Irs Helps Employers By Reducing Filings Required For Employees Learn The Tax Benefits Of A Flexible Benefits Plan Pay Someone Else S Taxes Appealing Taxes For Your Home The Basics

If you own a business and have employees, you have an inherent feel for the joy of filing employee related tax documents. Alas, the IRS is cutting back on the burden.

IRS Helps Employers By Reducing Filings Required For Employees

Employees are critical to any business other than the smallest ones.

That being said, the tax requirements for dealing with employees can be a pain in the derriere. The problems are many, but one particular situation puts employers in a very bad spot.

Withholdings on employee paychecks is a subject that can cause tension in a business. Inevitably, some employees will want to reduce the withholdings from their check beyond the norm. The employer, in turn, is faced with the prospect of the IRS focusing unwanted attention on the business because of such actions. In a worst case scenario, the IRS will send a lock letter setting the amount of the withholdings. This puts the employer in the bad position of telling the employee more money must be withheld – a situation sure to cause tension. Making matters worse, the employer was supposed to be able to determine when the employee was abusing the withholding process.

The IRS has issued regulations that at least relieve the employer of the burden of determining if an employee is stepping over the line on the reduction of withholdings. Whereas the employer was previously required to send a W-4 Withhold Allowance Certificate to the IRS if an employee was claiming a total exemption from withholdings or more than 10 allowances, it no longer does. As of April 14, 2006, the IRS will simply make its own determination using salary filings for the business in general.

This regulation modification by the IRS should be applauded as a significant boost to employers. No longer does an employer have to act as a detective in determining whether an employee is not paying in enough tax on paychecks. Instead, the employer can now sit back and wait for the IRS to act. If the IRS feels an employee is out of line, the agency will send a lock-in letter to the employer. The employer than has no choice but to comply. Employees are much more likely to understand this and focus their anger on the IRS instead of the employer.

The new withholding regulations represent a positive step by the IRS. They might just keep employers out of the tax problems of employees.

Flexible-benefits Plan (FBP) is an employee benefits plan which helps the employees’ to save considerable amount of taxes by paying certain expenses from their pre-tax income. Some of the eligible expenses from pre-tax income are medical, vision, dental, elder care, and dependent care. All state employees who get a regular paycheck are entitled to participate in the flexible-benefits plan.

Flexible-benefits Plan mainly boasts three components:

– Health Flexible Spending Account (HFSA)

– Dependent Care Reimbursement Account (DCRA)

– Health insurance premium deduction

Flexible-benefits Plan’s reimbursements are made occasionally, mostly once in a week. You will receive statements which helps you to keep updated on your account. Quick information about your account can be accessed with the help of customer service line or email.

Due to the program’s tax exempt features, the federal government strictly regulates the Flexible-benefits Plan. FBPs are regulated by sections 125 and 129 of the Internal Revenue Code (IRS). Hence it is advisable to review the IRS rules before you enroll. If you wish to enroll in the FBP, then it is better from your part to discuss how the program may benefit you with your financial planner or tax advisor.

How does a Flexible-benefits Plan work?

On enrolling in a flexible-benefits plan you first have to decide how much amount you need to earmark for your Dependent Care Reimbursement Account and/or Health Flexible Spending Account. After you have fixed a particular amount for your account, your employer will deduct the amount every month from your salary for the flexible-benefits plan. The deducted amount will be immediately credited to your accounts you have already specified.


Whenever you had met with an eligible expense, you can submit a claim for reimbursement. While submitting a claim, make sure that you have provided all necessary documents supporting your claim. Reimbursements are generally made weekly.

– Health Flexible Spending Account (HFSA)

While submitting a claim for reimbursement, first submit all your health care claims according to your health care plan. If there is any amount which is not covered according to your health care plan, you can claim those amounts for reimbursement with your Health Flexible Spending Account. While submitting a claim, make sure that you have provided a copy of an Explanation of Benefits (EOB) or your receipt together with your Flexible-benefits Plan Reimbursement Request.

– Dependent Care Reimbursement Account (DCRA)

You can submit a claim for your dependent care expenses by providing a copy of your receipt to a complete Flexible-Benefits Plan Reimbursement Request. You can also provide a complete Reimbursement Request signed by your dependent care provider.

Monitoring your account

It is advisable to keep a close eye on your account every time you make a claim or when ever you get a Flexible-Benefits Plan reimbursement check. Generally you will also obtain an Explanation of Benefits which displays your up-to-date details of deposits, the claims you had submitted, the claims you were paid, and the remaining amount you have in your account.

Besides this, you will be provided with an Account Status Report, in most cases three months before the end of your Flexible-Benefits Plan year. The report displays your total accounts and reminds you to submit any outstanding claims. This helps you to avoid any forfeiture.

According to the IRS regulations, you need to forfeit any unspent funds in your Flexible-Benefits Plan at the end of each plan year. Hence you must be very careful to plan your contributions and to make sure you have submitted request for all eligible reimbursements. Also make sure that you have submitted your request with all documentary proof. Keep in mind that it is always better to underestimate your eligible expenses than to overestimate them and risk forfeiture.

Did you know that you could make money by paying someone else’s property taxes? Thirty-one states provide a little-known investment opportunity that might be perfect for you.

You could even see an annual interest return from 18% to 50%.

The returns are available through tax lien and tax deed certificates sold by the county. Tax liens are placed on a property when the real estate taxes are late. Many local governments auction the liens off to investors once or twice a year as a way to get their owed money. These are called tax sales.

For example, if Mr. Jones owes $2,000 in real estate taxes and hasn’t paid it, the county will place a lien on his property. Eventually the lien will be auctioned to an investor. The investor may get the lien for $2,000. The county gets the money it needs right then. The treasury or finance department will start going after the money from the delinquent tax payer. They send nasty little notes, warning them of future actions. They charge penalties and interest rates of up to 50%. The local government can then turn around and pay the investor a large return.

You can find these investment opportunities through your local treasury or finance department. There are also many websites that keep the information in an up-to-date compilation. You may have to pay for the information. The best way is to contact your local department instead of paying for a national service.

These are short-term investment opportunities. After the lien has been auctioned off, the county lets the owner know that they might lose their property to the lien certificate holder if they don’t pay the taxes, interest and penalties. This gives the owner another chance to pay the bill and keep the property. If they don’t pay, the lien certificate holder can foreclose on the property.

In some areas, the government will forego the investment opportunity and outright sell the tax deed to the property. This means if they don’t pay the taxes, you are the owner of the property straight out.

There are many stories about making a lot of money buying tax deeds. A man in Oklahoma is rumored to have bought land for $17 at a tax sale only to sell it for $4,400.

Some people have been lucky, but there are risks and hazards with tax certificates. The property could be trashed, you could lose your money if you don’t follow the proper procedures, the title could be clouded, and the former owners might be irate and armed with ammunition.

Due to the auction property, a nice property might only be available with some not-so-nice terms attached. You might “win” the property only to then be responsible for all the unpaid taxes and mortgages. If you have to foreclose, you may have a lot of costs come up. The owner might be able to invoke the “equity of redemption” right that allows him or her to re-acquire the property after a foreclosure.

Make sure that you know all of the risks before you jump into tax sales. Research the properties, which are usually listed in the local newspaper a few weeks before the sale. Have a thorough understanding of your potential obligations, know what the rules are, speak with your attorney and realize that your best plans may not work out.

Ninety-eight percent of impacted property owners will pay their taxes. Most of the investors into these certificates make money on the interest paid on the tax bill.

Property taxes are a substantial expense for Texas homeowners, averaging about $3,600 annually. To reduce this expense, property owners should annually review and consider appealing property taxes. While there is no guarantee that an appeal will be successful, a recent survey conducted by O’Connor & Associates indicates that 70% of property tax appeals are successful.

Since the mortgage company typically disperses payments, property taxes tend to be a stealth tax. Although the homeowner writes a check, including taxes and insurance monthly, the property tax component is not evident. The property tax component can become quite evident when the homeowner is asked to fund a deficit in the escrow account.

Although 70% of property tax appeals are successful, only 7% of homeowners appeal each year. Research indicates five primary reasons homeowners do not appeal:

1. The process seems overwhelming and they do not know how to appeal,

2. They do not think an appeal is likely to be successful,

3. They think their home’s assessed value is below market value and there is no basis for appealing,

4. They do not understand they can appeal on unequal appraisal,

5. They are busy and do not want to set aside time, given the presumption that “you can’t fight city hall”.

Why appeal?

Consider an appeal for a $150,000 house where the property taxes are reduced by 5%. This would reduce the assessed value by $7,500 and the property taxes by $225, based on a 3% tax rate. Since the typical appeal hearing takes less than an hour, these are meaningful savings for the time involved. Regularly appealing your property taxes will minimize the value, so you are assessed for less than most of your neighbors. Most of the property tax appeals are resolved at the informal hearing, which is the first step in the process.

How to appeal

The first step to appealing annually is to send a written notice to the appraisal review board (ARB) for the county in which your home is located. Even if you have not received a notice of assessed value from the appraisal district, file a notice of appeal by May 31st for the following reasons:

1. The notice of assessed value can get lost in the mail,

2. A notice of assessed value is not necessary unless your assessed value increases by $1,000, and

3. You should appeal annually

You can file a notice of appeal by utilizing the Comptroller’s form available at or by sending a letter to the ARB. The letter to the ARB simply needs to identify the property being appealed and the basis for your appeal. You should always appeal on both market value and unequal appraisal. Since the appraisal district staff is extremely busy during late May and early June, sending any data on the value of your property tax is probably a waste of time. At the same time you send your notice of appeal to the ARB, send a “House Bill 201″ request to the chief appraiser at the appraisal district. The House Bill 201 request will provide you a volume of information at a modest price.

Reasons for obtaining House Bill 201 information

Since most homeowners are not familiar with House Bill 201, you may be wondering what it is and when it became available. House Bill 201 is the term used by property tax consultants to describe provision 41.461 of the Texas Property Tax Code. This section reads as follows:

“at least 14 days before hearing on a protest, the chief appraiser shall: … inform the property owner that the owner or the agent of the owner may inspect and may obtain a copy of the data, schedules, formulas, and all other information the chief appraiser plans to introduce at the hearing to establish any matter at issue.”

The property tax code further provides the chief appraiser the right to charge up to $15 for each residence, and up to $25 for each commercial property owner for this information. However, there are limits on the cost per page an appraisal district can charge. Practically speaking, the maximum charge is $1 to $2 for a residence. In Harris County, most homeowners can print this information from the appraisal district’s web site once an appeal has been filed using the “I file” system.

This section of the tax code was added in 1991, but many appraisal districts have attempted to ignore this section of the property tax code for years and some still do. After discussing this section of the Texas Property Tax Code on a radio show in 2005, several listeners called back a week or two later to report certain appraisal districts were claiming to be unaware of this section. When O’Connor & Associates sent House Bill 201 requests to appraisal districts in 2005, some called us and said “what do you mean you want our information, we plan to use your information at the hearing to prove our value.” While these examples seem quaint and cute, it is surprising that 15 years after taxpayer friendly legislation has been passed, that appraisal districts are still ignoring property owners and tax consultants who ask for this information.

There are at least seven reasons to utilize House Bill 201 to obtain the information the appraisal district will use at the hearing:

1. It is an effective way to obtain information regarding both market value and unequal appraisal for your property tax appeal,

2. You will receive the appraisal district’s information regarding the size, condition and other qualitative and quantitative data for your house,

3. The information can be obtained for a nominal cost,

4. It is helpful to know what information your adversary will be able to use at the hearing,

5. Making the request limits what information the appraisal district can present at the hearing. If you do not request their information prior to the hearing, they can use any information available to them at the hearing. However, if you request the appraisal district information using a House Bill 201 request, they may only use information previously provided to you,

6. If they do not provide you information on market value or unequal appraisal in the House Bill 201 request, you win by default at the ARB hearing, and

7. In many cases, the appraisal district House Bill 201 information clearly supports a lower value.

Preparing for the hearing

When you receive the appraisal district House Bill 201 information, start by reviewing the appraisal district’s description of your home and ask yourself these questions:

1. Is the year built accurate?

2. Are the qualities and amenities accurate?

If the appraisal district overstates either the quantity or quality of improvements to your property, this is an excellent means to reduce your property taxes both for the current year and subsequent years.

Filing a 2525c Appeal

If the appraisal district has overstated the size of your house by more than 5% to 10%, even if you did not file a property tax appeal in prior years, you should consider filing a 2525c appeal. This will allow you to reduce the assessed value of your property for the current year and for prior years.

Read more about Preparing for the Hearing.

and The Hearing Process at

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