Hold Your Horses on Filing Your AZ Taxes

Hold your horses Arizona! AZ residents may want to delay filing their AZ taxes. (Actually, many software packages do not yet permit filing AZ electronically yet.) Historically, AZ will sign a bill to conform to any Federal tax law changes, so the Arizona Department of Revenue prepared the 2018 tax forms with the Federal tax changes in mind. State lawmakers mean well, but throw a monkey wrench in the tax filing season. However, when the State lawmakers put the conformity bill on Gov. Ducey's desk they added a "small" tax cut of $150 million according to the Arizona Star. Lawmakers believe that the changes in the Federal tax code could result in Arizonans paying $150 million more in Arizona taxes. Wanting to avoid a windfall to Arizona, they proposed a tax rate cut to fix the problem. Unfortunately, this retroactive tax cut would require changes to software programming involved in e-filing and THAT is no small feat in an already complicated tax season. Therefore, Gov. Ducey refused to sign the bill stating "Let me be VERY CLEAR on this point: I will veto any budget that doesn't align with these tax forms." What is at the heart of the problem? Generally, Arizona permits the same deductions as used for the Federal tax return. When the federal tax code changed, eliminating or limiting some deductions in favor of a higher standard deduction, Arizona law did not change. Arizona must sign a bill to conform to the federal tax code. However, Arizona has not raised it's standard deduction, therefore, if Arizona conforms to eliminate many deductions, without raising the standard deduction, Arizonans will pay more in income taxes. Lawmakers could have fixed the problem last year. Lawmakers knew that had to pass the conformity bill last year, just as they know every year that there is a change to the federal tax code - which is almost every year. However, the lawmakers adjourned in 2018 without taking any action. Enrolled Agents visited the legislature in January to request that lawmakers take action as soon as possible to conform to federal law. Now, lawmakers want to take action and retroactively add a tax cut. Can they use the windfall to give teachers a bonus? I am not a fan of Arizona income tax increases caused by changes to the federal tax code. I understand the lawmakers position on the issue which could have been addressed last year. However, unless Arizona wants to unduly delay the filing season, we need to move forward. Perhaps Arizona could use the $150 million anticipated windfall and divide it between our 90,000 teachers as a one time bonus of $1667. Or, maybe fix the bone-jarring section of AZ Highway 69 southbound right before Humboldt, AZ. What happens if you file your AZ tax return now? Unfortunately, my approach is unlikely to be even considered. In the meantime, Arizonans are still awaiting a conformity bill before we can begin filing AZ taxes. If you choose to file your AZ taxes before the bill is approved, you may have to amend your AZ tax return.

Prescott Tax and Paralegal, your tax resolution specialist in Prescott, explains your options when you are in tax trouble

A letter from the IRS is rarely a good thing. One of the most dreaded letters to get from the IRS is the CP90 – Final Notice Before Levy. It is a final warning shot to scare you into paying and should not be ignored. If you find yourself on the receiving end of an IRS letter, Prescott Tax and Paralegal, your tax resolution expert in Prescott, wants you to be aware of your options.

After an IRS final notice, you could:

• Pay in full – most people would have already done that if they could have afforded it
• Sign on for an installment agreement on your own - with penalties and interest so excessive it feels like it will continue until you die.
• Ignore them - and wait for terrible consequences like garnished wages and tax liens. Don’t do this, ever.
• Contact your tax resolution professional to see what your resolution options are.

The CP90 intends to intimidate you into calling the IRS so the tax man can take as much as possible from you even if it leaves you in dire financial straits, unable to pay your bills or support your family.

A better option is to work with a certified tax resolution expert that can negotiate on your behalf for better results. A tax expert can pursue resolutions that would be difficult - if not impossible - to negotiate on your own. Here are four options to deal with tax debt.

Offer in Compromise (OIC): An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. It can be far more reasonable than an IRS installment agreement, but you have to see if you qualify based on your unique financial situation and specific case.

Installment Agreement (IA) or Partial Payment Installment Agreement (PPIA): These are well-structured installment agreements that can slash penalties by 50%. The IA is an agreement to make monthly payments on what’s owed in full while a PPIA lets you make a monthly payment that does not pay the total owed. You must qualify for a PPIA based upon your financial circumstances. These agreements generally run 6 to 72 months.

Penalty Abatement (PA): This agreement strips away penalties tacked onto your tax balance. Penalties include failure-to-file, failure-to-pay, and failure-to-deposit (for business owners). If you’ve never had a penalty before, a first-time abatement (FTA) penalty waiver may apply. Otherwise, your tax relief consultant can fight for a reasonable cause abatement if any of the following apply:

• Illness, death, or incapacitation of the taxpayer or their immediate family
• Fire, casualty, natural disaster, etc. affecting the taxpayer
• Inability to obtain records and documents
• Currently Not Collectible (CNC)

In cases of extreme financial hardship, your tax rep can argue that you can’t afford to pay anything. With this option, your tax debt goes on the back burner, and you make no monthly payments although penalty and interest keep accruing. The big advantage of CNC is that the 10-year statute of limitations on collection keeps ticking so you might be able to ride it out and pay nothing on the tax debt.

If you’ve received an IRS final notice or threatening letter, don’t ignore it. Instead, contact Prescott Tax and Paralegal to speak with a tax resolution specialist in Prescott to get the IRS off your back for good. To schedule an appointment, call us at 928-778-3113. Learn more about the services we offer at http://www.PrescottTax.com.

ADDITIONAL INFORMATION
Enrolled Agent in Prescott
Prescott Income Tax Preparation
Helpful Tax and Paralegal Articles