Friday, December 12, 2008

Joint Filing, Joint Liability

The Internal Revenue Code is an amazing piece of work. Consider the case of a married couple filing jointly. Let’s suppose one spouse earns $120,000 in a given year and the other spouse earns $0. After filing their “married filing jointly” tax return they incur a $14,800 tax liability. For whatever reason the couple fails to pay the tax for a couple of years. Penalties and interest have now caused the liability to grow to over $20,000. The couple decides to call it quits on the marriage and they get divorced.

The spouse who earned $0 has been forced to re-enter the workforce and is now making $31,000 per year all of which is consumed with monthly obligations. One day this spouse receives a notification in the mail they owe the IRS over $20,000 and they want payment immediately! What do they do?

This is a very real situation and happens more times than people may realize. The fact of the matter in this situation is that the IRS views each spouse liable for the entire tax amount based on the joint filing status! There are a few options the disadvantaged spouse has in this situation. This requires the help of a true tax professional.

I Can't Find My W2s Or My 1099s

It is not uncommon at all to have a situation where a taxpayer has gone a long period of time with unfiled tax returns and cannot find their W2s or 1099s from prior years. This can create a severe problem for the taxpayer if they have someone prepare their taxes that doesn’t really know how to approach the problem. This is when it becomes necessary to get a professional tax preparer involved with the case.

The first thing a professional tax preparer will do will be to contact the IRS and obtain all of the information the IRS has in regards to the amount of income that the IRS has record of for the taxpayer. The tax professional will then verify this with the taxpayer to make sure it is correct. Once everything checks out then the tax professional will proceed with filling out the delinquent tax returns with the correct income information. This will save the taxpayer from many problems in the future!

Should I Call The IRS?

From time to time this is a question people ask regarding their situation with the IRS. Of course people can call the IRS regarding their situation. The question is should they? One thing people need to realize is that when discussing a matter with the IRS the IRS will always structure their questions in a way as to favor the IRS and not the taxpayer. Taxpayers have rights and often times the IRS will not tell the taxpayer what their rights are.
This usually winds up with a situation where the taxpayer comes out on the short end of the stick. I have seen this the results of such a situation. A taxpayer will contact the IRS about their tax liability in an attempt to work out some type of payment arrangement. The IRS will not take the proper steps to accurately determine what the taxpayer can afford to pay. The taxpayer gets scared and agrees to what the IRS states. The taxpayer gets into a payment agreement they really can’t afford and ultimately ends up not being able to make the payments and gets right back into trouble with the IRS. When confronted with a problem with the IRS it is in the best interest of the taxpayer to get professional tax advice from a true tax professional.

Beware Of The Taxman!

It’s December and Christmas is right around the corner and so is the taxman! Whenever a taxpayer owes the taxman money (the IRS) the taxman will contact the taxpayer and ask for his money. If the taxman does not get a response then the taxman will knock a little louder. If the taxman still does not get a response then the taxman will go to the taxpayers employer and say, “Mr. Employer, one of your employers owes me money. I have tried contacting your employee and they have not responded. Therefore I am demanding you (the employer) to send me a big chunk of your employee’s paycheck BEFORE you send anything to the employee.”

This is known as a levy and this is what the IRS will do if a taxpayer does not pay the IRS when the IRS comes knocking. There’s some good news however for the month of December from what I understand. The IRS will not be issuing notices of levies in the month of December! Great! This is very good news! But don’t be fooled! The IRS is just playing nice for the Christmas season. Once December passes the IRS will begin serving notices of tax levies hard and heavy beginning in January. If you get one of these notices call someone qualified to help with this situation. So as January approaches remember this, beware of the taxman! He’s just around the corner!

A Word About Tax Liens

A Word About Tax Liens

A federal tax lien is serious business! Consider the following information taken directly from the IRS website at: (,,id=108339,00.html#Notice)

Notice of Federal Tax Lien
Liens give us a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:
We assess the liability;
We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
You neglect or refuse to fully pay the debt within 10 days after we notify you about it.
Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).
Caution!Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.

If you have received notification from the IRS by way of Certified Mail and the IRS is threatening you with filing a tax lien TAKE ACTION IMMEDIATELY! Call a professional tax resolution firm to help you!

Friday, December 5, 2008

Tax Resolution Is A Secret - Part II

Effective tax resolution begins with working with someone who is knowledgeable of tax law and the rules and regulations of the IRS. The IRS will not willing divulge information to taxpayers that will be in the best interest of the taxpayer. By having the knowledge and not divulging it in essence keeps the information “secret.” Suppose we were all standing in front of a safe containing $1,000,000 in cash and I had the combination to the safe. Further suppose someone needed a portion of the money to help him or her in a dire situation. By not divulging the secret and providing the combination to the safe I have in essence withheld information to someone’s detriment. In this case I have chosen to keep the knowledge I have secret.

The “secret” to effective tax resolution is to get a tax professional involved. Research tax professionals to make sure you get someone who knows the laws and the rules of how the game is played. The rules are many, they are very complex and they change frequently. If you are dealing with a serious tax problem do not allow yourself to be victimized by allowing someone to withhold the knowledge you need. Get someone who has the knowledge and is willing to use it to your benefit. You will be very glad you did!

Tax Resolution Is A Secret - Part I

Depending on which dictionary you use you will find various meanings of the word “secret.” One definition is as follows, “designed or working to escape notice, knowledge, or observation.” Another definition is this, “kept from the knowledge of any but the initiated or privileged.” With these two definitions in mind consider the Internal Revenue Code. The code (tax law) has over 60,000 pages. Buried deep within this enormously complex “code” lies the answer(s) to ALL tax related problems. The problem is taking the time to read and understand the code. Therefore I raise the argument that effective tax resolution is in fact a secret.

Consider the first definition of the word secret listed above, “designed or working to escape notice, knowledge, or observation.” The tax code has been designed in such a way that provisions in the tax code that provide relief to taxpayers suffering with an oppressive tax debt easily “escape notice, knowledge and observation” of the common taxpayer. Therefore tax resolution is a secret. Consider the second definition, “kept from the knowledge of any but the initiated or privileged.” In this definition “the initiated” represents the writers of the tax law. These are the individuals who write the laws and make the rules. Therefore they are the “privileged.”

Therefore it is a true statement that tax resolution is indeed a secret. The tax laws are written in such a way that provisions of the code that would help taxpayers pay LESS than they owe is kept a secret from the taxpayer thus subjecting them to the full force of maximum taxation. The only way to overcome this obstacle is to hire someone who knows the laws and the rules. Enrolled agents is one group of individuals that can help taxpayers have a more even playing field when dealing with the IRS.

Friday, November 28, 2008

Tax Resolution – State First, Federal Second

Many times I have come across taxpayers who have gone several years without filing their tax returns, both state and federal. Usually the IRS (federal) is the first to contact the taxpayer about the problem. I always advise the taxpayer, after learning they are unfiled for both the federal and the state, to get the state returns filed first and work our a plan of resolution with the state, then file the federal returns and work out a plan with the feds (the IRS) next. The reasoning on this is very sound.

By taking this approach the taxpayer is able to get a plan of resolution in place with the state first. When we go to negotiate with the IRS it is much easier to work out a payment plan with them that includes the payment already being made to the state. If the feds (the IRS) are done first and then we go to the state the individual states are not very flexible and will usually not be very agreeable to a reasonable plan. When consulting with a professional tax resolution consultant take this sound reasoning under advisement. You would do well to do so.

A Word On Amended Tax Returns

Before I even begin the first thing I am going to say is this…beware! Amending a tax return is okay if you are amending it to include income you left off for whatever reason. It’s also okay to amend a return to include deductions you forgot to list completely the first time around. This is where I would say BEWARE.

Whenever the IRS receives an amended return with a lot of deductions that was not listed on the original return the look at the amended return very closely. The statistical probability of the return getting audited is much higher than just an ordinary return. Too many times in the past the IRS found situations where taxpayers filed their return, was hit with a substantial penalty and then tried to rectify the problem after the fact in the form of an amended return.

Don’t get me wrong. It is okay to file an amended return just make sure you have all of the supporting documentation to justify the expenses you are claiming. Many taxpayers have found themselves in need of the services of a professional tax resolution firm as a result of getting audited after filing an amended return and subsequently getting hit with a huge tax bill. Just remember…have your documentation to support whatever deductions you make!

Dividend Income Is Reportable

Many employers have stock purchase plans and encourage employees to purchase stock in the company they work for. Some company plans allow for the employee to choose between accepting a cash payout for the dividends or having the dividends re-invested to purchase more shares of stock. If an employee chooses the latter then this must be reported as income.

Sometimes a company will allow an employee to purchase shares below market value. In this case the shareholder must report as income the fair market value of the additional stock on the dividend payment date. If the plan allows the shareholder to invest more cash to buy shares of stock at a price less than fair market value then the shareholder must report as dividend income the difference between the cash invested and the fair market value of the stock purchased.

This can become a sticky area when there are lots of purchases when the stock fluctuates wildly. It would be a good idea to have a professional tax preparer determine exactly what must and what must not be reported.

You Need To Report It!

Way back in time before money was as trustworthy as it is today as a medium of exchange people used to barter. According to Wikipedia, “Barter is a type of trade in which goods or services are directly exchanged for other goods and/or services, without the use of money. It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation.”

People still barter today despite the fact that we have a highly developed monetary system. For example, you have a plumber who is highly skilled at what he does and you have a mortgage banker who owns a beachfront property. The mortgage banker has an extensive, not to mention expensive, plumbing problem so he calls the plumber. The plumber comes out, works a couple of days, and fixes the problem and then hands the mortgage banker a bill for $7,150.

The mortgage banker, short on money, says to the plumber, “Hey, I have a beach home I usually rent for $7,500 for the whole week. I’ll let you have the place at no cost if you will accept my offer as payment in full for the $7,150 I owe you, deal?” “Deal.” the plumber replies. Well guess what? They both need to report the dollar value of the benefit they received as income! Sometimes seemingly simple little “oversights” like these can lead to tax problems requiring the services of a tax professional. Be careful and don’t forget…you need to report it!

Electronic Paying

Much is said about eFiling, filing your federal tax returns electronically, but how often do you hear about ePaying, paying your federal taxes electronically. The IRS has made it easy to file and also easy to pay thru an online system called EFTPS, which stands for Electronic Federal Tax Payment System. This system may work well for individuals who have an installment agreement with the IRS to re-pay a federal tax debt and would really work will for any business owner who is the person responsible for paying the company’s payroll taxes.

The system is quick and convenient. Enrollment is easy as well. All that is required is simply calling the EFTPS customer service number at 800-555-4477 and speak directly with a representative. You will need to give them your name, social security number, spouse’s social security number, mailing address, contact phone number and banking information complete with account number and routing number. Once you get set up in the system you will be notified what your PIN number is and to call to establish your password and then your ready to access the system. Give it a try, I’m sure you’ll love it!

Friday, November 21, 2008

IRS Installment Agreements

Taxpayers have lots of questions regarding installment agreements with the IRS. One question that comes up quite frequently concerns whether or not the taxpayer can roll a new tax year’s liability in with the pre-existing installment agreement. The only way this can be done successfully is to completely re-negotiate the installment agreement with the IRS. Whenever the IRS sets up an installment agreement with a taxpayer the agreement calls for the taxpayer to file all future returns and pay future taxes on time. If not, this alone will default thee agreement.
If the current agreement with the IRS is defaulted then the taxpayer goes right back into the collection cycle and may face liens and levies once again. Another point to consider is if the liability from the new tax year when added to the prior balance causes the total liability to go over $25,000 the an extensive negotiation with the IRS must take place. The best way to handle a situation like this is to have a professional tax resolution firm handle it.

Educational Tax Credits

The tax code has a provision whereby a taxpayer may claim a Hope credit up to $1,650 for qualified tuition and any related expenses paid by himself, his or her spouse and any dependent required for enrollment at any accredited college, university, or some other accredited postsecondary educational institution and can only be claimed for two taxable years for each eligible student.

For a student to be eligible they must hot have completed the first two years of postsecondary education and must be enrolled in a program that leads to a degree or so other for of educational credential. They also must be taking at least one-half of the normal full-time workload for their course of study for at least one period starting at the first of the calendar year and must not have been convicted of a felony related to the possession or distribution of a controlled substance.
The maximum amount that can be claimed is $1,650 per eligible student. This translates into a substantial tax savings for the taxpayer! Does your tax preparer know about this valuable tax credit?

A Stroke Of Genius

The other day I overheard a conversation that I found to be incredible. I overheard an astute businessman talking about the stimulus package the U.S government recently handed out to millions of taxpayers. I have wondered why the government did this. Anyone who has been living for more than 6 minutes knows that nothing in this life is free (except God’s love). Why then would the government give out billions of dollars for “free?” This topic came up in conversation the other day and one person said, “I believe that the stimulus package was a stroke of genius on behalf of the IRS (the U.S. Treasury Department).”

This person went on to explain that there were many taxpayers who had not filed their tax returns in many years. One stipulation of the stimulus package was that in order for a taxpayer to receive it they had to file their income tax returns. When many taxpayers did not receive their stimulus checks they called the IRS to check on it. After gathering all the necessary information on the taxpayer the IRS would then seek to collect on the unfiled taxpayers according to the man I overheard speaking. This seemed to make sense to me.
My interpretation of all of this was that the government used the stimulus package to uncover millions and even billions of more dollars owed to the IRS and the IRS would then begin the process of collecting on these individuals. Maybe this was the original intent. One thing is for sure, there seems to have been a large number of people calling our company in an effort to get back into compliance with the IRS.

IRS Penalty Waiver

Dealing with the IRS most always is a difficult and challenging thing. Often times clients want to know if penalties and interest can be waived on their IRS tax debt. For the vast majority the answer to this question is “No.” If I was a taxpayer and had fallen behind on getting my taxes filed I would ask the IRS to abate (remove) the penalties from the first tax year I fell behind. Knowing what I know after working in the tax resolution business I know the IRS has the ability to do this. The stipulation is that you must have a history of compliance (filing on time) prior to this. You have to ask for it however.
As for the other unfiled years that follow it is highly unlikely that the IRS will willingly remove the penalties for those years unless the taxpayer had a condition that prevented them from filing such as a hardship, act of God, was the victim of a financial crime or relied on a tax professional to get their tax matters under control, etc., in which case it may be best to contact a professional tax resolution firm.

Thursday, November 20, 2008

Nonresident Alien Filing Requirement

The United States has many nonresident aliens all of whom are required to file an income tax return if the fall under certain categories. If a nonresident alien worked or was considered to have worked in a trade or business during the 2007 tax year (in the United States) they must file a tax return if their income didn’t come a business conducted in the U.S. Additionally the nonresident alien must not have had income from any U.S. sources or the nonresident alien income is exempt from income tax.

If a nonresident alien had a tax liability that was not satisfied by the tax withholding where the withholding should have taken place and was not engaged in a trade or business within the U.S. then they must file a tax return. More can be learned about some of the other provisions that would require a nonresident alien to file a tax return by going to the IRS website.

Thursday, November 13, 2008

Filing Status Part V – Qualifying Widow (er) with Dependent Child (Q/W)

If a spouse dies in a given year the taxpayer may file married filing jointly and qualifying widow (er) with a dependent child, if eligible, in the following two years if the taxpayer meets the following conditions. They must be entitled to file a joint return with a spouse for the year the spouse died and did not remarry before the end of the tax year.

They must have a child, stepchild, or adopted child who qualifies as a dependent. This must not include a foster child. Additionally the taxpayer must have paid for more than half of the cost of keeping up a primary place of residence for the taxpayer and the child for the entire year with the exception of temporary absences. Many of the rules regarding filing status are complex and ambiguous. It is advisable to consult a tax professional if faced with some of the more complex filing statuses.

Filing Status Part IV – Head of Household (H/H)

A taxpayer desiring to file as head of household must meet several requirements. First, they must be unmarried or considered unmarried as of the last day of the year in which they are filing. A taxpayer must have paid for more than half of the cost of maintaining a dwelling that for more than half of the year was the main residence of the taxpayer and either a qualifying child or qualifying relative. It is important to note that a dependent can qualify only one taxpayer to use the head of household filing status for any given year.

If a parent doesn’t live with the taxpayer and the taxpayer claims the parent as an exemption, the taxpayer may still file as head of household provided the taxpayer pays more than half of the cost of keeping up the dwelling that was the main residence for the parent. This would also apply if the parent lived in a rest home.

If a taxpayer and his or her qualifying child are temporarily absent from the home due to circumstances beyond their control like an illness, business, vacation military service or education purposes the taxpayer still may file head of household. A professional tax preparer can give the best advice if any of these situations are present.

Filing Status Part III – Married Filing Separately (MFS)

Married couples may choose to file married filing separately (MFS). If so then special rules apply. If one spouse itemizes the other must also. Interest paid may not be deducted on a student loan. In most cases the taxpayer cannot take child and dependent care credit for expenses incurred, likewise the earned income credit cannot be taken. If Series EE U.S. Savings Bonds were used for higher education expenses the taxpayer may not exclude and of the interest income.

The taxpayer may not take credit for the elderly or disabled and may have to include more Social Security benefits received and cannot roll over any amounts from a traditional IRA or a Roth IRA if the taxpayer lived with a spouse at any time during the tax year.

The IRS code further stipulates a taxpayer may not take education credits, credit for adoption expenses and may have a smaller child tax credit than if the taxpayer filed jointly. Furthermore any capital loss deduction is limited to $1,500 instead of $3,000 if filing a joint return. If a taxpayer files a joint return then they cannot file a separate return for that year after the due date of that return. Professional tax preparers can be very beneficial when considering filing married filing separately.

Filing Status Part II - Married Filing Jointly (MFJ)

If a taxpayer is married on the last day of the year he or she is considered married according to the Internal Revenue Code. This means married and living together in a common law marriage that is recognized by the state in which the couple resides or in the state where such marriage began. They must be married and living together as husband and wife. It is permissible to be married and living apart, but not legally separated by operation of law such as a divorce decree or separate maintenance. A taxpayer is also considered married if they are under a divorce decree that has not been finalized.

A taxpayer is considered married for the whole year if their spouse died during the year. IRS code has several stipulations regarding filing status with the death of a spouse. For more information on this subject refer to IRS Publication 17.

When filing jointly both spouses must include all income, exemptions, and deductions and use the same accounting period. If either spouse is a non-resident alien at any time during the year a joint return cannot be filed. In the event of a divorce, the IRS code stipulated that both spouses may be held liable, both jointly and individually, for any tax, penalties and interest due on a joint return that was filed before the divorce no matter what the divorce decree states.

Filing Status Part I – Single (S)

Filing status is a subject of confusion for many taxpayers. This is one area that can get a taxpayer into trouble if not addressed correctly. For a more detailed look at how the IRS views the different filing statuses you may want to reference IRS publication 17. Therefore I am writing a 5-part blog, which will cover all the different types of filing statuses, which are:

Single (S)
Married Filing Jointly (MFJ)
Married Filing Separately (MFS)
Head of Household (H/H)
Qualifying Widow (er) With Dependent Child (Q/W)

We will begin by looking at the first filing status, single (S). Under IRS rules a taxpayer is considered single (S) if he or she is unmarried or legally separated from a spouse by divorce or separate maintenance. The taxpayer also must not qualify for any other type of filing status. The taxpayer is considered married for the entire year if they are married on the last day of the year and is unmarried or legally separated from a spouse under a divorce decree or separate maintenance.

Thursday, November 6, 2008

Non-Deductible Taxes

Taxpayers are often confused about the deductibility of taxes. Which taxes can be deducted and which can’t are some of the questions frequently asked. Generally the following taxes are considered non-deductible under current tax laws:
Fines and penalties
Estate or inheritance taxes
Transfer taxes
Federal excise taxes
Federal income taxes
Trash or pickup fees
Homeowner’s association fees
Rent increase due to higher real estate taxes
Social Security and other employment taxes for household workers
Employee contribution to private or voluntary disability plans
Taxes for local benefits (i.e. property improvements)
Gift taxes

Hopefully this list will help taxpayers make the determination as to the best action to take when making the decision as to listing a specific tax as a deduction. Taxpayers are encouraged to take full advantage of every provision in the tax code to ensure they do not overpay their tax obligation. Likewise taxpayers face big fines and penalties if non-deductible taxes are listed and are subsequently disallowed. If you do have a tax problem related to an audit you should call a tax professional.

Tax Deductible Taxes

Taxpayers are often confused about the deductibility of taxes. What can be deducted and what can’t are some of the questions frequently asked. Generally the following taxes are considered deductible under current tax laws:
State and local income taxes or general sales tax (but not both)
Occupational taxes
Taxes on income producing property
Tenant’s share of real estate taxes paid by co-ops
Foreign real estate taxes
Taxes that are expenses of business or producing income
State or local real estate taxes
Employee contribution to state disability fund or state unemployment fund
State income tax
Foreign income taxes
State or local personal property taxes that is:
1. Charged on personal property,
2. Based only on the value of the personal property, and
3. Charged on a yearly basis, even if collected more or less than once a year.
Hopefully this list will help make the determination as to the best action to take when considering listing a specific tax as a deduction. Taxpayers are encouraged to take full advantage of every provision in the tax code to ensure they do not overpay their tax obligation.

Friday, October 31, 2008

Excluding Foreign Earned Income

Increasingly we live in a global environment. This means a U.S. taxpayer may earn income overseas. If so, there is an exclusion from gross income for foreign earned income. A taxpayer may exclude up to $85,700 of income earned overseas, overseas housing exclusion or overseas housing deduction. To qualify the taxpayer must fulfill certain requirements.

First, the home must be in a foreign country. Next the income must be earned overseas. Finally the taxpayer must be either 1) a U.S. citizen with actual residency in a foreign country that includes and entire tax year, 2) a U.S. resident alien who is a citizen or national of a country the U.S. has established a tax treaty who is an actual resident of a foreign country for an uninterrupted period of time covering a full tax year, or 3) a U.S. citizen or a U.S. resident alien who is living physically in a foreign county for a minimum of 330 days during any consecutive 12 month period.

This can become quite confusing and is best left to a certified tax professional. Great must be taken to make sure the qualified taxpayer receives the full benefit of the law under a foreign earned income arrangement. Tax liabilities can result if this is not handled correctly.

Self-employed Income

Self-employed individuals are often not sure of some of the many forms of “self-employed income” the IRS considers in their gross income calculation. As a result some self-employed borrowers incur a tax liability with the IRS due to the fact they do not claim these forms of income on their tax return. This comes as a great shock when the self-employed borrower gets audited by the IRS and is told their income was much higher than what was reported initially for the year in question.

Here are some types of self-employment income:
Sole proprietorship income and non-employment compensation
Fees paid to corporate directors
Partnership income from partnership operating business (unless limited partner)
Guaranteed payment from a partnership
Income derived from bartering
Rental income from real estate rent (if received as a real estate dealer)
Income paid to retired insurance agents based on commissions received prior to retirement
Interest received in a trade or business
Newspaper vendor’s income if vendor is 18 or over
Net earnings of members of the clergy (unless taken a vow of poverty)
Gains and losses by a dealer in options or commodities from dealing or trading in section 1256 contracts or property related to those contracts
A professional fiduciary who administers a deceased person’s estate

These are some sources of income self-employed individuals need to be aware of and make sure gets reported on their federal form tax return 1040 to avoid owing the IRS at some point in the future. If a taxpayer does have a tax liability as a result of under reporting then it would be advisable to contact a tax professional to inform the taxpayer of all options available to them for effective resolution.

Friday, October 24, 2008

Calling The IRS

Have you ever received a letter from the IRS concerning a tax debt and the letter told you to call the IRS in order for you to work out the problem with them? If so then you may want to exercise a little bit of caution before calling. Often times the person you will reach when you call will be very friendly and will ask you lots of questions. It will appear the IRS has your best interest at hand, but the likelihood of this being true is slim to none.

The person you reach at the IRS is trained to get as much information from you as they possibly can for the sole purpose of collecting the maximum amount of money they possibly can from you! All taxpayers have rights and most taxpayers do not know those rights. This being the case many taxpayers are taken advantage of due to their lack of knowledge and complete inexperience in dealing with the IRS. As a result they wind up paying more money than they ever should. If you receive a letter of this nature you would do well to contact a professional tax resolution firm to help with this matter.

IRS Collections

The IRS is the ultimate debt collector. Credit card companies can ruin your credit score and write you lots of nasty letters. Automobile finance companies can repossess you car and your bank can foreclose on you if you do not pay your mortgage. The IRS can take money directly out of your bank account and they can demand that your employer send them a huge portion of your paycheck if you owe the IRS money! They have the ultimate power to collect!

The IRS can also put a lien against your social security number thereby affecting your ability to obtain credit, and buy or sell a home as well as many other things. If you are faced with an IRS collection you need professional representation for several reasons. First, a professional tax resolution company can request an immediate “stay on collections” thus buying much needed time to fix the problem. And second, they can find the best resolution for your specific situation. The last thing you would ever want to do would be to wait and let the IRS pursue some of their collection actions.

Friday, October 17, 2008

IRS - Effective Tax Resolution

“I have an IRS tax debt and I don’t know what to do. What are my options?” As a tax consultant this is a question I am asked frequently. In consulting with clients I have determined clients are not aware of the many options available to them thru the Internal Revenue Service tax code. The options can be broken down into three primary categories. First, the taxpayer may qualify for an Offer-In-Compromise. This is the highly touted “pennies on the dollar” settlement. The truth of the matter is very few of these are ever accepted by the IRS, but this is a viable option.

The second category is Currently Not Collectible. This applies to a taxpayer who demonstrates they literally do not have the ability to repay their tax debt they owe the IRS. If accepted into this category the taxpayer is not obligated to pay the IRS monthly payments, nor does the IRS attempt to collect on the taxpayer. The IRS will review the taxpayer’s ability to pay from time to time however and may attempt to collect at some point in the future if the taxpayer experiences a substantial increase in income.

The third category is some type of negotiated Installment Agreement. This is where a taxpayer does not qualify for either an Offer-In-Compromise or Currently Not Collectible and some type of monthly payment arrangement is made. It is usually a good idea to have a professional tax resolution company conduct a thorough analysis of your situation to determine the best alternative you qualify for.

The IRS - Death and Taxes

We have all heard the saying, “Two things in life are for sure and that is death and taxes.” Whoever said that was definitely telling the truth. Tax problems can, and often do, follow a person to their grave. It is a good thing to resolve any and all outstanding tax issues you have. One reason for this is because it is simply the right thing to do. The other reason to do this is because your tax liability will not end when you die. The liability will attach to your estate and will be left to your heirs.

Yes this is true! Too many times “taxes after death” have claimed large portions of the deceased person’s estate because the tax liability was not effectively addressed when the person was alive. The liability grew so large that it consumed all of the wealth the deceased individual willed to their heirs, sometimes causing additional hardships. Don’t let this happen to you! If you have a tax problem call a tax professional and figure out a way to get the problem resolved before it’s too late.

IRS Federal Tax Lien

If you have been issued a federal tax lien you have basically two options to remove the lien. Paying the tax in full will get the lien released or getting an Offer-In-Compromise accepted. Despite what you hear or read a federal tax lien is difficult to remove. The IRS files tax liens to protect the government’s interest. Tax liens are usually filed when a taxpayer owes more than $25,000 to the government. Tax liens may or may not be filed if the amount owed is less than $25,000.

Sometimes taxpayers are unaware a tax lien has been filed. This can happen if the taxpayer has not received notifications from the IRS stating their intention to file a lien. Or the taxpayer may have years of unfiled tax returns and the IRS files the returns for the taxpayer, calculates the tax liability and files a tax lien. Either way this is a situation that requires professional assistance. The best bet is to call a professional tax resolution firm and have them evaluate your options.

Friday, October 10, 2008

IRS Tax Problems – Tax Returns

The federal income tax return is a complicated document that most U.S. citizens are required to file each tax year. Tax laws are very complicated and the rules are often hard to interpret and understand. Taxpayers sometimes find themselves in a position where they have not filed their returns for a few years. This is NOT a good situation to be in. The most important thing is to get unfiled returns filed QUICKLY!

Many complications can arise from returns that are not filed correctly. One of the most common problems is being audited. The IRS conducts a “tax match” on all returns filed with the IRS. The first thing the IRS system looks at is whether or not the income the taxpayer reported “matches” with what the IRS has on file. If it does not the return is “flagged” for further review. This can ultimately lead to an audit. When considering filling out your tax returns yourself you must be sure you have your income numbers correct.

One advantage to utilizing a professional tax firm to assist you with this is that the firm should contact the IRS to review your taxpayer history and retrieve all the income figures reported to the IRS that the taxpayer earned for the tax return years being completed. This is one of the BEST “tax tips” for anyone with unfiled tax returns. There are some really good tax professionals our there that can help you with this.

IRS Tax Debt

Do you have an IRS tax debt? If you do you may be asking whether or not you will ever be able to pay the debt off. Said another way, will this debt last forever? The answer is yes and no. An IRS tax debt, just like milk you buy from the grocery store, has an expiration date, which means at some point it will no longer be collectible, legally, by the IRS. While this is a good thing, the fact that you will not have to “pay forever” the IRS still has other options at their disposal.

It is entirely possible for a taxpayer to owe the IRS and let their collection expiration date expire and they are forever released from the tax debt. However, if the IRS believes the taxpayer has assets that at some point could be sold and the tax paid the IRS can have the tax debt reduced to a judgment against the taxpayer. A judgment is filed in the courthouse of the county in which the taxpayer resides and can be “renewed” every 10 years. Thus making the tax debt last forever.

If you have an IRS tax debt it is wise to have this analyzed by a tax professional to make the best determination as to what course of action would be best. The tax laws are complex and the options are many. A professional must be involved to handle these types of concerns. You should be able to find a professional tax resolution firm who provides a confidential tax consultation at no cost and who can help with whatever problem you may have.

IRS Tax Debt - Corporate Distributions

Taxpayers can develop tax debt problems from many different sources. One of those areas is corporate distributions. If you are the part owner of a corporation it is entirely possible incur a tax liability and never tangibly receive income from the corporation. This income, although never received directly, is reported to the IRS and needs to be recorded on IRS Form K1 and subsequently reported on the taxpayer’s federal form 1040.

Sometimes taxpayers overlook this when preparing their income tax returns. Failure to report this will most likely result in an increased tax liability. The amount of distribution reportable to the business owner is calculated by taking the total deposits and subtracting the total withdrawals for the year. The resulting number, either positive or negative, is then divided according to each business owner’s percentage of ownership and then reported on form K1 as a corporate distribution and is treated as taxable income.

This is something that happens to new business owners who may be unfamiliar with all the rules regarding corporate accounting. There are many other rules that must be followed to avoid incurring an IRS tax debt related to corporate matters. When in question it is always best to consult a tax professional.

Friday, October 3, 2008

IRS Tax Problems

Do you have an IRS tax problem? If so beware of calling the IRS for help. This could worsen your problem. Whenever you have a tax problem the IRS will send you a letter which usually contains a phone number for you to call for help. The truth of the matter is that the IRS will always be looking out for their best interest and not yours. Money magazine published an article addressing this issue that is worth reading.

IRS tax problems are complicated and are best left to tax professionals. A true tax professional will consult with you first to determine your situation and then give the proper advice as to how to correct your problem. Tax payers have rights and taxpayers have options. The role of the tax profession is to advise you of your options and enforce your taxpayer rights. When in doubt call a tax professional.

Saturday, September 27, 2008

IRS Help – Enrolled Agents – Part II

If you have a tax problem with the IRS and need the help of a tax professional you want someone truly qualified to give you the best help possible. You need an Enrolled Agent. An Enrolled Agent (EA) is a federally authorized tax practitioner with highly specialized technical expertise in tax matters and is qualified to represent taxpayers before all administrative levels of the Internal Revenue Service including audits, collections and appeals.

The Enrolled “Agent” is authorized to appear before the IRS on behalf of the taxpayer. Only Enrolled Agents, CPAs and attorneys are authorized to represent taxpayers before the IRS. Enrolled Agents are true tax specialists and probably represents a taxpayer’s best option for representation before the IRS due to their level of experience and knowledge. Part I of this two-part series mentioned the importance of hiring a tax resolution firm that employs Enrolled Agents. Some firms employ former IRS agents who are also Enrolled Agents. This is perhaps the most formidable combination of skill, experience and expertise when resolving a tax matter. There are a few firms that have this combination.

Getting into a plan of resolution is the most important thing a taxpayer needs to do if they owe the IRS money. An IRS tax debt doubles every 4 years. If this is not addressed quickly the taxpayer’s financial condition will eventually dissolve into financial ruin. An excellent tax resolution firm understands this and strives to bring the best plan of resolution possible to the taxpayer through the skill and expertise of their Enrolled Agents. If you have a tax problem don’t stall, make a call! Call a tax professional today!

IRS Tax Help

Do you have a problem with the IRS and need tax relief or some other type of tax help? Your best bet is to call a professional tax resolution firm. Some things to consider when selecting someone to represent you would be a firm capable of representing you in every aspect of tax matters. Another point of consideration would be whether or not the company is a member of the Better Business Bureau, and if so what is their rating? Additionally you want a company that truly seeks to understand your specific tax problem. Without knowing the client’s position it is impossible to accurately determine how to solve the client’s problem.

Once the problem(s) have been accurately identified a plan of resolution must be formulated to resolve the problem(s). Some of the typical problems clients have result from years of unfiled tax returns and/or a large tax liability (they owe a lot of money to the IRS). If a client has unfiled returns the tax resolution firm you select must be able to act quickly to get these returns completed and filed. If the client owes the IRS money and is unable to pay then a plan of resolution needs to be developed and then implemented. One of the most qualified persons to do complete this task is a type of specialist known as an Enrolled Agent (see part II for information about Enrolled Agents).

Tax problems are complex, unique to the client’s own personal circumstance, and require highly specialized skills to get the problem resolved. The team you select to help you with your situation should consist of Enrolled Agents who will use their collective skills and abilities as well as their knowledge and experience in working with the IRS to get the taxpayer into the absolute best plan of resolution available. There are firms that offer clients a no cost, no obligation consultation to determine whether or not the client could benefit substantially from their services. Be careful who you use to help you. It will make all the difference in the end.

Friday, September 26, 2008

Unfiled Tax Returns

Are you “unfiled” with the IRS? If so, then you may have a problem. The IRS laws classify an unfiled tax return a misdemeanor. An unfiled taxpayer may be sentenced to up to one year in prison for each year they are unfiled. Needless to say unfiled tax returns can be a serious problem. Consider the case of actor Wesley Snipes and what happened to him for unfiled tax returns.

Filing unfiled returns will get a delinquent taxpayer back in good standing with the IRS. However, when filing you want to make sure the returns are filed correctly. If there are several years that need filing a taxpayer should seriously enlisting the services of a professional tax preparer. You want the returns filled out correctly and accurately.

Filling out the returns correctly depends on the preparer’s access to tax preparation software that matches up with the year(s) being prepared. Tax laws change from year to year and it is very important to select a tax preparer that had the correct tax preparation software. Failure in this area can trigger an audit!

Filling out the tax returns accurately depends on the diligence of the tax preparer to conduct the proper research to get all the facts necessary to completing the returns. This research should include 1) working directly with the taxpayer to get all expenses that can be written off and to 2) interview the IRS for the purpose of analyzing the taxpayer’s IRS transcript and to obtain a copy of the IRS Income and Wage report to ascertain exactly what income records the IRS has on the taxpayer.

All combined these factors should enable a tax preparer to correctly and accurately prepare the taxpayers outstanding returns. By making sure the returns are filled out according to the tax laws pertaining to each year requiring filing and matching up the proper income obtained from the Income and Wage report the taxpayer can be confident that they are virtually “audit proof” with their returns.

IRS Letter – Certified Mail

You just received a certified letter from the IRS and you’ve opened it and read it and you’re wondering what the letter is all about and what you need to do. First, read and understand the letter and second, take action on the letter! Letters from the IRS have codes identifying what the letter is about. Usually certified mail from the IRS is either a CP 504 or an L1058. These letters are described below.

CP 504 – Initial Notice of Intent to Levy
This is the first collection oriented letter you will receive certified from the IRS. It is an initial notice of intent to levy your wages and/or bank accounts. This is the first warning shot the IRS is firing at the taxpayer.

L1058 – Final Notice of Intent to Levy
This letter is what it says…a FINAL NOTICE of intent to levy. The taxpayer has 30 days to respond to this letter. If no response if given the IRS can levy (garnish) your wages and/or bank accounts. This is serious!

It is best to be proactive if you receive either of these letters. A professional tax resolution firm can be very helpful with situations like these. The first step a tax professional will take will be to file a Power of Attorney on behalf of the taxpayer and request a stay on any collection activity the IRS may have in the works. The bottom line is this…get help immediately! Call a tax professional!

IRS Letter

You’ve got mail! We’re not talking about a friendly email you have received from a friend. We’re talking about mail from the IRS that arrives at your home by certified mail. If you have received this type of mail from the IRS DO NOT IGNORE IT! Open it immediately and respond! Whenever the IRS sends certified mail to someone they are trying to get their attention to let them know they are getting ready to take specific action against them. A response is needed.

If you have received such a letter your best bet is to contact a tax professional to help you with your problem. The chances are very good you are about to get your wages and/or your bank account levied (forcefully taken by the federal government). The IRS is serious about collecting from you. Fortunately there are options available to help with this and calling the IRS yourself is NOT the right answer (the letters will suggest you call the IRS)! The best bet is to contact a tax resolution firm who employs former IRS agents who know how to apply the tax laws to YOUR benefit and NOT to the benefit of the IRS. Your problems can be resolved, but it’s up to you. Take action NOW if you have received one of these letters. Get help now!

Friday, September 19, 2008

Tax Attorneys

Do I need a tax attorney? This is a common question I am asked of taxpayers whenever they have a serious problem with the IRS. First of all, any problem with the IRS is a serious problem. As a tax consultant my question back to the client is, “It depends.” It depends on the type of action the IRS is taking against the taxpayer. For the most part a taxpayer should consult a tax attorney to help them avoid having a problem with the IRS. However, if the taxpayer has not taken the proper steps to protect them from the IRS and they now find themselves in a situation where they owe the IRS money, a tax attorney is generally not the best option.

If the issue is unfiled tax returns and/or an unpaid tax liability these types of problems can be handled by a tax advisor skilled in tax resolution. A tax attorney would be needed if the taxpayer was under some type of formal indictment by the Criminal Investigation Division of the IRS and needed legal representation. A tax advisor skilled in tax resolution who knows the rules regarding tax resolution should be able to work out a plan of resolution with the IRS on behalf of the taxpayer. Most delinquent taxpayers are unaware of all the options available to them thru the tax code.

Current tax law provides for 21 methods of resolving an outstanding liability with the IRS. The challenge for most people have is knowing all of the laws. This is why the services of a tax professional is a must. Tax attorneys are great at what do. So are tax consultants. Know your options! Call a tax consultant today!

IRS Tax Penalties

When you owe money to the IRS they will charge you interest and penalties on the money you owe. By law the IRS must charge interest on your tax debt. Penalties, however, is another story. Penalties can be abated under certain circumstances. The IRS will conduct a thorough review of every fact surrounding the circumstances of your situation before abating any penalties.

In general, the IRS will consider one or a combination of the following reasons for penalty abatement:

Medical condition
Reliance on a tax professional
An act of God
Loss or theft of records
Victim of a crime

Before granting penalty abatement the IRS will conduct a “reasonable cause interview” whereby they will ask for detailed documentation supporting the reason for the causes listed above. The IRS will request a detailed chronology of events for these occurrences. A comprehensive review of what they will look for is listed below.

Medical condition – documentation including medical notes from physicians, medical bills, other financial bills, disability claims, lack of income or employment, etc.

Reliance on a tax professional – proper documentation would include law suits filed against the professional, documentation of dismissal of the tax professional with an analysis of the reason for dismissal, etc.

An act of God – any documentation proving a hardship related to a flood, hurricane, tsunami, tornado, fire or anything else that could be classified as an act of God. Insurance claims and proof of property loss would be required.

Loss or theft of records – police reports or documentation of dismissal of employees relating to the documents lost or stolen by an employee, etc.

Victim of a crime – evidence of embezzlement or other type of theft supported by police reports, insurance claims, etc.

There are a host of other questions the IRS will ask in their consideration of granting a penalty abatement. If you have a large tax liability and have experienced one or more of the items mentioned above the chances are good that you may qualify for penalty abatement. As a tax consultant I always seek ways to help clients benefit from penalty abatement. If you think you may qualify for penalty abatement call a tax professional. It is worth the call!

Making A Difference

I am a tax consultant and I work with people every day who have considerable tax problems. Their problems range from owing the IRS a relatively small sum of money all the way to owing a very large sum of money with years of unfiled taxes. Most of the individuals I speak with are very concerned about their situation with the IRS. They want to know what can be done to solve their problem.

The thing I like most about my job as a tax consultant is making a difference in people’s lives. The tax laws are complicated and confusing. To make matters worse there are tax resolution firms that advertise settling your tax debt for “pennies on the dollar,” which is a legitimate plan of resolution but is rarely accepted by the IRS. Such advertisements lead to further confusion.

A competent tax consultant will ask very specific questions in order to get to the heart of the matter, will not be judgmental and will tell the client the truth of their situation and will provide accurate advice as the absolute best course of action that must be taken to effectively resolve the client’s situation. If you have a tax concern and are needing honest answers to your deepest concerns call a tax professional. Listen to what they say and then make the determination whether they are concerned about you and your situation or selling you just any old service. This is the litmus test. Choose your tax consultant wisely! You want a tax consultant who is concerned about your and truly making a difference in your life for the better.

Friday, September 12, 2008

CP 523

Are you in an installment agreement with the IRS and have you received form CP 523 from the IRS by certified mail? If so, then this means your installment agreement has gone into default. This creates a significant problem for tax payers due to the fact that the taxpayer is now back in the collection process and will be pursued aggressively by the IRS once again.

Once the IRS issues you a CP 523 you have a short window of time to get this corrected. Usually the only way to fix the problem is to hire a professional who has experience working with the IRS. The best type of tax resolution firm to contact is one who employs former IRS agents. A former IRS agent should have the necessary experience and skill to successfully negotiate a new agreement for you.

The Effects Of A Garnishment

You just received notification from the IRS and your employer you are about to have your wages garnished and you’re wondering what effect this is going to have on your income. IRS Publication 1494 provides a comprehensive breakdown of what to expect based on your filing status and the number of exemptions you claim.

The IRS will garnish your wages if you owe them money and you do not respond to their request for payment. First, the IRS will send you notification of their intent to levy (garnish) your wages. If you disregard these notifications you open wide the door for the IRS to garnish your wages. If this happens you will need to enlist the services of a tax professional to get this levy lifted. If you get a notice of intent to levy (garnish) you need to take action immediately. Call for help now!

Qualifying Child

Can I claim my child on my tax return? This question comes up frequently with taxpayers. The taxpayer’s child must pass the four “qualifying child” tests. These four tests are related to relationship, residence, age and support. There are also rules that need to be followed in the child is claimed by two or more taxpayers in a given year.

This is one area that causes taxpayers significant tax problems. If you claim a child on your tax return and the child does not qualify you may have a tax problem due to the fact the IRS will disallow this benefit. The problem gets worse if this goes on for a number of years and is discovered after many years of filing. If you have a tax problem due to this and are wondering what your options are you should consult a tax professional.

Friday, September 5, 2008

Unfiled Tax Returns - Am I In Trouble?

You have not filed a tax return or two or three or maybe even more and you’re wondering if you’re in trouble with the IRS because you haven’t heard anything from them. The answer is YES! You are in trouble. Don’t get a false sense of security just because you have not heard from the IRS. They’ve got your number (and your numbers!). The IRS maintains a file on every taxpayer. They have a record of all income you have earned from all sources.

It is not unusual for a taxpayer to go for a period of time with unfiled returns and not hear from the IRS. This does not mean the IRS has forgotten about you. They have not. At some point in time the IRS will send the taxpayer an SFR which stands for Substitute For Return. When they prepare the SFR they will prepare it in such a way as to apply the maximum tax and will include all penalties and interest. Then they will seek collection. It is at this point that you, the taxpayer, will need professional tax help.

On a more important note it is important to recognize that the IRS considers non-filing to be a criminal offense. The IRS always reserves the right to pursue prosecution by referring cases of non-filing to the Criminal Investigation Division of the IRS. Don’t let this happen to you! If you’re unfiled get your tax returns filed quickly and accurately!

Pennies On The Dollar Tax Settlement

You owe the IRS a large sum of money and you want to settle your tax debt for “pennies on the dollar.” The Offer In Compromise is the key to your problem. This is a program offered by the IRS whereby you can offer the IRS LESS than what you actually owe to settle your entire tax debt. You must qualify financially for the program, however.

The program is complex requires a high degree of sophistication to effectively calculate your offer amount and structure your offer. This is best handled by someone with considerable experience in this particular method of tax resolution. You can do it yourself but if you do you may be putting yourself at great risk.

If you choose to “go it alone” there are some things you should consider. You may offer the IRS too much! This may put you in a position that you cannot afford which would ultimately jeopardize your agreement. Or you may offer too little in which case the IRS will consider your case a frivolous offer and reject it. If your offer is denied on this basis the IRS may construe your frivolous offer as an attempt to delay or obstruct the collection process and may turn your case over to the Criminal Investigation Division of the IRS for criminal investigation. Don’t chance it! Hire a professional! At the very least obtain some degree of professional tax consultation. Good luck!

Thursday, September 4, 2008

Help! I'm Getting Levied!

Help! I’m Getting Levied!

If you get a notice that you are going to be levied by the IRS you need to get help immediately! When the IRS notifies you are getting levied you need to take action to stop this process ASAP! The IRS has the authority (and the power) to have your employer send a significant portion of your pay check directly to the IRS as payment toward your IRS debt. The amount the IRS can take varies depending on your filing status.

You will know if you are getting levied because the IRS will send you a notification in the mail. The notification you will receive will be either a “CP504 – Urgent!! We intend to levy on certain assets. Please respond NOW” or an “L1058 - CALL IMMEDIATELY TO PREVENT PROPERTY LOSS – FINAL NOTICE TO INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING” These notices are your last chance to take action. If you receive either of these notifications you need to call a professional tax resolution specialist.

Friday, August 29, 2008

Business Taxes - Am I Liable?

Business Taxes – Am I Liable?

Are you a business owner? Does the business owe taxes? If so, you may be liable for the taxes and need to speak with a tax professional. There are two types of taxes associated with a business (excluding sales taxes) and they are income and payroll taxes. Most small business owners get into trouble in the area of payroll taxes. It is the responsibility of the business owner to withhold the appropriate amount of payroll taxes and then pay the federal government and the state government (if applicable).

Payroll taxes are due on the 15th of the month immediately following the month for which the taxes were withheld. If the taxes are not paid the IRS will notify the business owner of the amount owed. If not paid within the timeframe requested then the IRS will take actions to collect. If the business is unable to pay the taxes the IRS can force the business to close and then go directly to the business owner to pay the taxes at which point the business owner becomes personally liable for the payroll tax(es).

The good news in this is that often times dealing with the IRS can be somewhat easier as an individual taxpayer than as a business. Payroll taxes rank as one of the top IRS collection priorities. Taking a proactive approach to this problem is always the best option. If you think you have an issue with payroll taxes consult a tax professional today.

Thursday, August 28, 2008

Surviving an IRS Audit

Surviving An IRS Audit

Have you been audited and now owe the IRS money? If so you may need to talk to a tax resolution specialist. The key to surviving an audit is to effectively plan for an audit. A large percentage of taxpayers are sole proprietors who work out of their homes, use their personal vehicle for both personal and business purposes and have a variety of expenses to write off.

Many things can trigger an audit. The IRS will flag returns that have either excessive write offs or under reported income. One way to effectively prepare for an audit is to get your records in order! Everyone, not just small business owners, needs to set up a good system of record keeping to maintain all documents that will be required during the course of an audit. A good system of record keeping would adequately maintain all records relating to income, expenses, home and investments. A basic record keeping system would keep track of the following:

Form(s) W-2
Form (s) 1099
Bank statements
Brokerage statements
Form (s) K-1

Sales slips
Cancelled checks or other proof of payment

Closing statements
Purchases and sales invoices
Proof of payment
Insurance records

Brokerage statements
Mutual fund statements
Form (s) 1099
Form (s) 2439

Rules to recordkeeping
Many people wonder how long they must keep their income tax returns after the due date of the return. If you did not report income that was more than 25% of the gross income shown on your return you must keep the return 6 years. If you filed a fraudulent return or did not file a return then there is no limitation. If you owed additional tax on a return and your did not file a fraudulent return and you did not report income that was more than 25% of the gross income shown on the return then the limit would be 3 years. Any time a claim is filed for a credit or a refund after filing the return then you must keep the return must be kept the later of 3 years or 2 years after the tax is paid. If a claim was filed for a loss from worthless securities then the return must be kept for 7 years.

Remember, when you are accused by the IRS of owing taxes the burden of proof is on you the taxpayer. You must be able to prove what you claim. If you haven’t already, set up a system of recording keeping today to help you survive an audit. If you are in trouble then get help now!

Wednesday, August 27, 2008

The Truth About Liens & Levies

The Truth About Tax Liens & Levies

When you owe money to the IRS the IRS has two very effective ways to collect the taxes they are owed, the federal tax lien and the levy.

The Federal Tax Lien – An Encumbrance
When the IRS assesses a tax liability against a taxpayer they are required to give notice to the taxpayer and demand for payment within 60 days of the assessment. If the full payment is not made then a tax lien is thereby created and subsequently encumbers all property and property rights of the taxpayer. This encumbrance applies to all current property and current property rights as well as any and all property and property rights acquired in the future by the taxpayer until the tax is paid in full.

The Levy – A Seizure
A levy is a seizure of your property, In order for the IRS to gain possession of your property thru a levy the following must take place:
1) The IRS must make a notice and demand for payment.
2) The taxpayer must neglect or refuse to pay the tax within 10 days of the notice and demand.
3) The IRS give the person a notice in writing of his or her right to a hearing 30 days before the levy is made on the taxpayer’s property.

Unless the taxpayer asks for a hearing, the IRS may levy upon all property and rights to property belonging to the taxpayer with the exception of certain exemptions. Do you have a federal tax lien or levy? Make sure you user a professional tax resolution company in order to learn what your best options are in dealing with this problem.