If you suspect that an individual is not fulfilling his or her tax obligations (for example he or she is evading taxes), you have a right to report this to the IRS. You do so by filling in Form 3949-A Information Referral and sending it to the IRS in Fresno, California. Alternatively, if you wish you may send a letter with the relevant information. Your letter should contain the name and address, social security number (or business employer identification number) of the person (or business) you are reporting, a description of the alleged transgression done, including how you came to know about the case, how long has the alleged violation been going on, the estimated dollar amount of any unreported income and finally, your name, address and telephone number.

If you do not wish to identify yourself to the IRS, you may remain anonymous. But you may want to consider revealing your identity in case the IRS decides to reward you as the whistleblower. Among other things, you may use Form 3949-A to report the following:

• False Exemptions or Deductions
• Kickbacks
• False/Altered Document
• Failure to Pay Tax
• Unreported Income
• Organized Crime
• Failure to deduct Withholding taxes

But not all transgressions of tax law should be reported using Form 3949-A. You should not use 3949-A when it is a case of:

• Identity theft
• Fraudulent activity by a tax preparer
• Unauthorized change made to your tax return by a tax preparer
• Abusive tax promotion
• Wrongdoing by an organization exempted from tax
• A piece of information for which you seek a reward
• Phishing activity by persons or organizations impersonating the IRS

For more information on Form 3949-A, check out the IRS website at www.irs.gov.

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Today, I’ll conclude on my article yesterday about how to correct FICA withholding errors on your employees’ wages. As I said yesterday, it’s easy to make withholding mistakes, so keep IRS Publication 505, "Tax Withholding and Estimated Tax," handy, and consult with a tax professional if need be. So what can you do if you overpaid in your withholding?

For overpayments of FICA taxes, you as the employer may make an adjustment or seek a credit or refund of the employer share of the FICA tax. Generally, you cannot seek the employer’s share of overpaid FICA taxes unless you in your capacity as a fiduciary also seek the employee’s share. This makes things a bit more complicated for you, as you have to obtain consent from your employee to claim the credit or refund on his or her behalf.

In some instances, you must obtain a certification that your employee has not sought and will not seek a refund for the same overpayment amount. However, this requirement does not apply when the taxes were not withheld from the employee. It also does not apply in a situation when after you have made reasonable efforts to repay or reimburse your employee or secure his or her consent, you cannot locate the employee or the employee will not provide consent.

 

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The Federal Insurance Contributions Act (FICA) stipulates that all employers and employees must contribute 12.4% of annual income must be paid for Social Security tax and 2.9% into Medicare up to a total of $113,700. These funds are for financial and health welfare of all salaried workers. While there is a cap on your salary below which you are obligated to contribute to Social Security, there is no such cap for Medicare contributions, meaning no matter how much you earn, you still have to contribute to Medicare.

As a salaried worker, you pay only half the FICA bill i.e. 6.2% for Social Security plus 1.45% for Medicare, while your employer contributes the rest. This tax is automatically withheld from your salary every month.
In this article, I’m going to assume you are the employer with some staff members you are responsible for. As an employer, you are to make the correct withholding on your employees’ salaries. But it is not uncommon for human errors to creep into the calculations for withholding. If the error is discovered within the same tax year, it is quite easy to rectify. But more often than not, this is not the case. When the error is discovered in the following year(s) after the wage payment, the process for correcting it may not be so straightforward. The way to do so would depend on whether the error is an overpayment or underpayment.

Let’s consider how to amend underpayments. If you as an employer fail to make a withholding of an employee’s FICA taxes in either a current or a subsequent year, you can make an adjustment when the error is discovered to the quarter in which the underpayment occurred. Use Form 941- X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund to make the correction.

On the other hand, if you discover the error after the calendar year when wage was paid, you should also provide the employee and the Social Security Administration a corrected Form W-2 (Form W-2c) that shows the additional FICA earnings, if applicable, for the prior year and FICA tax withholding as if you had made it correctly.
These regulations allow you to recover the FICA tax from your employee’s pay that you paid on the employee’s behalf. If you do not recover the amount from your employee, the payment of FICA tax you made is current wage compensation subject to FICA and income tax withholding and is reflected on the employee’s year-end Form W-2.

So that’s what to do in the event of underpayment of FICA taxes. Tomorrow I shall write about what to do about overpayment.

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The National Taxpayer Advocate Service (TAS) is designed to help you, the taxpayer resolve your issues with the IRS when normal channels of resolution have failed. The TAS is an independent body that reports directly to Congress so they help keep the IRS in check. The TAS offers its services for free but there are some eligibility criteria you must fulfill. Here they are:

1. Economic harm or potential economic harm

If an IRS collection action has resulted in financial and economic distress to you, for example you are threatened with eviction or foreclosure, or you cannot afford to pay your utilities, then you qualify. However, you will have to substantiate the hardship.

2. Imminent IRS adverse action

If you are at the verge of some enforcement action by the IRS against you with written notice having been given, then you are eligible for TAS help.

3. Significant costs (including legal fees for professional representation)

If you will incur significant costs in the immediate future if relief is not granted, then you qualify for TAS.

4. Irreparable injury or long term adverse impact

Without resolution to your tax problem, you will be subject to serious injury or adversity in the long term. This is a criterion for TAS help.

5. Delay of more than 30 days

If you have waited for more than 30 days after the time the IRS set to resolve a tax problem, you are eligible for TAS assistance.

6. No response within deadline

When you have not even heard from the IRS by the time a deadline has elapsed, you should approach the TAS for help.

7. IRS system or procedural failure

If an internal IRS system or procedure has caused the problem, then you may be eligible for TAS assistance. For example, you experience a delay in your tax return processing because the IRS failed to give you credit for a full payment made on your past taxes and now your present year’s tax refund is being withheld due to this.

8. Improper administration of tax laws

If you are a victim of unfair administration of any tax law, or your rights as a taxpayer have been violated due to this, then you qualify for TAS help.

9. Compelling public policy

If the National Taxpayer Advocate has determined that compelling public policy warrants assistance to you, then you qualify.

If you are already subject to collection procedures by the IRS such as wage garnishment, bank levies etc, the TAS cannot remove such actions. But the TAS does know IRS policy and how to help you navigate it. The advocate will listen to you, help you understand what needs to be done to resolve it and guide you every step of the way until your problem is resolved.

To contact the TAS, call the toll-free line at 1-877-777-4778. For more information, refer to IRS Publication 1546.

 

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If you’ve not heard of the National Taxpayer Advocate, it’s an organization within the IRS that protects the rights of the taxpayer in tax matters. The position is currently held by Ms. Nina Olson and she answers directly to Congress. Each state is represented by Local Taxpayer Advocates, a group of over 2,000 employees who are autonomous of any nearby IRS office. Each Taxpayer Advocate office communicates with you independently from other IRS offices using a separate phone, fax, and mailing address. They also have the discretion not to disclose to the IRS any information you give them, or even inform the IRS that you’ve contacted them.

So if you have a tax problem that has hit an impasse with the IRS, I would suggest you approach the Taxpayer Advocate Service (TAS). Here are some situations where the TAS would be helpful:

• Where IRS actions prevent you from providing for necessities such as housing, transportation or food

• When you cannot afford the cost of professional legal help to represent you in resolving their tax challenges with the IRS

• If you own a business and are unable to meet basic expenses such as payroll

• If you have been kept waiting more than 30 days to resolve a tax related problem, or are not receiving a response by the date promised

• If you have waited past the deadline that was set by the IRS to resolve your problem, and there is no official word from the IRS on the matter

The TAS has a team of advocates whose job is to give the most relevant advice for faster resolution of a taxpayer’s complaints. To get help from the TAS, you have to fulfill some eligibility criteria. Their services are totally free of charge and ideal for those who cannot afford tax attorneys.

Will contacting the TAS work for you? It has for many taxpayers, so you won’t know till you try. The TAS has offices in every state as well as in the District of Columbia and Puerto Rico. Look them up in the phone book. You can also refer to IRS Publication 1546 for more information about the Taxpayer Advocate Service and find out how the services can help you resolve your tax related problems. Another way to contact the Taxpayer Advocate Service is by filling and submitting the IRS Form 911.

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