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Disclosures

Disclosures

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Confidentiality

Taxpayers should note that all communications throughout the tax preparation process with an Enrolled Agent are confidential, but not privileged, and may be disclosed if a summons is issued. The working papers for an engagement are the property of the Enrolled Agent and constitute confidential information. Any requests for access to these materials must be discussed with the client before making them available to other parties. more... Limited privilege may be available during the representation process under IRC §7525. Clients may advise an Enrolled Agent to assert this privilege in non-criminal tax matters involving the Internal Revenue Service or federal district courts, but should be aware that disclosure of information considered during the tax preparation process is not covered under the privilege—only tax advice communications are covered. Clients should immediately engage legal counsel if they have any concerns regarding possible criminal matters. less...

Privacy

An Enrolled Agent does not disclose nonpublic personal information about current or former clients to anyone unless instructed in writing to do so by a client. Access to nonpublic personal information is restricted to those professionals who may assist in the preparation of a client's return or who provide tax advisory and bookkeeping services. Monica Haven, E.A. has instituted all reasonable measures, including physical, electronic, and procedural safeguards to protect her clients' nonpublic personal information. Clients, however, assume the risk of loss of confidentiality and/or tax documents during unencoded electronic transmission via the internet or mailing via U.S. Post Office and third party delivery services.

Use of Information

Unless authorized by law, Monica Haven, E.A. cannot use any tax return information for purposes other than the preparation and filing of her client's return, without express written permission from the client. However, in addition to tax preparation services, Monica Haven also offers year-round financial consultation and tax planning services. These services will be happily provided upon request and with the client's written consent.

Extensions

Individual and business taxpayers may file requests with federal and state tax authorities to extend the deadline for filing but should note that such extensions merely extend the deadline for submitting tax returns and all associated paperwork. Filing extensions does not extend the time for payment; therefore, interest and penalties will continue to accrue on any unpaid balances. Taxpayers are advised to contact the tax authorities to establish an installment plan or make other acceptable arrangements for payment in the event that any balance due cannot be paid in full in a timely fashion.

Supporting Documentation

Taxpayers are required to maintain the necessary documents and records to support any deductions claimed on their tax returns. Federal and state laws provide for the imposition of penalties in the event of substantial understatement of a tax liability. The tax authorities regularly question whether any cash or bartering transactions have transpired and closely scrutinize expenditures, including but not limited to travel and entertainment expenses, business use of automobile and cell phones, as well as charitable donations. Tax practitioners are required to provide full disclosure to tax authorities should estimates or reconstructed data be entered on the return.

Estimated Tax Payments

Aware of the filing deadlines, most taxpayers comply, but are then occasionally surprised to receive subsequent invoices from various tax authorities for late payment. Separate penalties apply for late filing and late payment. To avoid the latter, the tax liability should be pre-paid by establishing proper wage withholdings or making timely estimated tax payments each quarter. Individual taxpayers may avoid the Late Payment (or underpayment) Penalty under the federal Safe Harbor Rule: more...

  • Total withholding and estimated payments must equal the lesser of either (a) 90% of the current year's tax or (b) 100% of the prior year's tax [110% if the taxpayer's adjusted gross income (AGI) in the prior year was over $150,000 ($75,000 if Married Filing Separately], or
  • The tax due for the current year, after subtracting withholding and refundable credits, is less than $1,000, or
  • The taxpayer was a U.S. citizen or resident and had no tax liability on the prior year's return that covered a period of 12 months.

States have distinct rules. In California, for example, the Safe Harbor Rule requires that:

  • Total withholding and estimated payments must equal the lesser of either (a) 90% of the current year's tax or (b) 100% of the prior year's tax [110% if the taxpayer's adjusted gross income (AGI) in the prior year was over $150,000 $75,000 if Married Filing Separately)], or
  • The tax due for the current year, after subtracting withholding and refundable credits, is less than $500 ($250 if Married Filing Separately).

NOTE:  California's high-income taxpayers with earnings in excess of $1 million must pre-pay at least 90% of their current year liability and may not rely on the prior-year liability to avoid underpayment penalties. Additionally, California now requires taxpayers who owe more that $20,000 per quarter to submit their payments electronically. less...

Penalties

Taxpayers may be subject to civil and criminal penalties for a variety of transgressions. Below is a partial list of the most commonly encountered federal penalties – Note that state tax authorities may independently assess separate (but similar) penalties as well.

Violation IRC Code Maximum Penalty
Late Filing / Failure to File a Return § 6651(a)(1) 5% of unpaid liability for each full or partial month that the return is late [maximum= 25%]. If the return is > 60 days late, the minimum penalty is $135. There is no penalty if the return shows a refund
Late Payment / Failure to Pay Tax § 6651(a)(2) 0.5% of unpaid liability for each full or partial month that the payment is late [maximum= 25%].
Underpayment of Estimated Tax § 6654 In addition to the Late Payment Penalty [see above], interest is assessed at the applicable federal rate for each day that the payment is late.
Accuracy-related Penalty § 6662 20% of underpaid liability due to:
  • Negligence – Failure to make a reasonable effort to comply with the tax law, including failure to keep adequate records or use ordinary and reasonable care in preparing a return; OR
  • Substantial Understatement – Applied if the understatement is > 10% of the correct tax and > $5,000; OR
  • Substantial Valuation Misstatement – Applied if the valuation is ≥ 150% of the determined value and causes a tax understatement > $5,000. (Penalty increases to 40% in the case of “gross valuation misstatement”.); OR
  • Substantial Estate or Gift Tax Valuation Understatement – Applied if valuation is ≤ 65% of the determined value and causes a tax understatement > $5,000.
No penalty imposed if Taxpayer can show a reasonable cause.
Erroneous Refund Claim § 6676 20% of disallowed portion for which Taxpayer has no reasonable basis.
Frivolous or Incomplete Tax Return § 6702 $5,000, regardless of actual tax liability.
Willful Attempt to Evade Tax § 7201 This is a felony, punishable by $100,000 maximum fine, 5 years in prison, or both.

Other Tax Liabilities

Please note that this website addresses primarily federal income tax issues with some reference made to state income tax obligations, but that taxpayers may have many more tax reporting and payment responsibilities. Additional obligations may include but are not limited to local income tax, Business Tax, Property Tax, Sales and Use Tax, Payroll Tax, estate, gift and inheritance taxes, Generation-skipping Tax, Alternative Minimum Tax, excise and transfer taxes, as well as foreign taxes.

Calculators

The information provided by third party calculators linked to this site is for illustrative purposes only. Any default figures shown are hypothetical and may not be applicable to your individual situation. Be sure to consult a financial or tax professional prior to relying on the results since accuracy is not guaranteed.

Interest

Federal and state tax authorities may also assess interest in addition to penalties.  While penalties may–under certain circumstances–be waived for reasonable cause, interest will generally not be abated.  The IRS, for instance will eliminate the interest charge only if:

  • interest was assessed due to an unreasonable error or delay of IRS personnel in performing ministerial or managerial acts;
  • interest was accrued during a period for which a valid extension was granted in a federally declared disaster area; or
  • interest was charged on erroneous refunds issued by the IRS but repaid promptly by the taxpayer upon request.

Current IRS interest rate information is available at the IRS website; FTB information at CA.gov.


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Satisfied clients have said:
"Through the years, Monica has displayed the utmost integrity."

"I have never seen her take an expedient route when a more difficult one would better protect the interests of those whom she represented, even when doing it right meant personal sacrifice without direct reward or recognition."

"Ms. Haven impresses me as being possessed of a personal code of ethics of the highest caliber."

This Office Promises You:
  • Professional expertise
  • Personal attention
  • Year-round service
  • Confidentiality

Useful Links

Useful Links are available under Tax Info.
Disclaimer: The information contained herein should not be used in any actual transaction without the advice and guidance of a professional tax advisor who is familiar with all of the relevant facts of your personal situation since the information is general in nature and not intended as legal, tax or investment advice but is merely educational. Furthermore, the information contained herein may not be applicable to or suitable for an individual's specific circumstances or needs and may require consideration of other matters. To ensure compliance with certain U.S. Treasury Regulations note that, unless expressly indicated otherwise, any advice in this website relating to any federal or state tax issue is not intended or written to be used and cannot be used by any person for the purpose of avoiding any federal tax penalties. Monica Haven assumes no obligation to inform any person of any changes in the tax law or other factors that could affect the information contained herein. And Monica Haven does not offer legal advice or services in any jurisdiction in which she is not licensed; nothing herein should be interpreted as the creation of a fiduciary or client/attorney relationship. This website is not intended for use by viewers in any state in which the site may fail to comply with the regulatory and ethical restrictions imposed by that state.