Deductions And The IRS Queue
Individuals and business seek tax write offs like customers at the mall on Black Friday. Write off is initiated by universal desire for deductions to gross, adjusted gross and taxable income.
Federal income tax deductions will reduce taxable income when qualifying as a medical expense, mortgage interest, charitable gift, property tax or as an expense associated directly with the production of income.
Deductions are an up-front consideration for tax write off when preparing tax return. Queue is a an after-the-fact tax write off consideration following a filed balance due return. With reasonable cause factual circumstances, an irs extension, queue and write off will be considered. Reasonable cause includes productive use of irs resources.
Deductions taken on a filed return are temporary in nature due to irs right to examine and accept deductions claimed on return. Temporary is 3 years from the date return is filed.
Responsibility for prompt filing of return, and payment of tax, cannot be canceled or deferred automatically. For this reason, case facts voluntarily reported will support a request for write off. Write off is either temporary or permanent in nature.
Example queue (temporary) tax write off situations are,
Amended return. an amended return will change and correct erroneous deductions reported on an orginal return already filed and posted. The change will either increase or decrease tax. Any irs debt tax decrease will qualify the amended return for deferred compliance and queue on any reduced amount. Following examination and approval, any reduction of tax amount originally reported will provide a basis for permanent write off and removal from queue.
Bankruptcy . filing a bankruptcy petition will not disturb deductions taken on an original return and will not operate to change any amount due on return. However, a balance due return will qualify for temporary relief and irs queue from the date petition is filed through the date of dismissal or discharge. Following discharge or dismissal, old tax better than 2 years due and owing and assessed over 240 days, will go away for cancellation and permanent write off. A filed lien does not go away.
Compromise . proposing compromise or settlement has nothing to do with deductions, but all to do with balance due. During compromise processing, a return balance due
qualifies for temporary irs queue. Following examination, acceptance will provide permanent write off for tax debt forgiveness, cancellation and removal from queue when all compromise terms are satisfied.
Claim For Refund. processing a claim for refund provides individuals and business and the irs with opportunity to fully explore the merit of a claim which can include deductions. Thus, during processing, a return balance due qualifies for temporary queue. Following examination, approval will cancel tax erroneously or improvidently assessed for permanent write off and removal from the queue.
Hardship . processing an application for hardship considers exemptions and necessary living expenses as deductions. Temporary write off and irs queue is available during processing. Following processing and approval, an application reflecting gross income entirely encumbered by exemptions and necessary living expenses will qualify the balance due for continued deferred compliance in the irs queue.
Non-taxable return. the irs will not impose on requirement to file a tax return reflecting minimal or no tax due. Following a filed voluntary statement to that effect, verbal or written, pursuing a non-taxable return is not productive and qualifies for write off and queue at irs discretion.
Pay plan . qualified deductions are exemptions and necessary living expenses. The difference between gross income and qualified deductions is disposable income. The amount of disposable income is the pay plan amount; with an approved pay plan, the balance due qualifies for write off and queue until the tax is paid in full.
Penalty abatement. a request for penalty abatement qualifies for deferred compliance, temporary relif and irs queue, during processing stage. An approved request to abate penalty will provide cancellation, permanent write off and removal from irs queue.
Ten-year recovery statute. there is no provision for temporary write off in anticipation of prescription of recovery statutes. Normal running of the recovery statute for a return balance due can be suspended by agreement, certain litigation situations such as TAO and bankruptcy and a processable offer to compromise tax.
Individuals and business and the irs recognize there is mutual benefit in reporting deductions accurately, and in reaching agreement to write off a balance due.
Pose a tax question or concern about deductions, the irs queue and tax write offs.
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