The body can be divided into four distinct sections:

1) Description of the business
2) Marketing
3) Finances
4) Management

Agenda should include an executive summary, supporting documents, and financial projections. Although there is no single formula for developing a business plan, some elements are common to all business plans. They are summarized in the following outline:

Elements of a Business Plan 

1. Cover sheet 
2. Statement of purpose3. Table of contents

  I. The Business 
A. Description of business
B. Marketing
C. Competition
D. Operating procedures
E. Personnel
F. Business insurance

II. Financial Data 
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
F. Three-year summary
G. Detail by month, first year
H. Detail by quarters, second and third years
I.  Assumptions upon which projections were based
J. Pro-forma cash flow

       III. Supporting Documents 
A. Tax returns of principals for last three years Personal financial 
statement (all banks have these forms)
B. For franchised businesses, a copy of franchise contract and all 
supporting documents provided by the franchisor
C. Copy of proposed lease or purchase agreement for building space               
D. Copy of licenses and other legal documents
E. Copy of resumes of all principals
F. Copies of letters of intent from suppliers, etc.

Sample Plans

One of the best ways to learn about writing a business plan is to study the plans of established businesses in your industry.
Review examples of real business plans. 

Gustavo A. Viera, CPA

        

Greece Lists Tax Dodgers

Trying to crack down on rampant tax evasion, the Greek authorities have made good on promises to name — and shame — some of the worst offenders.

The Finance Ministry made public a list of 57 Athens doctors who officials believe are guilty of a variety of tax offenses, including failing to give patients receipts for their fees or even recording the visits.

Twelve of the doctors had reported a combined income of slightly more than $15 million from 2001 to 2008, yet they had deposited more than twice that much — about $39 million — in their bank accounts, the ministry said Thursday.

Experts estimate that the Greek government may be losing as much as $30 billion a year to tax dodgers, a figure that would have gone a long way to solving the nation’s debt problem.

When the authorities audited the tax returns filed by 150 doctors with offices in one of Athens’ most expensive neighborhoods last year, they found that more than half of them were claiming incomes of less than $40,000. Such an income would have made it virtually impossible to pay the rent.

Thirty-four of them claimed they earned less than $13,300, making them exempt from paying any tax. And tax inspectors said that one dentist in the area reported an income of just $375.

So far, 11 doctors have been fined a total of $5.4 million. The fines range from $70,840 for a radiologist to $1.7 million for the head of a diagnostic center. Some will face criminal charges.

The list dominated the television news cycle, though the doctors’ names were published in only a few newspapers. It drew fire from the general secretary of the Athens doctors association, Giorgos Eleftheriou, who told Imerisia, a business newspaper, that doctors were being unfairly singled out.

Gustavo A. Viera, CPA

       

States limit sweeping tax hikes

While much of the nation may be focusing today (May 18) on key U.S. Senate primaries in Arkansas, Kentucky and Pennsylvania, a special statewide election in Arizona could gauge voters’ temperature on the question of whether or not to raise taxes.

Arizona voters will decide whether to endorse Republican Governor Jan Brewer's proposal to raise the state sales tax by a penny to 6.6 percent. The proposed tax hike would last for three years, raising $1 billion. If approved, it would mark a departure from what many state legislatures have been doing in 2010 to balance their books.

Few states are going for across-the-board hikes in sales taxes, one of their major sources of revenue. Instead, they are slapping higher sales taxes on particular items, from tanning beds in Indiana to wind energy in Wyoming.

The Kansas Legislature is the lone exception thus far. Kansas bumped up its rate by a penny, from 5.3 percent to 6.3 percent starting July 1.

Compare these moves to last year, when California, Massachusetts, Nevada and North Carolina all went after higher sales tax rates.

If Arizona voters endorse the governor’s tax plan, they would join Oregon voters, who in January approved a general tax increase, although Oregon’s targeted corporations and the wealthy.

At least 28 statehouses have completed their sessions for the year. Some of the most cash-strapped states, such as California, New Jersey, Ohio, Pennsylvania and Rhode Island, are among those whose legislatures are still in session and working on new budgets that begin July 1.

While the revenue picture appears to be brightening, states are facing a third straight year of cutting spending and raising taxes and fees. And it won’t be the last. At least two more lean years are in the offing because tax collections plunged more than 18 percent during the recession.

Here’s how states are responding, thus far, on the tax front:

Higher taxes on candy and soda passed in Colorado and Washington State. A similar measure is pending in Massachusetts.

Cigarettes are still a target, as New Mexico, Utah and Washington all raised the tax by $1 per pack, while Hawaii boosted its rate by 20 cents. Over the governor’s objections, South Carolina raised its tax by 50 cents, so the state no longer has the lowest-in-the-nation cigarette tax (Missouri now holds that distinction). Sixteen states raised tobacco taxes last year.

The “Amazon” tax— essentially, enforcing the sales-tax law on Internet purchases — is still getting a look even though the legality of it is in question. Colorado acted this year. North Carolina and Rhode Island were among states that passed last year, following New York’s lead.

Discontinuation of tax breaks or exemptions is increasing. Colorado dropped a sales-tax exemption for “to-go containers” and other items ranging from printed materials used in direct-mail advertising to compounds used in agriculture. Iowa dropped $115 million worth of tax credits it didn’t think created jobs and suspended for three years its incentives for boosting film productions in the state. Hawaii suspended the claiming of technology investment tax credits and repealed deductions for political contributions.

Gustavo A. Viera, CPA