How to Respond to an IRS Notice of Deficiency

An IRS Notice of Deficiency is official confirmation from the IRS that you have not paid the complete tax amount that you owe to the IRS. This notice is issued to the taxpayer when the information on the tax return filed by the taxpayer does not meet the information provided by the employer or the information collected by the IRS from third-party sources.

When does the IRS issue the Notice of Deficiency?

When the IRS finds any confirmed mismatch or discrepancy in your information, it issues a statutory notice telling the taxpayer to pay additional income tax, which also includes interest and penalties. It is issued if a taxpayer fails to respond to the communication initiated by the IRS in a pre-assessment letter. The failure to timely respond to this pre-assessment letter or 30-day letter results in a 90-day letter, or the Notice of Deficiency. Your Notice of Deficiency includes an explanation of adjustments to the taxpayer and how the IRS has calculated the deficiency.

What to do when you receive a Notice of Deficiency

You have two options to respond to the Notice of Deficiency: either agree to the additional tax liability by signing a Waiver Form 4089 or challenge the tax deficiency in U.S. Tax Court(!)

The applicant has 90 days to file a claim in the U.S. court. The 90 days are counted from the date the Notice of Deficiency was mailed to the taxpayer’s last known address. The IRS cannot collect or perform any assessment unless the 90 days expire or a Tax Court decision is finalized.

If you need assistance with how to respond to your IRS Notice of Deficiency, you can contact the experts at Agro Accounting CPA.

What a Certified Public Accountant Exactly Does

Many people often use the terms accountant and Certified Public Accountant interchangeably. After all, these terms do not matter unless you are looking for something beyond tax preparation. However, if you ever need audit representation, auditing and other attestation services, forensic research, income tax services for small businesses, or anything else that requires a CPA, you must know clearly the difference between a staff accountant and a Certified Public Accountant.

What is a CPA?

CPA stands for Certified Public Accountant. A CPA does much more than taxes. A CPA works with businesses or individuals on auditing, forensic research, financial consulting, investment accounting, tax planning, and much more. A CPA is skilled in various forms of accounting.

How to Become a CPA?

To become a CPA, an accountant has to meet various requirements. The terms and conditions to become a CPA vary from state to state. But still, there are some common conditions that every accountant has to fulfill to become a licensed CPA that include:

• A CPA must have a bachelor’s degree in accounting with at least 150 credit hours
• A CPA must have at least two years of proven public accounting work experience
• A CPA must have passed all four parts of the CPA exam, which is the same from state to state and covers the same topics. The exam includes topics like auditing, financial accounting and reporting, regulation, investment accounting, and more
• Many states have state-specific additional requirements for an accountant to apply for a CPA license, which CPAs have to follow

How to Find a Good CPA?

The best way to find a good CPA is to search online for accountants in your area or seek references from family, friends, and colleagues. Just make sure you perform basic research like checking for a license number, asking about experience, and reading reviews before hiring a Certified Public Accountant.

Agro Accounting CPA is the name to count on for all your accounting needs. If you need any assistance in filing your taxes or bookkeeping, we are here at your service!

How to Respond to IRS Notice CP2000

 

A taxpayer receives the IRS CP2000 Notice when the information provided on a tax return by the taxpayer does not match the information the IRS has from third-party sources. It is also (less commonly) called an underwriter inquiry. The automated system of the IRS sends this notice to the taxpayer when it detects some discrepancies with the tax return. Thus, the notice you receive may or may not be correct. There are three courses of action when responding to an IRS CP2000 Notice:

• You can agree with the IRS CP2000 Notice
• You can disagree with the IRS CP2000 Notice
• You can partially agree with the IRS CP2000 Notice

Here is how to respond to the IRS Notice CP2000:

If you agree with the IRS CP 2000 Notice, you have to respond back to the IRS with the response form and payment (if applicable). You can ask your accountant to respond to the notice for you. The notices from the IRS are not audits, but they work similarly. If you owe any amount to the IRS in taxes, pay it out with the response form and explanation.

If you do not agree to the IRS CP2000 Notice, you can complete and return the response form. There, you have to specify your reason(s) for not agreeing to the notice and supply any documentation to support your statement. If the information reported to the IRS by a third party is not correct, then you can contact the third-party information provider to correctly update it with the IRS.

If you partially agree with the IRS CP2000 Notice, you need to respond via mail explaining your position to the IRS with the required forms and attached documents. You need not amend your return. Just provide the IRS with the right information. If it accepts your explanation, the IRS will update it on its end.

Get in touch with Agro Accounting CPA to get help with your response to IRS Notice CP2000.

All You Need to Know About IRS Notice CP3219A

 

Sometimes taxpayers receive an unexpected letter from the Internal Revenue Service (IRS). Many taxpayers get stressed out by such notices. However, there is nothing to panic about. You should have proper knowledge about IRS notices and the steps you can take after receiving one.

Here we are discussing IRS Notice CP3219A, which is the IRS Notice of Deficiency. In simple terms, this notice indicates that you owe an additional payment to the IRS. In most cases, this situation arises when the IRS receives information from a third party about your income standing.

The good thing is that this notice is really like a proposal. You have the option to agree or disagree with this notice. If you agree, then you can send in the extra payment. But if you disagree with the notice, then you can file a petition. Taxpayers have their own legal rights, and they can take immediate action whenever necessary.

A Short Guide To Doing Your Taxes As An Artist

 

Many people don’t get an opportunity or platform to earn a living from their talent or artwork. There is nothing better than turning your passion into a profession. There are many perks of working as an artist and making money. But along with that, it also adds on some responsibilities, such as managing your finances, profit and loss reporting, transaction bookkeeping, and taxes. Let’s quickly learn what an artist should know about taxes.

●     When you start earning as an artist, it would mean you have a profit motive. Now, you will have to behave like a business. You can be a painter, musician, sand artist, singer, or an actor; whatever. But from the moment you start practicing your art for money, then you must start behaving like a business.

 

●     Keep track of your expenses and know the expenses that you can deduct. As an artist, some of your expenses, like art supplies, studio rent, phone, and internet bills are deductible. And, if you spend money on research like museum trips, art gallery visits, or fairs, it will also fall under a deductible expense category.

●      As a professional artist, you should keep a record of all your receipts, invoices, and bills. Also, don’t mix your personal and professional expenses. Open and use a separate bank account. Whatever you spend for business purposes should be used from the business account only.

The final word

When you decide to become a professional artist and earn money from your artwork, consult with an accountant. You can also hire an expert who can help you in tax preparation for artists. If you don't have much knowledge about finances and taxes, then taking professional assistance becomes necessary. You will have to accept that art is now not just your passion but also the source of your income.

Common Accounting Mistakes

 

Many people, like small business owners, manage their financial accounts themselves. In such cases, there are high chances of errors. Small mistakes can be easy to correct, but a severe mistake can affect the financial health of your business. Taking the help of a professional and hiring an accountant for freelance workers or small business owners can reduce accounting mistakes. In this column, we will learn about the top 4 accounting mistakes.

1. Failing to reconcile accounts

The first thing to do is recording cash flow and other financial data in your books. Then, you should also ensure that your bank account reflects the same balance as your books, transaction timing aside. A gap between the two can be an error that needs immediate action.

2. Not recording small transactions

This is a very common mistake. People often neglect small transactions and don’t keep receipts or records for them. Keeping record of every expense is essential to your business, no matter how insignificant it may seem: eventually, small transactions add up.

3. Not backing up data

Most people use accounting software for bookkeeping and/ or other operations. But along with the various advantages, there is a problem to this: if you lose your data and don't have it backed up anywhere, you will face troubles. There are high chances of data or financial information being lost, hacked, or stolen. So, it is essential to keep a backup of your data.

4. Lack of planning

Accounting and bookkeeping require excellent planning and organization skills. Tracking and storing your information properly is necessary. A small mistake or error may cause you trouble.

The final word

If you want to prevent these technical errors, avoid managing your own financial accounts. Rely on a professional accountant instead. It will reduce the chance of errors, and you will get better and more reliable results.

If you are looking for an affordable Certified Public Accounting firm that is an expert in company formation, then please know that at Agro Accounting CPA, we have a range of solutions that can help you in every aspect of your business. We do everything from tax preparation to bookkeeping, company formation & tax ID issuance, and audit representation.

A Guide to Tax Settlement: Benefits and Eligibility Criteria

 

A tax settlement is a discounted arrangement regarding taxes owed that is acknowledged by the IRS or the state taxing authority. It is also known as an offer in compromise. Under this settlement, a taxpayer is allowed to extinguish an outstanding tax debt for less than the actual amount owed. Some extenuating circumstances that have prevented taxpayers from paying their taxes owed are accepted by the IRS. Taxsettlement services can be best carried out through proper guidance.

 

Not every kind of situation is considered for tax settlement. Tax settlement may be based on the current circumstances of the taxpayer and applicable tax regulations. Let’s discuss tax settlement in this blog.

 

How can an IRS settlement benefit you?

 

Negotiating a tax settlement can benefit you in these ways:

 

●     Pay less: The first obvious benefit is that you will be able to pay less to the tax authority than you actually owe. Given the situation of the taxpayer, a tax settlement can be determined and presented in a short time span. Once you pay the balance on the mutual agreement, the tax account is taken to be settled in full, leaving you with no late fees and other penalties.

 

●     No need for Liens and Garnishments: The other benefit offered by a tax settlement is that the taxpayer does not need to suffer from a tax lien on his/ her home or business.

Who is eligible for a tax settlement?

 

The IRS offers the settlement option to taxpayers who have a difficult time paying off their tax debts or have a valid reason for their penalties to be abated. Not everyone is eligible for such tax settlement.

 

The main factor considered is the financial hardship of the taxpayer. Their financial situation is analyzed, and if the tax authority comes to the conclusion that the financial situation is not favorable, then the taxpayer is taken to be eligible for tax settlement. Financial hardship is a good indicator of tax settlement.

 

For more clarity, you can take the help of Tax Services for Freelance Workers to check if you are eligible and how a tax settlement could benefit you.