Frequently Asked Questions
Q: Where can I find information about the Government's response to COVID-19 and available relief?
A: Mopsick Carrere, LLP has prepared a resources page dedicated to COVID-19 information with many informational links on relief made available by the Government in response to COVID-19. The COVID-19 resources page can be accessed here. You can also contact Mopsick Carrere, LLP for assistance.
Q: When are estimated tax payments due?
A: Estimated tax payments are due quarterly for the IRS on April 15, June 15, September 15, and January 15.
Q: What is an FBAR and when is the due date to file?
A: An FBAR form is required to be filed with FinCEN to report foreign financial accounts when the aggregate value exceeds $10,000 in a calendar year. The FBAR is due on April 15th. An automatic extension is available extending the due date to October 15.
Q: What is the penalty if an FBAR is not filed on time?
A: The penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. Non-willful violations are subject to a $10,000 penalty per violation.
Q: What is the statute of limitations on collection of federal income taxes?
A: The statute of limitations on a federal tax debt is 10 years from the date of last assessment. There are a number of events that can toll the statute of limitations.
Q: Do I have to pay a ten percent penalty if I withdraw funds from my retirement account before age 59 1/2 when I use that money to pay my taxes?
A: Yes. The 10 percent penalty on early withdrawal of retirement funds applies even if those funds are used to pay taxes. The ten percent penalty does not apply if the IRS levies a retirement account.
Q: How do I obtain an Employer Identification Number ("EIN") for my business?
A: An EIN is obtained by completing and filing form SS-4 with the Internal Revenue Service. The process can be completed online at the IRS website and by phone.
Q: How do I make a tax payment if I do not have a bank account?
A: Taxpayers with no bank account are commonly referred to as "unbanked." Unbanked taxpayers can make tax payments to the Internal Revenue Service by making an appointment at a field office to deliver a cash payment. This procedure is common in the developing cannabis industry.
Q: Should I file an income tax return even if I can't afford to pay the tax?
A: Yes! Always file a proper and accurate income tax return on time, as it will avoid the penalties for failing to do so.
Q: What do I do if I am audited by the IRS?
A: The IRS will ask for a variety of items to verify your income tax return is correct. The first thing you will need to do is notify both your CPA and tax attorney. Then, with their guidance, begin assembling the documents relied upon in preparation of your income tax return. Documents may include bank statements, cancelled checks, receipts, deposit slips, etc.
Q. What is the difference between and offer in compromise (OIC) for doubt as to liability, and an OIC for doubt as to collectibility?
A. An OIC based on doubt as to collectibility is to settle a tax debt for an amount less than the tax liability when a taxpayer is financially unable to pay the tax liability in full before the statute of limitations expires. An OIC for doubt as to liability is to settle a tax liability for less than the amount owed because the validity of the liability itself is questionable.
Q. What happens if I have an accepted offer in compromise and do not meet the terms?
A. The IRS can default the accepted offer, reinstate the entire liability, and resume its effort to collect.
Q. What happens if I can no longer afford my IRS installment agreement?
A. If there is a change in circumstance, you can advise the IRS and ask to have the payment reduced. In many cases where the installment payments are no longer affordable, the agreement defaults due to a missed payment requiring negotiation of a new agreement. It is important to establish a new agreement in the appropriate amount to avoid enforced collection by lien or levy.
Q. How much time does the IRS have to audit an income tax return?
A. In most cases, the IRS has three years to audit an income tax return from the due date of the return, or the date it was filed, whichever is later. The IRS has six years if there is a substantial understatement of income, and there is no time limit to audit a return when there is fraud.
Q. What is an eggshell audit?
A. An eggshell audit is the civil audit of a tax return that contains a fraudulent position (intentional understatement of income, overstatement of deductions, or claiming a credit for which the taxpayer is not eligible), but the agent auditing the return is not yet aware of the fraudulent position within the return.
Q: What is a will?
A: A will is a legal document that sets forth wishes for the distribution of property upon one's death.
Q: What is a revocable living trust?
A: A revocable living trust is a legal entity used primarily for estate planning purposes which holds title to property and sets forth the wishes for the distribution of that property upon one's death. A revocable living trust is used to avoid costly probate proceedings. A trustee manages and controls trust property, and is usually the same person that formed the trust.
Q: What is an advanced healthcare directive?
A: An advanced healthcare directive identifies in advance the medical decisions to be made for a person if that person becomes unable to make medical decisions for themselves.
Q: What is a durable power of attorney?
A: A durable power of attorney grants authority for someone to act on behalf of a person, even after that person becomes incapacitated.
Q: What happens if myself or a loved one passes without an estate plan in place?
A: Your estate will be distributed on State intestacy laws that applies when someone passes without a will or trust in place.
Q. What is probate?
A. Probate is a court proceeding to determine if a will exists and if it is valid, identify beneficiaries of an estate, wind-down an estate, and distribute property of the estate to the rightful heirs. Probate is required in the State of California when certain assets of an estate exceed a specified dollar threshold. Proper estate planning can help minimize the chance a probate will be necessary.
Q. Can I amend my will?
A. Yes. A codicil is a legal document used to amend a will so rewriting the entire will is not necessary.