Thursday, December 18, 2008

IRS Secret Agent

Quote of the week:

"The purse of the people is the real seat of sensibility. Let it be drawn upon largely, and they will then listen to truths which could not excite them through any other organ."

-Thomas Jefferson

Thursday, December 11, 2008

IRS Secret Agent

Quote of the Week:

"Any tax is a discouragement and therefore a regulation as far as it goes."

-Oliver Wendell Holmes

Tuesday, December 9, 2008

Is Your Social Security Secure?

So you are retired and it's time to relax and live life at a more relaxed pace. This is the life you have been waiting on. You can finally live life with no worries. You have a retirement nest egg and of course you have your Social Security Income. But also have some lingering tax issues you did not get cleared up before you retired. Most might fear that the IRS can gather up your nest egg and leave you with an empty "coop." This is true but there IS another concern...the IRS can also levy your Social Security Check. Let me say that again...

The IRS can levy your Social Security Check!

The IRS can levy up to 15% of your Social Security Income in order to retrieve the money you owe the IRS for past due taxes. I know what you are thinking...I don't make enough in my social security check am I going to pay my bills if they take even more money out of it? There are solutions that can be reached so if you want to know what your options are before this happens to you please contact a professional tax resolution company.

Wednesday, December 3, 2008

IRS Secret Agent

Quote of the Week:

"The Congress will push me to raise taxes, and I'll say no, and they'll push and I'll say no, and they'll push again. And all I can say to them is read my lips: No New Taxes."

-George Herbert Walker Bush

Tuesday, December 2, 2008

Tax Challenges for Business Income - Part I

Understated business income...the IRS says this is becoming more and more prevalent especially in small businesses. Are more and more small business owners trying to cheat the IRS out of tax dollars? The IRS thinks it is more likely to be the lack of knowledge on the part of small business owners of just how to calculate and document gross business income. Here are some helpful tips from the IRS to help out those who struggle with this on their tax returns.

First of all, what is business income? Business income is any and all income associated with a business. If there is any connection between the income and a business it is business income. You can answer that question with another one...if the business did not exist would the income have been received? If you can answer that with "yes," then put it in the business income column. As a business owner you are legally required to report ALL income that is derived from your business.

There are numerous ways to receive business income. Typically, the income is from simple forms of payment such as cash, checks or credit cards. However, trades, bartering, exchanging of services, exchanging of property are additional ways of paying for the goods and services provided by a company. All of these are considered taxable as sources of income. This leads us into Cost Of Goods Sold (COGS) where businesses will sell products in order to trade for services needed. This is where a lot of things are not as "black and white" on the business income spreadsheet. Next week we will continue with this topic and get into how to actually calculate gross business income though these types of sources.

Wednesday, November 26, 2008

Tax Resolution Integrity

So you find yourself being the subject of the IRS collections process. You have a tax liability with the IRS. You have unfiled returns for past tax years. Maybe you even owe money to the state for same reason. How are YOU going to get it resolved?

The answer is fairly simple. Most taxpayers cannot get their tax liabilities resolved on their own. Mostly because of a lack of knowledge of how the IRS works or because they simply don't have the time to spend hours, days and weeks on the phone negotiating the tax debt they have accrued. If it is simply tax returns from years past the taxpayer can usually file these as long as they understand the guidelines of what can be deducted or included on the tax return for that particular year, have access to all of their financial information, and can access the correct years tax return forms. Simple right? Tax returns are the easy one. If it is a tax debt owed of substantial amounts the IRS would love for all taxpayers to handle this on their own without any representation whatsoever...this is the easiest way for them to get all of their money.

OK, so you need a tax advisor who can handle filing past due returns and negotiate your past due tax liability. How do you find one? Even more do you find the right one? Here are some important tips to consider:

  • Make sure they are a member in good standing with the Better Business Bureau. Also look to see how many complaints they have had each year. Some companies may have a satisfactory rating but have a high number of customer complaints.
  • Make sure they are licensed for both preparation of tax returns and tax resolution.
  • Make sure they are licensed to operate in the state for which you have tax issues...there are several who do not or cannot operate in all 50 states due to improper business practices.
  • Make sure you are dealing with a company who is financially today's economy there are a lot of "fly-by-night" companies who simply do not have the financial structure to make it through tough times and you may find out the company you sent money to yesterday is out of business today. Make sure they have been in business for at least four years...most new businesses fail financially in the first three years so if you have a business in year four you probably have a strong company financially.
  • Make sure they do not have any pending litigation from civil lawsuits from unsatisfied clients.
  • How long does the average resolution take? Anything outside of 180 days is unsatisfactory.
  • Do they simply submit all clients under one program (Offer in Compromise) or do they have multiple options for resolution.
  • Do they have a good reputation on the industry? This can be done online through a google search. Keep in mind most companies (good and bad) have varying reports. Not all customers who get tax resolution get the resolution they wanted so there will always be complaints with just about every company but look at the reasons and more specifically the number of complaints. Ask the company you are talking with to furnish customer testimonies on services rendered.
  • Are they a member of the Net Promoter Score Program which is designed to identify companies who have excellent customer service. (Here's a hint: review the program guidelines and see what the company's score actually is.)

I hope this helps you in your search but keep in mind...this is something in my opinion the average taxpayer cannot handle themselves. Make sure you get the right help with your tax situation and hire a professional tax resolution company.

Monday, November 24, 2008

IRS Secret Agent

Quote of the Week:

"Friends and neighbors complain that taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay we might the more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly."

-Benjamin Franklin

Wednesday, November 19, 2008

Can the IRS Require More Taxes From Your Check?

In a conversation I had with a customer this week, we discussed why he owed so much money each year to the IRS. He is an employee from which taxes are taken directly, and at the end of the year he receives a W-2 detailing the amount of earnings and taxes paid. If he pays his taxes out of each paycheck, how does he owe more at the end of the year? Well, he did not have the correct amount of taxes witheld from his paycheck. Therefore, at the end of the year he had not paid what he owed to the IRS.

He asked me if the IRS can make him change this. The answer to this question is...YES! The IRS may direct your employer to withold additional taxes from your paycheck to cover the appropriate amount needed which is done through a "Lock-in Letter." At this point the amount of witholdings on your W-4 Form become null and void and your employer MUST increase the tax rate on your paycheck. You will also be sent a copy of the letter and given a period of time before the changes are effective. If there are specific circumstances for the decreased witholdings or proof that they are accurate, you can submit a new W-4 Form with documentation directly to the IRS to try and reverse the changes made. However, once a Lock-in Letter has been issued only the IRS can make those changes, so your employer cannot do anything until a change confirmation has been received from the IRS. So keep your witholdings correct, your returns filed and your taxes paid and you won't have to worry about any IRS interventions on your next paycheck.

Sunday, November 16, 2008

IRS Secret Agent

Quote of the Week:

"The only thing that hurts more than paying an income tax is not having to pay an income tax."

-Lord Thomas Robert Dewar

Thursday, November 13, 2008

E-file Frenzy

Do you remember the good ole days where you would have a friend or family member who thought they knew tax returns show you how to fill out your returns. You would then, armed with a ton of energy and ambition ready to tackle your own returns, wait until 11:50 pm on April 15th and drive to the post office in order to hand your package to the post office by midnight so it would get postmarked correctly and the ENORMOUS dreadful event would then be over for another year. If someone would have told me fifteen years ago that one day I would file my taxes on my computer and never leave the house I believe I would have felt deprived of the annual trip to the post office. How else would I get to know the postmaster at my local office if I did not see them in mid April every year?

In fact we are as a nation headed in that very direction and in 2008 almost 60% of this country filed their returns via e-file. We crossed the halfway mark in 2005 (just six short years after the beginning of the program) but hit the highest point of 57.8% in 2008. This number is projected to be over 60% in 2009. Do we really trust these programs? Do we really like to be online that much? Have we become too lazy for the "old school" train of thought? Maybe we need to reconnect with our local postmaster again this coming year. As for me, any tax returns I prepare will be with a pen and a calculator and delivered promptly at midnight to the post office on April 15th.

IRS Secret Agent

Quote of the Week:

"What at first was plunder assumed the softer name of revenue."

-Thomas Paine

Thursday, November 6, 2008

Help Yourself by Filing Past Due Tax Returns

So you have tax returns from previous years that are unfiled. The IRS has not contacted you, so why should you file them? Maye the IRS forgot about you... they didn't forget! So here are some reasons to go back and file those late tax returns:

  • If you have a child moving into higher education and you are in need of federal financial assistance...a review a filed tax returns is a requirement in order to receive that assistance.
  • Lending institutions may require tax returns for you to qualify for a loan.
  • Social Security income, medicare and disability benefits are all figured on the basis of a tax payer's lifetime earnings which is based from information obtained from the tax returns filed.
  • Just like Social Security, Medicare and Disability income listed above, Unemployment income is also based on tax returns filed.

If you do not file your returns you can incur failure to file penalties, forfeit tax refunds, lose your Earned Income Tax Credit, and open yourself up to criminal charges for failure to file.

The bottom line is: make sure you file your returns. Even if you DO NOT have the money to pay what you owe the IRS you still need to file the returns. For more information, please consult a tax professional.

IRS Secret Agent

Quote of the Week:

Question: " I understand that Congress is considering a so-called 'flat' tax system. How would this work?"

Answer: "If Congress were to pass a 'flat' tax, you'd simply pay a fixed percentage of your income, and you wouldn't have to fill out any complicated forms, and there would be no loopholes for politically connected groups, and normal people would actually understand the tax laws, and giant talking broccoli stalks would come around and mow your lawn for free, because Congress is NOT going to pass a flat tax."

-Dave Barry

Wednesday, October 8, 2008

Fishing for Birdies and Paying Tax

So it's the weekend and you are ready for your favorite leisure activities to replace the hectic work week chores. You can't decide should I play golf, go fishing, work in the garden, or maybe stay inside and organize my favorite stamp collection. While you are deciding what activities are going to fill your weekend you may want to consider how much tax you may be required to pay on them.

What am I talking about? There are activities that some taxpayers pursue (typically more than a leisurely level) that can be considered a business. Golfing, fishing, gardening, sewing, woodworking, coin collecting, stamp collecting, and scrap-booking are just a few of the activities that the IRS could potentially tax as a business if there is a profit created from the participation in these activities. A hobby is an activity that is not pursued for profit. A business is an activity generally carried on with the reasonable expectation of earning a profit.

So how do you know if you need to consider these kinds of activities as a business income instead of a hobby? Here are some simple guidelines to answer that very question:

  • Does the time and effort put in to such an activity indicate an intention to make a profit?
  • Do you depend on income from the activity?
  • Have you changed methods of operation to improve profitability?
  • Do you have the knowledge to carry out the activity as a successful business?
  • Did you make a profit through similar activities in past years?
  • Does the activity make a profit in some years?
  • Do you anticipate making a profit in the future due to the appreciation of assets used for the activity?

Generally, the activity in considered a business if it has produced a profit in three of the last five years including the most recent year. Deductions for both business and hobby income are allowed but you must first determine whether your income is from a business or a hobby in order to follow the correct procedures for taking these deductions.

The IRS is not out to spoil your fun, but if these activities produce a profit every year or so you may want to determine whether or not you are required to pay taxes on that money. Don't find yourself behind the "eight-ball" with the IRS who may tell you you owe them taxes on your unreported income. This can become a mess and hard to provide proper documentation leaving you with an unexpected tax liability.

Tuesday, October 7, 2008

IRS Secret Agent

Quote of the Week:

"I like to pay taxes. With them I buy civilization."

-Oliver Wendell Holmes

Monday, October 6, 2008

Closing Costs? Take the Deduction!

So you recently closed on a mortgage finance transaction and you are wondering how you can benefit from paying all those closing costs. You can take a tax deduction on the "points" you paid to obtain your mortgage loan. There are several factors which come into play in regards to how you need to deduct them and if they can be deducted in full or over time. Make sure you understand these guidelines so you take advantage of this unique deduction. You can deduct the entire amount of the points in the year you paid them if the following conditions are met.
  • If your home loan is on your primary residence.
  • You use the loan to buy or build the home you will be living in.
  • If paying points to a mortgage company or bank is a standard practice in your area.
  • The points you paid are not excessive for your area.
  • Points were not paid as a lump sum for other services typically listed separate on the Settlement Statement (i.e. Appraisal Fees, Titlework, Attorney Fees, Credit Report Fees, Inspection Fees or Property taxes)
  • The points were computed as a percentage of the total amount of the loan.
  • The amount is clearly shown on the settlement statement.
  • The points were paid before or at the closing by the borrower or seller but none of the amount owed was borrowed.

Points that do not meet these standards are not wasted money. Most are very necessary to the process of obtaining a mortgage loan from any financial institution. However, if the y do not fit the above requirements - all is not lost. You can deduct them over the life of the loan. Simply total the points and divide them by the number of payments required within the term of the loan and then deduct the points on your annual tax returns (on a Schedule A with your 1040 return) by how many payments were made in that year.

So don't worry you were charged too just gives you a larger deduction. This should make everyone feel better. Well maybe not but anytime we can write off expenses on a tax return is helpful.

Thursday, October 2, 2008

Are you Moving?

Congratulations on your new even get to move to a new could qualify for a tax deduction from your moving expenses. If you have recently moved to a new city for a new job or because your current company has moved it's operations you may qualify for a tax break on your moving expenses. The main factors are how far you moved and how much time you spend on the job. If it is a short-time or part time job or if the move is relatively local you may not qualify.

Your new job must meet the "mileage test" which states that the new job must be 50 miles further away from your home than the old job was. For example, if you drive 3 miles to work on your current job, your new job location must be 53 miles away from your home.

You must also meet the "time test" which states that you must maintain Full Time Employment for at least 39 weeks during the 12 months immediately after the move takes place and 78 weeks of the 24 months immediately following the move. How do you determine that if returns are due before this can be verified??? You can still deduct the expenses even if you have not met the "Time Test" qualifications before your return is due if you realistically expect to meet those guideline requirements. If you are a military personnel and your move occurs because of a permanent change of station you do not have to meet these requirements.

How much can you deduct? You can deduct the expense of moving your household goods and personal items as well as the expense of traveling to your new home which includes lodging. However, no part of the purchase transaction can be deducted as a moving expense. Make sure you take advantage of these deductions in order to save you money on your returns. Also make sure you maintain documentation of all moving expenses with a copy of your tax returns. This will keep you in line later if the IRS decides to audit any of your returns.

IRS Secret Agent

Quote of the Week:

"Only the little people pay taxes."

-Leona Helmsley

Wednesday, October 1, 2008

Beware of Tax Scams!

So you got an e-mail notifying you that you owe taxes to the IRS and you can send the money in to get it resolved. Before you send any money you may want to check the source. The IRS has been one of several government agencies and corporations whose names and websites have been copied by impostors claiming to be IRS employees and asking for your money. Be aware that the IRS does not contact taxpayers through e-mail in regards to tax debt. DO NOT open links in unsolicited messages claiming to be from the IRS.

E-mail isn't the only way for "scammers" to access your personal information. Phone calls are also a good way to obtain information. DO NOT give away any personal information to anyone over the phone claiming to be from the IRS unless you have verified the callers identity. You can do this by calling the IRS at 800-829-1040 to avoid becoming a victim of fraud. Thieves can use your personal information to access accounts, run up credit card balances, apply for personal loans or credit accounts. They can also produce false information and identification enabling them to intercept refund payments and present the IRS with false information leaving you to deal with tax issues you didn't create.

Some of these con artists make a living creating fraudulent tax returns knowing that you (as the taxpayer) are ultimately responsible for all the information on your tax return. Make sure you are using a credible company to file your returns and make sure you review ALL returns for accuracy to make sure they are correct. To avoid these scams takes awareness, a little common sense and making sure you are filing and paying taxes on time as required by the IRS. The last rule of thumb here will help the most.

Wednesday, September 24, 2008

Don't Leave Money On The Table!

Have you recently donated money or items to a local charity in order to help someone less fortunate than yourself? Don't leave money on the table when you can take a tax deduction for such activity. Just make sure you have the required documentation in order to back up the deduction on your return. The IRS has become more strict on this since January of 2007 due to the Pension Protection Act of 2006 so make sure you understand the guidelines and follow the rules. This will save you a lot of time and money by taking deductions the right way.

In order to deduct a donation to a charity you must have a bank record or a written communication from the charity showing the name of the charity, the amount given and the date of the contribution. Acceptable bank records can be cancelled checks or bank statements containing the name of the charity, the amount given and the date of the contribution. Bank registers, diaries and personal notes made around the time of the contribution are no longer acceptable. Here are some additional tips to keep in mind when filing for a deduction on your tax returns:
  • Contributions must be made to a qualified organization.
  • Used clothing and household items must be donated in good used condition.

  • Vehicle donations are subject to special rules.

  • To deduct charitable items which have a value more than $250, you must have a written acknowledgement from the qualified organization.

  • To deduct charitable items which have a value more than $500, you must complete a form 8283, Non-cash Charitable Deductions, and attach the form to your return.

If you need further information or help a good resource is IRS publication 526. As always, make sure you take advantage of the tax credits you are entitled to but make sure you follow the proper procedures. If you don't you can leave yourself open to filing an improper return and fall subject to penalties and interest. If this happens you can always obtain the services of a professional tax resolution company to rectify the situation. However, if you follow the rules on the initial return this will help you to avoid an unpleasant situation all together.

First Time Homebuyers Tax Credit

The recently enacted Housing and Economic Recovery Act of 2008 has created a tax credit that all "First Time Homebuyers" should plan on taking advantage of. This credit applies to all homes purchased after April 8, 2008 and before July 1, 2009 and can reduce a taxpayer's tax bill or increase their refund dollar for dollar. This credit will even be paid out to eligible taxpayers even if they owe no tax or the or the credit is more than the tax they owe. So how much is this credit?

Up to $7500.00!!!

More specifically the credit is ten percent of the house value with a maximum credit amount of $7,500 for a single person or married couple filing jointly or $3,750 for a married person filing separately. This applies to a primary residence within the United States only. You can also qualify if you have not owned a primary residence within the last three years even if you are not a first-time homebuyer. There are also some income parameters set in place that can keep you from qualifying so make sure you know all the details about this tax credit to see if you qualify.

Basically, you are given up to $7,500 which you will pay back over 15 yeas with no interest. If you qualify for the maximum you will file for the tax credit on your 2008 tax return. Subsequently, your payments each year (starting in 2010) will be one-fifteenth of the amount of your tax credit. At the maximum amount this would simply be a $500 payment each year using the new IRS form 5405 filed along with your annual returns. So if you have recently purchased a home or are considering purchasing a home and wonder if you qualify for this program please make sure you consult a tax professional.

IRS Secret Agent

Quote of the Week:

"The best things in life are free, but sooner or later the government will find a way to tax them."

-Author Unknown

Thursday, September 18, 2008

Tax Preparer Fraud

So you did what millions of Americans have done for years and visited a local tax preparer firm or CPA to have your annual tax returns prepared. This made you feel good that your tax returns were completed and done accurately by someone who knows how to correctly prepare returns for the IRS. But did they actually prepare them correctly and who will be liable if they make a mistake?

If you are using a reputable tax firm or CPA the reality is you are probably not going to have a tax issue. But laws change and mistakes can certainly be made and when they occur the person who is liable for the accuracy of the tax returns is ultimately the taxpayer and not the tax preparer. This seems to be a little unusual since the taxpayer placed their returns in the hands of a certified professional because they themselves do not know the laws. However, the accuracy of the returns is the sole responsibility of the taxpayer even when they didn't prepare them.

Mistakes are acceptable and even tax preparers are human so every return is not going to be perfect. However, there is a fine line between errors and tax preparer fraud. Tax preparer fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions for their clients. In most cases the taxpayer may not be aware of the returns having false or fraudulent information on them but when the IRS reviews those returns for accuracy and detects a false return it is the taxpayer - not the preparer - who pays the additional tax as well as the additional penalties and interest. This can cost the taxpayer thousands of dollars that they could have avoided by choosing a reputable tax firm. So when you are having your taxes prepared by someone else please make sure you choose them wisely. Next week I will go over some tips on how to select a good tax preparer so make sure you return to view these useful tips.

IRS Secret Agent

Quote of the Week:

"Taxes: Of life's two certainties, the only for which you can get an automatic extension."

-Author Unknown

Wednesday, September 17, 2008

IRS Targeting Veterans for Employment Positions

The Internal Revenue Service has made an effort to fill positions inside the IRS with military veterans from our armed forces. This push to target veterans is mainly due to their training and capability to handle highly skilled positions inside the IRS. On September 4, 2008 the IRS announced that they have met their goal in hiring 1,000 military veterans in this fiscal year and will continue to focus hiring efforts within this valuable group of men and women. The fiscal year, which ends on September 30, 2008 has seen 1,052 hirings of such veterans.

“The men and women who served America in the military are highly capable and trained individuals ready to supply valuable skills needed by the IRS, or any employer for that matter. I am pleased the IRS has met its goal. But we are not going to stop there. We will continue to recruit from this talented pool of people who already have demonstrated their leadership, work ethic and dedication,” said IRS Commissioner Doug Shulman. This comment coming from an article posted by the IRS on their website.

This is a trend that will continue as the IRS begins a web-based advertising campaign called America's Heroes and a recruitment push to hire an increased number of veterans beginning this fall.

Thursday, September 11, 2008

Still Waiting for Your Stimulus Check?

Are you still waiting and wondering when you are going to receive your stimulus check? Do you walk to the mailbox every day hoping it will arrive only to find bills and junk mail? The Internal Revenue Service is still processing stimulus checks but have found some common trends in taxpayers who have not received theirs yet. There are several common errors that taxpayers make that may delay the process or keep you from receiving your check all together. If you have not received yours yet you may need to check to see if one of the following common errors applies to you.
  • File only one tax return - It can take about 12 weeks to process paper returns for stimulus checks so DO NOT send a second copy of the 2007 return if you are not getting an immediate response thinking maybe the IRS did not receive it. This can delay the processing of your stimulus check
  • List qualifying income - A lot of taxpayers are listing the monthly income versus the annual income and this is not qualifying them for the stimulus check.
  • Review your tax liability - Some people who make the required income to qualify but have very little or no tax liability may only qualify for a $300 check ($600 for a married couple) instead of the $600 check ($1200 for a married couple).
  • Filing an amended return - Generally a taxpayer cannot file an amended return solely to receive a stimulus check unless they are a retiree or a veteran. While amending the return will properly adjust the income and tax liabilities, the economic stimulus check will not be affected by the amended return.
  • Use the most current address - If you move after filing, you must obtain and complete a Form 8822 (change of address form with the Postal Service) in order to update your address. If the postal service cannot deliver the check to the address listed it will be returned to the IRS.

You must file your 2007 tax return by October 15th in order to receive the stimulus check. The IRS has completed about 90 percent of the checks but will continue to process them until December 2008. The biggest error is not filing your return for the 2007 tax year but there is still time. If you want to know more information of how to receive one or when yours will be delivered you can find out through the IRS Website. You also want to keep in mind if you owe any money to the IRS from unpaid taxes this check will simply be applied to that past due balance. If this is the case make sure you are being proactive in getting your tax debts resolved.

Wednesday, September 10, 2008

Restructuring Your Business? Part Four

In the first three parts of this series we looked at some of the changes your business can go through without being required to file for a new Employer Identification Number (EIN). We also looked at what changes would require a new EIN if you operate your business as a Sole Proprietor or a Corporation. Now we will look at some changes that your business can go through that WILL require you to file for a new EIN if you operate your business as a Partnership.

If you are a Partnership, you will need to file for a new EIN if any of the following relate to your business restructuring changes:

  • You incorporate.
  • Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
  • You end an old partnership and begin a new one.

Make sure you are following the guidelines set forth by the IRS with regard to making sure your business changes don't interrupt your business. If you stay on top of this from the start it can save you a lot of time and money trying to correct the problem later.

Tuesday, September 9, 2008

IRS Secret Agent

Quote of the Week:
"If you make any money, the government shoves you in a creek once a year with it in your pockets, and all that don't get wet you can keep."
-Will Rogers

Wednesday, September 3, 2008

Restructuring Your Business? Part Three

In the first two parts of this series we looked at some of the changes your business can go through without being required to file for a new Employer Identification Number (EIN). We also looked at some changes that would require you to file for a new EIN if you operate your business as a Sole Proprietorship. Now we will look at some changes that your business can go through that WILL require you to file for a new EIN if you are a Corporation.

If you are a Corporation, you will need to file for a new EIN if any of the following relate to your business restructuring changes:

  • The corporation receives a new charter from the Secretary of State.
  • You are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
  • You change to a partnership or a sole proprietorship.
  • A new corporation is created after a statutory merger.

Make sure you are following the guidelines set forth by the IRS with regard to making sure your business changes don't interrupt your business. If you stay on top of this from the start it can save you a lot of time and money trying to correct the problem later. Next week we will look at Partnerships and what restructuring aspects can affect your business.

Tuesday, September 2, 2008

IRS Secret Agent

Quote of the Week:
"I shall never use profanity except in discussing house rent and taxes."
-Mark Twain

Monday, September 1, 2008

"Declaring your In-Dependants"

So you are filing your tax returns and are unsure how to fill out the "dependants" portion on your returns. Here are some helpful hints to let you know what a dependant is and can they be claimed on your return. First of all, a dependant is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependant exemption. Each dependant decreases the income subject to tax by a set amount for each tax year. For example, a dependant exemption for 2007 was $3400 so a taxpayer with two children could reduce their taxable income by $6800. A taxpayer cannot claim a dependant exemption on any person who can be (or has been) claimed by another person. So if there are children involved who can be claimed by another taxpayer make sure you understand who is claiming the exemption because it can cost you time and money later for filing a child on your return as a dependant after another taxpayer claims the same child. Unless it is court ordered for one taxpayer to receive the credit over another, the credit will go to whoever files the return first. The other taxpayer will be subject to an adjusted tax return resulting in penalties and interest on the principle debt owed from the year for which the exemption was filed. This can cause some real headaches later for the taxpayer who discovers they now owe the IRS money due to incorrect information given to them on a tax return.

If you want to know how to "Pass the Test" on whether you can claim an individual as a dependant there are several questions you can ask yourself in order to figure out if a person qualifies. Please make sure you understand these guidelines before you file. There are several tests available to help clarify your situation including the relationship test, age test, and residency test among others. These can clarify specific points so you know whether or not a person qualifies as a dependant on your return or if you are sending incorrect information to the IRS. Make sure you know the difference.

Wednesday, August 27, 2008

Restructuring Your Business? Part Two

In the first part of this series we looked at some of the changes your business can go through without being required to file for a new Employer Identification Number (EIN). Now we will look at some changes that your business can go through that WILL require you to file for a new EIN.

If you are a Sole Proprietor, you will need to file for a new EIN if any of the following relate to your business restructuring changes:

  • You are subject to a bankruptcy proceeding.
  • You incorporate.
  • You take in partners and operate as a partnership.
  • You purchase or inherit an existing business that you operate as a sole proprietorship.

Make sure you are following the guidelines set forth by the IRS with regard to making sure your business changes don't interrupt your business. If you stay on top of this from the start it can save you a lot of tie and money trying to correct the problem later. Next week we will look at Corporations and what restructuring aspects can affect your business.

Tuesday, August 26, 2008

IRS Secret Agent

Quote of the Week:
"Unquestionably, there is progress. The average American now pays out twice as much in taxes as he formerly got in wages."
-Henry Louis Mencken

Monday, August 25, 2008

The IRS Knows Who You Are!

To say being in compliance with filing your tax returns is important is a gross understatement. A good number of taxpayers do not file returns for specific years because they owe money to the IRS and cannot afford to pay the balance due. While it is true that owing money to the IRS can be a very stressful and embarrassing experience -- you can find yourself in a much worse position by not filing the returns. You can be prosecuted criminally for unfiled returns as many people are finding out across the country. In 2007 there were 516 investigations initiated and 300 of these had prosecution recommended for not filing tax returns. Of the 300 cases recommended for prosecution, 278 were sentenced (an 80.6% incarceration rate) with the average time served being 38 months. That is over 3 years in a federal prison because someone decided they either willfully did not want to follow the laws regarding filing taxes or maybe they thought (as so many people do) they could not afford to pay the taxes so I will wait and file the returns when I can pay. Take my advice FILE YOUR TAX RETURNS!!! It is better to have the IRS forcing monthly payments on you in order to pay the balance of your tax liability over time than to actually "do time." Ask yourself - would I rather pay for 5-10 years or be in jail for 5-10 years? I think this is an obvious answer.

Here are few examples of people who made the wrong decision:

  • Indiana Man Sentenced for Failing to File Individual Income Tax Return
    On April 17, 2007, in Indianapolis, IN, Patrick D. Bogan was sentenced to 12 months imprisonment, fined $4,000 and ordered to cooperate with the IRS after pleading guilty to willful failure to file an individual income tax return. Bogan admitted that he failed to file a 2001 individual income tax return. Bogan had taxable income in 2001 totaling approximately $280,389 resulting in an unpaid tax liability of approximately $99,551.
  • Defendant Sentenced to 21 Months in Prison for Failure to File Three Years of Income Tax Returns
    On May 30, 2007, in New Orleans, LA, Michael P. Nance, a Riverboat Pilot who worked for the New Orleans-Baton Rouge Steamship Pilots Association (NOBRA), was sentenced to 21 months in prison to be followed by one year of supervised release. According to the Information filed in the court in October 2006, Nance received gross income of $292,762 in calendar year 2000; gross income of $316,026 in calendar year 2001; and gross income of $296,134 in calendar year 2002. On December 13, 2006, he pleaded guilty to failing to file his personal federal income tax returns for the years 2000, 2001 and 2002.

  • Dallas Businessman Sentenced to Two Years in Prison for Failing to File Income Tax Returns
    On March 2, 2007, in Dallas, TX, John Hayden LaRue, Jr., a Dallas businessman, was sentenced to 24 months in prison for failing to file an income tax return. As part of his plea agreement with the government, LaRue paid $1.8 million in restitution to the Internal Revenue Service. LaRue owns Medical Contracting Services, Inc., (MCS) in Dallas. He admitted that he knew he was required to file a federal income tax return and that he voluntarily and intentionally failed to do so.

These are a few examples taken from an article on the IRS website from the year 2007. You can view others from 2006, 2007 & 2008 for additional proof. If you are behind on your tax filings don't think the IRS doesn't know where to find you or they won't come after you for the money. Please seek professional help in order to get into compliance and resolve your debt in a manner that is financially beneficial to you before it is removed involuntarily without your best interest in mind.

Wednesday, August 20, 2008

Restructuring Your Business? Part One

So your business is changing. Maybe you are undergoing a simple change in ownership. You may need a new Employer Identification Number (EIN). If you are looking to incorporate a sole proprietorship or form a partnership you MUST get a new EIN. However, if you only change the following aspects of your business you will not need a new EIN.

  • Simply change the name ONLY of your business.
  • A partnership or corporation declares bankruptcy.
  • A corporation chooses to be taxed as an S-Corporation.
  • You changed locations or added locations.
  • You elected on Form 8832 to change the way the entity is taxed.

Make sure you do your due diligence on this matter before you make any changes. Not filing for a new EIN if one is needed can lead to major complications later when filing your tax returns. In the second part of this article (next week) we will look at some of the specific changes in your business restructure that will require you to apply for a new EIN. If you find yourself in the situation where complications have come about for your business because you did not follow (or know about) the procedures you can get help from a certified tax resolution professional.

Tuesday, August 19, 2008

IRS Tax Relief

Quote of the week:
"How much money did you make last year? Mail it in. (suggestion for a simplified tax form)"
-Stanton Delaplane

Monday, August 18, 2008

Don't Wait to Collect Your Refund!

So you haven't filed your tax returns yet but you're not worried because the IRS owes you a refund. You can always go back and file to get your money when you need it right? WRONG! You do have the ability to file a late tax return and claim any refunds due to you from the IRS but pay attention: THERE IS A TIME LIMIT!

Generally, you may claim a refund only within three years from the time period the tax was paid or withheld from wages. There are some exceptions to this rule (of course) so you want to review the guidelines on the IRS website order to make sure you are within your rights to file a claim for a refund. The bottom line is file your tax returns on time...especially if you are due a refund. Once your time limit has expired your money will now be a tax donation to the IRS...without the benefit of the write-off for charitable contributions. Don't miss the opportunity to collect your money! If you don't know how to claim it or don't know if you qualify please consult a professional tax consultant.

Wednesday, August 13, 2008

Why am I Responsible for my Spouse's Tax Debt?

So the IRS sent you a letter informing you that you owe them $50,000 in taxes. This must be wrong. Besides, you paid your taxes through your company who withheld taxes directly from your paycheck. You paid your taxes and then some. In fact, the IRS owes you a refund. Why then are you receiving notices for payment on taxes you don't owe? You filed your return as "Married & Joint" and your spouse worked as an independent contractor for a company who did not take any taxes out of her paycheck. She owes money on her taxes even though you don't. Can you be held accountable for her debt? In a word -- ABSOLUTELY!

There is a category you may want to check into however. It is called "Innocent Spouse" and it is designed for those who are being held accountable for debt for which they had no control. To find out if you are eligible for this status check out the qualifications in the IRS tax code. Some of the questions you need to answer are as follows:

  • Are the taxes owed from your spouse or ex-spouse?
  • You did not significantly benefit (above normal support) from the unpaid taxes?
  • You suffered abuse in your marriage?

If you can answer "yes" to any or all of the above questions you may be able to qualify for this unique designation. You will need to file a Form 8857 with the IRS to be granted a formal determination. One thing to keep in mind, however, you must have documented proof of the above factors. All of the above are hard to prove and if you filed your return for the year in question as "married and joint" you will have a hard time proving you are an innocent spouse. The obligation for accurate tax reporting ultimately comes down the taxpayer and once you sign your return you are responsible for the information on it.

Tuesday, August 12, 2008

IRS Secret Agent

Quote of the Week:

"Taxes are the price we pay for civilization."

-Oliver Wendell Holmes Jr.

Monday, August 11, 2008

Mileage Rate Increased

Tired of paying rising gas prices everywhere you go? Are you going through lifestyle changes in order to fight the rising cost of fuel? Is your business or job being suffocated by the financial crunch of keeping vehicles on the road in order to continue business as usual? There is some help on the horizon.

The IRS just raised the mileage rate for the 2008 tax year beginning in July. The rate for January 1, 2008 until June 30, 2008 is 50.5 cents per mile. As of July 1st the rate is increased to 58.5 cents per mile for the remainder of the year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers." This statement coming from a recent article on the IRS website posted June 23, 2008.

Thursday, August 7, 2008

I don't have any money -- EXTENSION!!!!

Every day I come across taxpayers who have not filed their income tax returns for one simple reason.

"I didn't have the money to pay my taxes."

Most of these taxpayers tell me it's OK because I filed for an extension. However, no payments were made when they filed for this extension. They all say, "If I had money to pay the taxes...I wouldn't have filed for an extension." But filing for an extension is NOT an extension to pay your is an extension to file your return. You are still required to mail in an estimated tax payment with your request for extension.

You now, however, have three ways to file for an extension. You can file online with Form 4868 by using a credit card to pay an estimated tax payment. You can file through the mail using Form 4868 and mailing your extension with a check for your estimated taxes. Finally, you can simply pay all or part of your estimated tax payment though an outside service provider provided on Form 4868. There is a separate process you must go through if you are serving in the military in a combat zone or hazardous area.

Just remember one must pay your taxes when you file for an extension or it is like you never filed them at all. The IRS wants the money due to them. Paying an estimated amount of taxes with an extension will allow you more time without further penalties.

Wednesday, August 6, 2008

IRS Secret Agent

Quote of the Week:
"A person doesn't know how much he has to be thankful for until he has to pay taxes on it."

-Author Unknown

Tuesday, August 5, 2008

"Lien-ing Tower of Taxes"

Got a tax lien filed against you by the IRS? You are in the same boat as thousands of taxpayers every year. In fact, if you owe $25,000 or more in taxes there is an "implied lien" against you whether it has been filed at the courthouse or not. This is becoming more popular these days and a recent article on Yahoo Finance further solidifies that the IRS is cracking down on taxpayers and liens are going to be a bigger part of their arsenal.
You will have this lien until it is paid in full or it expires which is 10 years from the date the lien is placed. There are some things that CAN extend this period however, such as submitting an Offer in Compromise, Bankruptcy, an Audit, and a collection due process hearing, just to name a few. This will affect your ability to finance a home, automobile or get most types of loans from a lending institution.

Sound pretty bad? Before you answer, there is one more type of lien that you need to be aware of.

This is called a Statutory Lien or "Silent Lien." This occurs when a lien is filed on a taxpayer and in later years the taxpayer incurs additional debt. Even though the initial lien is filed for the original liability amount the payoff for that lien will include ALL the liability owed to the IRS. For example, if you got a lien filed for $10,000 against you in 2004 but in 2007 you could not pay the $11,000 you owed for that year, your tax lien will still say "$10,000" at the courthouse. But the $11,000 from 2007 is what is known as a "Silent Lien" and your payoff will include both amounts for a total of $21,000 plus penalties and interest.

Can this tough situation be avoided? Yes! File your taxes on time and if you cannot pay the amount owed please consult a professional tax resolution company.

Monday, July 21, 2008

I.R.S. Secret Agent

Quote of the Week:

"In this world nothing can be said to be certain, except death and taxes."

-Benjamin Franklin

Tuesday, July 15, 2008

The IRS Took My Paycheck

After several notifications from the IRS, you receive a "CP 504" as a certified letter like the one shown in the picture above. This letter is not like the others you have received. This letter has "ATTENTION PLEASE" written all over it. First, it's delivered certified mail which is always an eye opener. Next, the letter serves to notify you that since the IRS has not received a response or payment for your back taxes (in spite of all the notices they sent you) they have decided to levy your paycheck. Since you decided not to send any money to the IRS they decided to help you out by saving you the cost of a stamp and remove it themselves. That way you don't have to mail them a check for up to 85% of your net paycheck each pay period.

The fact is, that as "off the wall" as the above comments may sound, the IRS can remove up to 85% of your net paycheck each and every pay period for as long as it takes to eliminate the entire liability. This is done through a process called a wage levy. This can be removed once you have entered into a negotiated agreement of tax resolution. If this has happened to you please make sure you contact a professional tax resolution company to help you in the negotiation process.

So if you receive a certified letter CP 504 in the mail notifying you that the IRS is planning to send your employer a wage levy request, please make sure you don't waste any time getting this taken care of. Once the levy is in place it will take more effort, time and money to get it released. And if that letter is on a form L1058 (noted in the bottom right hand of the letter) a levy is eminent in a very short period of time. This is a final notice that can come after the CP 504 and before the levy...or not at all before being levied. Don't wait once you get a certified letter in the mail. GET HELP SOON!

Monday, July 14, 2008

I.R.S. Secret Agent

Quote of the Week:

"People who complain about taxes can be divided in two classes: men and women."

-Author Unknown

Sunday, July 13, 2008

Caution: Pennies on the Dollar Part IV

In the first three parts of this series on an Offer In Compromise (OIC) we have discussed some of the pitfalls and things to look out for when using this as a resolution. We have attempted to make you a little more aware and a little more educated on the process and what will be acceptable by the IRS. We also went over the first two areas where an OIC might be an option for taxpayers which are "Doubt as to Collectibility" and "Doubt as to Liability."

Finally, let's take a look at the last area where an OIC might be accepted. It is known as Effective Tax Administration (ETA). This is an area where there is NO DOUBT as to the liability and there is potential to collect the liability in full but other circumstances are present that would allow the IRS to consider an OIC. There is no monthly disposable income, equity in assets owned is equal to or greater than offer submitted, the customer is not able to procure a loan on such assets, and extreme circumstances are involved such as health or sickness of an individual. To be eligible for this extreme circumstance the taxpayer must demonstrate that the collection of the tax would create an economic hardship or be unfair or inequitable. These offers are very rare.

Some other things to keep in cannot be in bankruptcy or have bankruptcy pending, you must pay a $150 application fee, you must submit 20% of your submitted offer up front if you are submitting a lump sum cash offer, you must be in full compliance with filing (no unfiled returns), you must be current with any quarterly estimated tax payments if you are self-employed, and 941 taxes are not eligible for an OIC.

So to wrap it all up - you absolutely need a professional to work on your tax resolution on your behalf but BEWARE of the company you choose. I recomend you do your due diligence and research their reputation as well as their BBB ratings and history. You must be aware that you actually qualify under the restrictions of the program we discussed before you submit an OIC or you will only waste time and money but your tax liability will still be there. Whatever you do, DO NOT WAIT to get your tax liability professional help immediately.

Thursday, July 10, 2008

IRS Cash Withdrawl

Just an ordinary trip to the bank turns into an alarming realization. The IRS has helped themselves to your entire account balance through what is known as a Bank Levy. Your bank has informed you that the IRS has requested the current balance in your account to be sent to them as a payment on your past due tax debt. This, unfortunately, is money you will not get back but here are a few things you should know if this happens to you.

First of all, the IRS levy will remove all the money in your account up to the balance of your tax debt. If you have more money in your account than you owe in taxes they will only remove the amount of your tax debt. If you owe more than what is in your account the bank will remove it all and send it to the IRS. The levy is only set to remove what is in your account on the 1st day the account is levied. The amount in your account will be frozen for 21 days. On the 21st day only the amount that was in your account on day one will be sent to the IRS. After the 1st day any subsequent deposits should be available to you in your account for normal banking activity. Some smaller banks who may not understand the policy of an IRS Bank Levy routinely freeze the account for the required 21 days including all subsequent deposits and send the entire balance to the IRS on the 21st day not providing you access to normal bank activity during the 21 day process. The initial balance will be removed but the subsequent deposits can be restored if action is taken quickly with a professional tax resolution company.

The levy process can also cause a number of bounced checks which can add up plenty of penalties for each check depending on the banking policies of the financial institution you are working with. However, there are warning signs that this action is being considered by the IRS. Within the due process that the IRS must follow you will receive several letters regarding payments on your tax liability. The final notices are sent via certified mail stating the IRS intends to levy you. This can be a bank levy, a wage levy or both. Check back next week and we will discuss the details of a wage levy.

The moral of this story...keep your tax returns filed and up to date and pay your taxes! If you cannot pay the tax amounts owed on your returns, please call a professional tax consultant.

Monday, July 7, 2008

I.R.S. Secret Agent

Quote of the Week:

"Did you ever notice that when you put the words 'The' and 'IRS' together it spells THEIRS?"

-Author Unknown

Sunday, July 6, 2008

Caution: "Pennies on the Dollar" Part III

In the first two parts of this series we have taken an inside look at a program called an Offer In Compromise or OIC for short. This is advertised by many companies who offer "Pennies on the Dollar" settlements. Be very careful before you attempt this type of settlement or use a company who uses this as the primary way to resolve your tax debt.

The IRS will generally accept an OIC when it is unlikely that the tax liability can be fully collected AND when the offered settlement amount reasonably reflects the potential collectibility from the taxpayer. However, there are several reasons that an OIC can be accepted. In part two we discussed a classification known as "doubt as to collectibility." In this part we discuss "doubt as to liability."

Doubt as to liability occurs when a legitimate doubt exists that the taxpayer owes part or all of the assessed tax liability. This can be used to re-open an audit. The taxpayer must refile amended tax returns to show proof that they don't owe part or all of the tax liability. This is a rare case and has a less than 5% success rate. There must be some very complete and accurate documentation from the taxpayer in order for this to be considered because you nobody wants to re-open an IRS audit.

Next week we will look at an Effective Tax Administration OIC. We will also look at some other issues that may keep you from reaching a settlement through an Offer In Compromise.

Thursday, July 3, 2008

Tax Tip of the Week

Tired of trying to keep up with all of the legislation changes in the IRS tax code? Feel like you don't understand some of the laws and the ones you do understand change every year? Well, here is your weekly tax tip on a new penalty you may want to be aware of if you file your own taxes.

If you file a claim for refund or credit of income in an excessive amount without a reasonable basis for the claim you will encur a penalty. This penalty can apply to any claim made after May 25, 2007. This penalty does not apply to any amount that a fraud penalty or accuracy-related penalty has been applied.

So the bottom line is if you are not sure about income credits or refund claims on your tax returns consult a proffesional tax advisor. It is better to pay for the advice up front than pay any penalties to the IRS for errors on a tax return. The penalties will cost even more and if not taken care of immediately will lead to loss of time and money as you attempt to resolve the debt over time.

Tuesday, July 1, 2008

I.R.S. Secret Agent

Quote of the Week:

"I'm proud to be paying taxes in the United States. The only thing is --I could be just as proud for half the money."

-Arthur Godfrey

Monday, June 30, 2008

Caution: Pennies on the Dollar Part II

In part one of this series on an Offer In Compromise we discussed how this has become one of the most misunderstood (and incorrectly promoted) tax solutions in recent times. There are a lot of companies who advertise this "Pennies on the Dollar" solution as the one and only way to resolve your tax debt with the IRS. They also willingly charge you money to submit an Offer In Compromise on your behalf with total disregard to your financial situation and the requirements the IRS has set forth in order to qualify for this resolution. While this is a viable option within the IRS tax code I must caution you to make sure you are aware of the qualifications of any company who is working on your tax resolution.

So let's look at one of the qualifications inside this program so you are aware if this is an option that you can qualify for. This could save you time and money. One reason for submitting an Offer In Compromise is called "Doubt as to Collectibility." That is when doubt exists (under your current financial conditions) that a taxpayer could fully pay off the tax liability in question before the expiration date the IRS has set. The IRS typically has ten years from the assessment date for each tax year to collect the unpaid date for that year. There are several things that can cause this expiration date to be extended but we will discuss that at another time. In order to confirm "Doubt as to Collectibility" there must be a financial analysis performed in order to discover if you can qualify under this rule. Current equity in the assets you own, current disposable income, terms on current loan payments, and future potential income are some of the things a financial analysis will uncover. If this is not properly done prior to submitting an Offer In Compromise you may be doing so without knowing whether or not you can even qualify for this program. This will waste time and money and extend the amount of time the IRS can collect the tax liability in question. Make sure you analyze your current financial situation to discover if you qualify before you follow this path to resolution.

In the next part of this series we will look into additional guidelines from the IRS on qualification for submitting an Offer In Compromise. Be sure to check back next week.

Wednesday, June 11, 2008


Every Thursday we will look at a unique situation that has come across my desk during the week. This week we will look at a situation where a customer believed he was being over taxed. Now I realize this is not all together a surprising circumstance. There are lots of people who believe this to be the case in their own situations from time to time. This case however covers a specific circumstance.

This was a client who runs a business as a sole proprietor which is simply a small one man operation. His net income on the business is only about $20,000 on an average year. He received a notice from the IRS making him aware that he owed almost $18,000 in taxes for one tax year. He was a little confused at how he could owe so much tax on such a small income. There may be a lot of people who have experienced this and wondered the same thing. Well, here is how this occurred.

This particular customer operated his business for almost 6 years without filing a single tax return. The companies he did business for, however, filed 1099 forms with the IRS for work completed throughout the year. After several years of 1099's filed on my client without a single tax return filed, the IRS opted to complete a "Substitute for Return" on his behalf. The IRS can choose to file this type of return in lieu of an actual return being filed by the taxpayer. Typically, these are filed about three years after the due date of the unfiled return. The drawback to this type of return is that the IRS will file the income straight from the 1099 income (or W-2 income) filed with the IRS without any cosideration of tax write-offs for business expenses or other income credits such as child credits or mortgage interest which are allowed by law. This would leave the taxpayer paying taxes on total gross receipts rather than net income. For this particular client his gross receipts were over $60,000 even though he only would have claimed $20,000 in income after all of his deductions. Due to taxes, penalties and interest his total debt is $18,000 but this amount can be reduced by simply filing a return for the year in question thus enabling the taxpayer to file the appropriate deductions and only pay tax on the adjusted net income.

So make sure you file your taxes timely each year to avoid such a return being filed on your behalf. This will keep you in good graces with the IRS and eleviate the stress of being "over-taxed."

Saturday, June 7, 2008

Tax Tip of the Week

Haven't received your Tax Stimulus check yet? Tired of looking in the mail day after day for a check that never comes? Here is one thing to take into consideration.

Do you currently owe money to the IRS for an unpaid tax debt?

If the answer to that question is "YES" then you will not be receiving your check. Your check, just like any refund check from subsequent tax years, will be automatically applied to the tax debt on your behalf. Typically, if there is several years of tax debt owed the money from your stimulus check and tax refund checks will be applied to the oldest year for which a debt is owed. Thus making sure the IRS maximizes the time it is allowed by law to collect the tax debt. So if you owe any money to the IRS the bad news is you won't receive a stimulus check or refund check until the debt is paid in full or the time the IRS is allowed to collect that debt has expired. The good news is you now owe less to the IRS than you did a month ago.

Caution: "Pennies on the Dollar." - Part One

There seems to be a lot of companies out there offering taxpayers quick and easy settlements of their tax debt for "pennies on the dollar." This program is called an Offer In Compromise but is this really the best solution for your tax problem? The IRS warns us to check carefully before using this option to resolve your debt. There are specific circumstances where this is a viable option or it would not be available within the IRS tax code. However, it is not the "automatic solution" that these companies are trying to sell to taxpayers. Most of these companies DO NOT GUARANTEE an Offer In Compromise will be accepted by the IRS on your case...they simply charge large amounts of money from the taxpayer to simply submit an offer to the IRS on your behalf. Typically, there is little examination as to the taxpayer's current financial circumstances in order to determine whether a settlement is an available option or even the best solution.

The IRS does have the ability to agree to a settlement of a debt for less than the current balance in certain situations. The IRS only approves about nineteen percent of the Offer in Compromises submitted annually. In fact, the IRS resolves less than one percent of all balance due accounts through the Offer In Compromise program. This option can cost the taxpayer time and money and should only be considered after all other options have been exhausted.

If this solution is something you are considering you will want to check back over the next few weeks. We will review the specific circumstances and requirements for this program so you can understand if this program is right for your tax situation.

I.R.S. Secret Agent

Quote of the Week:

"The hardest thing in the world to understand is the income tax."

-Albert Einstein

Tuesday, June 3, 2008

IRS Tax Relief

Does the IRS have their hand in your pockets? Are you having trouble keeping up with paying off tax debt due to penalties and high interest charges? Is the IRS collections process placing enormous challenges on your financial situation? Check back soon and often for IRS tax information and help on dealing with IRS tax issues. TaxDollarsAndSense is here to help you with any and all of your tax resolution issues.