Why More Offers In Compromise Should Be Accepted

Offers In Compromise are rarely accepted (10-15%) but now with the IRS offering more flexibility we should see an increase in acceptances.  Before this announcement yesterday, the IRS would consider an Offer In Compromise using a taxpayer’s previous income history. However, now the IRS will be placing higher emphasis on a taxpayer’s current and future income as well as their job status.  Many taxpayers who are struggling financially or unemployed will get offers accepted if they agree to adjust their agreement when their financial situation improves. It is important to understand that the IRS will not accept an Offer In Compromise or an offer to pay less than what you owe unless the IRS feels that you will not be able to pay in full. Other acceptable reasons include proof that amount assessed is incorrect or that if the IRS collected the full amount from you it would cause economic hardship.

Schulman did state in an interview though that if you ignore the IRS, or you fail to file a tax return that you will not be eligible for an Offer In Compromise or any other tax settlements. In general, always file a tax return as the consequences are stiff.

This recent announcement is part of a greater IRS effort to help taxpayers during these difficult economic times. The IRS has stated publicly, that for taxpayers facing financial hardship, the IRS is ready to help. Doug Schulman, the IRS commissioner stated, “Times are tough for many people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain.” This includes taxpayers who missed Installment Agreement payments, taxpayers facing tax liens that are preventing them from selling their home or refinancing, and taxpayers who need levies released (e.g. IRS wage garnishment).

Related posts:

1. Spotting Tax Settlement Scams
2. Three Common Tax Relief Methods if You Can’t Pay Your Taxes
3. 6 Guidelines for Unfiled IRS Income Taxes

• Do you qualify for OIC- Debt settlement is a popular method of debt elimination, however dealing with the IRS and owed taxes is an entirely different ballgame. In order to be eligible for an OIC, you must meet certain criteria which you can learn more about by visiting the IRS website. If you feel you are eligible per their guidelines, then you can consider working with a company that offers tax settlement services. By educating yourself first before moving forward you can reduce the chances of being scammed by a company that is not forthcoming with all the facts regarding the process.
• Company offers guaranteed results without questioning your situation- Be on the lookout for companies that promise guaranteed results, fast without even bothering to ask you some basic questions. Does the tax attorney or “expert” confirm why you owe the taxes? Do they question your ability to repay the taxes in a traditional method? If they are not asking you the right questions, but are instead pushing for an OIC without considering other options, they are more than likely not interested in resolving your problem with the IRS. In order to truly help you with your tax problems they must understand the background information. Secondly, no one is able to predict how the IRS will respond, therefore anyone promising fast results without even meeting the taxpayer to learn more, is selling results they can’t possibly predict.
• Confirm physical locations- Telephones, fax machines and email have made it possible for most business transactions to require little or no physical meetings. This makes it possible for “dummy” companies to scam people without ever meeting them face to face. A legitimate company will have a physical address whereas con artists will set up locations that do not exist or they will not disclose their address. If you can’t meet with the people who are helping you resolve your tax problems, they are probably not conducting legitimate business services.
• Amount of cash deposit required- Tax attorneys, like other attorneys generally require some sort of cash deposit before they begin working on your case. This in itself is not a sign of a scam, however honest attorneys will estimate how much your case will cost and determine a fair deposit amount based on that figure. If you have already discussed your case with a tax attorney and shared how much cash you have available to work with, and the deposit matches that amount….proceed with caution. In general, it is best to avoid companies with retainer fees (if possible) in order to limit your risk.
• Unresponsive or changing representatives- You are dealing with a serious financial problem and need to have the ability to communicate with the person handling your case on a regular basis. If you find you are often waiting for replies or are dealing with company representatives that are constantly changing, the chances your case is being handled with the care and focus necessary to be successful are slim.

When it comes down to it, you have to use a bit of common sense and follow your instincts when considering a tax settlement company or attorney. Research the company prior to exchanging information and if you see red flags that just don’t seem right, continue searching until you find a company or person who you feel is competent in representing your case.

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3. Tax Services: Use a Large, Nationwide Firm or Small Local Firm?

April 15th is the normal deadline to get your income taxes filed with the IRS. You can always request  an automatic 6-month extension, which gives you until October 15th to file your taxes using form 4868.  Be aware, that if you elect to to extend your filing deadline, it is not an extension to pay. In fact, if you push off your filing the IRS will charge you interest for an underpayment. If your underpayment is greater than 10%, you will incur a Failure to Pay Penalty which is .5% on the amount owed. The worst thing you can do is file your taxes late without filing for an extension first.

But why would you want to file your tax return late? Well there are many good reasons for doing so with some being more obvious than others.

• You Simply Cannot File By April 15th Due to Unforeseen Events – This may be a death in the family, a natural disaster, sickness in the family, incarceration, your records were stolen, and so on.  Remember, the IRS does not need a reason for you to request a filing extension–the extension is automatic.
• You Plan On Purchasing A House & Realizing the Tax Credit for 2009 – When Congress extended the home-buyer tax credit last year it had a few notable provisions.  As long as you purchase a home on or before April 30th, 2010 you can qualify for the tax credit. Furthermore, if you can secure a contract before May 1st, 2010 with a closing before July 1st, you can also qualify for the tax credit as well. Therefore, if you plan on purchasing a home and you are not sure if the process will be completed by April 15th, it makes sense to file an extension. Alternatively, you can always claim the tax credit on your taxes for 2010.
• You Converted a Traditional IRA to a Roth and It Lost Value – If you converted a traditional IRA to a Roth IRA in 2009 you would be expected to pay taxes on that conversion since a Traditional IRA is funded with pre-tax dollars.  However, if you Roth lost money after the conversion it makes no sense to pay taxes on money that is not there anymore. Reversing a Roth IRA back to a traditional IRA is called a “Recharacterization.” The deadline for this reversal is October 15th of the year after the conversion to prevent tax liability. Therefore, a tax extension will allow you to lower your tax liabilities if you plan on reversing a Traditional to Roth conversion. If you are doing this recharacterization you will need to submit proper forms and documentation to your Roth IRA holder. It is best to speak with a tax professional here as well when filling out your 1040 in order to make sure you follow procedure in showing the IRS that you converted it back.

Realize with points 2, and 3, you can always amend a tax return if you have already filed by utilizing Form 1040X. The downside to filing an amended tax return is not only is it more paperwork and work then you need, but amended tax returns typically have a higher probability of getting audited.  Tax returns can be amended typically 3 years after the due date of the original tax return.

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1. File Unfiled Taxes By 10/15 or Face More State and IRS Penalties
2. Friday Tax Tip Findings From Around the Financial Blogosphere
3. Tips to Avoid or Reduce the Most Common IRS Tax Penalties

Common Cheating Methods

Method: Underreporting Income

• How it Works: If you do not report all the income you made you will pay a drastically lower tax amount. For about every $100 you underreport, you will save about $25-$30 in tax money that you have to pay. Seems pretty simple huh?
• Why You Will Get Caught: Anyone who gets a W-2 or a 1099 they have to realize that a copy goes to you and a copy is also being sent to the IRS. The IRS actually has a complex matching system that is called the Information Returns Processing System. This system matches up what you reported vs. what you should have reported (as provided by whoever paid you). Yes, sometimes you do receive cash and you do not receive a W-2, but you have to realize that the IRS systems know how much it costs to be YOU, by comparing you to the averages of other people who have the same occupation as you, live in the same location etc. If your amounts differ much more than theirs, you can expect to get audited and caught.

Method: Claiming Some Extra Children

• How it Works: For each child you claim you can receive a $1,000 tax credit. It makes sense, the IRS wants people to have more money to take proper care of their children and they are willing to give a very solid tax credit for it, so why not claim as many children as you can.
• Why You Will Get Caught: Well now the IRS requires that each child that is claimed has a legitimate social security number. A child cannot be claimed more than once because the IRS will catch this duplicate tax credit in their tax return matching process. Many people each year try claiming children that are not theirs and do get caught.

Method: Round Up Or Down to Your Benefit

• How it Works: Just round up to the closest thousand to get that few extra hundred dollars of benefit on that write off. Rounding will also make for easier calculations since you won’t have to deal with decimals.
• Why You Will Get Caught: Round numbers is one of the biggest IRS red flags. The IRS system does statistical analysis on all numbers and knows it is highly unlikely to receive rounded numbers as income or in expenses, so you can expect them to check up on those numbers pretty quickly with an IRS audit.

Method: Launder Money Overseas

• How it Works: It is a fact that when you make certain financial transactions in the US that the IRS is watching and even if you wanted to hide these transactions there is no way to. If you move money offshore where the US government does have the legal ability to be watching over each financial transaction that is made, then it can become easy to avoid some hefty taxes.
• Why You Will Get Caught: The IRS has partnered with many state agencies to crack down on transactions that go overseas. If you ship off money to an overseas account, it is likely the IRS will now about it and they will investigate. The IRS has been cracking down hard on these types of transactions and not going light on the penalties when they do catch individuals doing this.

It is true that many people do get away with cheating on their taxes each year but they are taking some serious risks. If you look at the at taking these types of risks from an investors standpoint, the risk vs. the reward is too high for a smart investor to even consider trying to cheat on their taxes. If you are looking to shelter your money from taxes you should look into the legal forms of tax shelters and you can significantly reduce your taxable income each year.

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It was reported today by USA Today that Crow Creek Sioux Tribe (CCST) in South Dakota has settled with the IRS and has obtained a loan to buy back 11.1 square miles of land the IRS seized and auctioned off last December when the CCST failed to pay about $3 million in employment taxes, penalties and interest.

It was confirmed last December that the sale of the land would not be finalized until a trial was held after the tribe’s attorneys filed a formal notice to prevent the completion of the sales until the trial was completed.  The trial, that was scheduled for 5/4, has been canceled because a settlement has been reached.

When the land was auctioned last December, the IRS gave them 180 days to buy the land back at 20% more than the winning bidder. The winning bid was $2.58 million which means the tribe could purchase back the land for 3.09 million within a 180 days. Brandon Sazue, the tribal chairman, said he has received a loan for 3 million from another tribe in Minnesota.

The CCST plans to withdraw taxes from employee paychecks going forward. The reason why this whole case started was because CCST states that the Bureau of Indians affairs told them they were tax exempt.  It turns out that Federally recognized tribes are, but not corporations affiliated and formed as separate entities.

Related posts:

1. IRS Seizes & Auctions Crow Creek Sioux Land to Recoup Back Taxes

Tax Filing & Preparation Tips

• Free Online Tax Filing, Tax Preparation Services & More:  Reviews of a few of the top online tax sites that offer free tax filing and/or preparation.
• What to Bring to a Tax Accountant To File Your Taxes: Ever go to your accountant and realize you forgot something? This is a good checklist of things you should consider bringing to your accountant to ensure you have everything the first time.
• H&R Block at Home Review: A solid review of H&R Block software. H&R Block is one of the top tax preparation programs.
• Turbo Tax Review: A thorough review of Turbo Tax tax preparation software.
• New Forms This Filing Season: Well the IRS loves to make taxes more complex each year, most people won’t even realize there are new forms because of software or they use tax professions but in-case you do, this article has some good details on what is new for 2009.
• What Can Happen vs. What Will Likely Happen if Taxes are Not Filed: Understand what the IRS can legally do to those individuals that did not file their taxes vs what will probably happen. If the IRS actually did put all non-filers in prison they would have to increase prisons by 10,000%.

Misc Tax Tips

• How Long Should You Keep Your Financial Documents – Quick Guide: Understand what papers are important to preserve, and which papers you can toss. Use this guide to determine how long to keep certain documents for your tax filings.
• IRS Tax Debt Help: Good information on what you can do if you cannot pay your taxes. Understand what you can do to significantly reduce your risk of penalties and future collection actions against you from the IRS.
• 14 Tax Time Tips: Phil from ptMoney asked his readers to give their best tax tips and this is what he gathered from his followers
• Rules to Follow to Get Back Ahead of the IRS Game: If you have fallen behind on your taxes or have run into a problem there are 3 rules you can follow to get back ahead of the IRS. If you don’t have a problem, then use these 3 rules to stay ahead.
• Tips to Avoid or Reduce the Most Common IRS Tax Penalties: Understand what the most common penalties are and how you can avoid them. Many times taxpayers incur large penalties because they don’t realize the action they are taking has such significant impact on the penalties when there are likely simple ways around it.

Tax Deductions

• What Documentation Do I Need to Claim The First-Time Homebuyer Tax Credit? If you are planning on claiming the First-Time home buyer tax credit on your 2009 tax return you better be ready to provide the required documentation. Understand what you will need.
• Tax Deductible Domains To Haiti: An Analysis: Understand how a donation to Haiti can impact your 2009 or 2010 tax return. Understand some criticisms to this donation as well.
• 2010 Roth IRS Conversion Rules: A good article about Roth IRS conversion rules. People can convert their traditional IRS’s, SEP IRA’s, Simple IRA’s, old 401K’s, old 403b’s into a tax free Roth IRS account.

Have a great tax advice article that I missed? Please let me know and I will review it and include it in next weeks findings (email me at admin at backtaxeshelp.com). Do you need a fresh tax article for your readers? If so I would be more than happy to guest post on your blog, just shoot me an email with and a general idea of a topic you would like.

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1. Rules to Follow to Get Back Ahead of the IRS Game
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Many Americans, believe it or not, who become unemployed or settle debt can be stuck with a State and/or Federal tax bill. It seems crazy that anyone facing such financial difficulties would be asked to pay taxes but this happens for many reasons.

Unemployment Compensation

There are many ways you could end up paying owing more taxes than you thought when you file this year.  Under the American Recovery and Reinvestment Act, the first $2,400 of compensation is tax free for an individual (married or not). With unemployment, you can elect to have your taxes taken out or you can choose not to since unemployment compensation is taxable. Federal law requires that individuals who left the workforce have the option of taxes being withheld from unemployment benefits. Many states offer the same choice, but some just do not withhold taxes or tax unemployment income at all (like California). You should be mailed Form 1099-G, which will show how much unemployment compensation you received.

Canceled Debt or Settled Debt

Creditors must report debt that is forgiven over $600 to the Internal Revenue Service and to you (you should receive a 1099-C). The amount forgiven must be part of the debt’s principal as interest or penalties received would not constitute income. The IRS looks at this forgiven debt as income and will expect you to pay taxes on the amount in most cases. There are a few exceptions though.

• Insolvency – If you are deemed insolvent before your debt was forgiven or settled you usually will not be liable to pay taxes on the canceled debt amount. Insolvency mean your debts are greater than your assets. To figure out what you have to report on your tax return you must first calculate your insolvency amount. For example, if you owe $40,000 in credit card debt, and have $30,000 in assets, you are insolvent by $10,000. If your creditor cancels $12,000 in credit card debt you will have to report $2,000 in income on your tax return. However, if your creditor forgives $9,999 or less you will not be held liable for any taxes. To prove insolvency you will use Form 982 and attach it to your tax return along with a financial statement that illustrates your assets (fair market value) and liabilities at the time of settlement. Keep in mind, State laws differ on this issue so be sure to check your state or call a state tax representative.
• Real Estate – With a foreclosure, taxes are normally owed on the deficiency amount which can be defined as the difference between what your mortgage balance was and what the lender sold the property for. If you foreclosed on your home you, and it was your primary residence, you will not be held liable for the taxes (up to $2M) because of the Mortgage Forgiveness Debt Relief Act of 2007 (extended to 2012).   However, if the property was not your primary residence (a vacation home) or you defaulted on a loan that was secured by your home but not used for home improvement you will be liable for taxes–unless at the time of the default you are insolvent of course.

If you fail to report canceled debt you will ultimately owe back taxes or have tax liabilities. In this case, you will end up receiving IRS letters and/or potentially an IRS audit which means you will incur tax interest and penalties. In many cases, the negative consequences of failing to report forgiven debt can outweigh the original benefit of having the debt canceled.

If you are already a victim of these unfortunate tax laws related to unemployment or debt settlement, and you owe back taxes, sign up for a free consultation today.

What do you think of these negative tax consequences associated with unemployment and canceled debt? Feel free to comment below.

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Jose, it seems, has been doing everything he can since his MLB career ended to create additional revenue even though he made millions of dollars during his MLB Career.  In 2005, Jose Canseco caused a stir with his book “Juiced: Wild Times, Rampant ‘Roids”, Smash Hits & How Baseball Got Big,” in which he confessed to taking steroids and pointed out others major MLB players like Jason Giambi, Mark McGwire, Juan Gonzalez and others did as well.  Since then he has been present in reality television shows and even in the the boxing ring fighting Vai Sikahema and later mixed martial arts pro Hong Man Choi.  Even in 2003, you could spend a day with him for $5k.

In any event, this latest tax lien is another example of how taxing authorities are making no exceptions if you fail to file or pay your taxes in full. If you are facing a tax lien, get professional help and a plan to get it released. Releasing a tax lien is in your best interests to not only get taxing authorities off your back but also to prevent the destruction of your credit.

Jose vs. Hong Man Choi

Source: DetNews.com

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The reason why the IRS will complete a tax return on your behalf is so they can begin collections against you. The IRS cannot begin collections until a tax amount has been assessed. Once a tax amount has been assessed they will have 10 years to collect that amount.

Below are the reasons why you should prepare and send in a different return than the one the IRS has prepared on your behalf.

• You will likely be assessed with a higher tax bill than if claimed your actual income and deductions
• The IRS can audit that year forever. If you do not sign the SFR and the IRS files that return for you, they can always hold that tax year against you
• If you ever declare bankruptcy it is very unlikely that these taxes will be able to be discharged in it if the IRS files a SFR
• Penalties will likely be much higher because they are charged based on the amount of tax liability assessed

If the IRS has filed a Substitute for Return on your behalf then it is in your best interest to prepare a tax return to replace that return. It is very likely that if the IRS claims you owe $25,000, you probably can get that down by about half after you apply your proper deductions and lower the penalties and interest that have been charged.

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Some of the IRS rules are more important than others. Knowing the main basic rules can help prevent you from losing ground quickly against the IRS. Below are the common rules and in the IRS game and descriptions of how each of them can keep you down.

• Rule #1: File Your Taxes – This is the most important rule of the game. Not following this rule will make it very difficult to get back ahead if you don’t follow. The penalties that the IRS charges for unfiled taxes are some of the harshest penalties that will add up 10 times faster than other penalties. This is the one rule that should not be broken and if it has been, take quick action to get your taxes filed in order limit the lead that the IRS takes on you.
• Rule #2: Pay Your Taxes – This is an important rule, but not as important as rule #1. The standard penalty for not paying your taxes is 10 times less than the standard penalty to not file your taxes. There are times when this rule cannot be followed and the IRS is well aware of this and for this reason you will not be penalized that much if this rule is not complied with fully. The penalty for not paying your taxes can be reduced further by complying with rule #3.
• Rule #3: Work With the IRS and Be Honest – Yes, it is true, working with the IRS can help you catch up. Penalties given by the IRS will slow if you do work with them. If you let the IRS know that you cannot pay your taxes and make an agreement to pay them back, they will reduce the penalty by 50% if you cannot pay. This agreement will allow you to pay your taxes back over time in monthly increments and will allow you to eventually catch up with them. It is very important to not hide anything from the IRS because they will penalize you even further if they are to find out, which they likely will.

The way the IRS plays the game is that they want to keep it even. They will allow you get back to even as long as you follow their rules. If you follow the rules above you can be assured that you will never get too far back in this ongoing game. This is not a fun game to play, but everyone must play it and they must play by the rules set by the IRS.

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What the IRS Can Do

• Tax Felony Charge: Worst case scenario, the IRS can charge penalties up to $100,000 and can send an individual to prison for up to 5 years for unfiled taxes. This can happen if you are charged with a felony for not filing your taxes. This is a very rare occurrence and will likely only happen if there was something very deceitful that was done in order to evade taxes.
• Other Worst Case: This is more common than getting charged with a felony, but still very rare. The IRS can charge a penalty up to $25,000 for each year of unfiled taxes and can send the taxpayer to prison for 1 year for each unfiled tax return. If the IRS actually sent each person who didn’t file their tax returns to prison for one year, the US would have to increase their jails by 10,000% in order to house all the inmates. The IRS mainly sends individuals to jail to set an example, which is mainly why they go so hard after celebrities. The IRS likes to use the fear tactic on the US and they know that if they put a celebrity in jail it will get highly publicized and will help ensure people file their taxes.

What Will Likely Happen

• Common Tax Fraud Charges for Unfiled Taxes: When you have not filed your taxes with the intent of committing fraud, the IRS will typically triple the normal penalties for not filing your taxes. The IRS will charge 15% a month that the taxes remain unfiled and up to 75% of the total tax bill. So if the taxes remain unfiled for 5 months, 75% of the taxes owed will be charged as a penalty. The IRS typically does not go after individuals for fraud, and even if it was fraud it is difficult to prove so the IRS will normally just charge the normal civil penalties which are below.
• Common Civil Tax Penalties: The most likely scenario the IRS will charge the standard failure to file penalty.  The failure to file penalty is 5% a month, which can reach up to 25% of the total tax bill. So if the taxes remain unfiled for 5 months, 25% of the taxes owed will be charged as a penalty.

To top off all these penalties the IRS will also require you to pay interest on the outstanding tax liabilities that is owed. Many people get into trouble with the IRS when they realize that they cannot pay what they owe and they decide not to file. The most important thing for taxpayers to realize is that it is not considered a crime if you cannot pay your taxes, it is only considered a crime when you do not file your taxes. The IRS has an excellent, but slow, system of catching non-filers. It is always a good idea to file tax returns before the IRS sends notices, especially because of their unwritten rule to not prosecute voluntary filers. The IRS will find those taxpayers that have not filed and will charge them steep penalties. The easiest way to avoid these hefty penalties is to file a tax return each year, even if taxes cannot be paid in full.

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Joe Stack in Austin, TX  set his house on fire then flew a single-engine plane into a building in Austin that houses Federal offices including an IRS office. The motive of the crash seems to be attacking the IRS due to the fact that he set his house on fire and left a suicide note that attacks the government and the Internal Revenue Service. Joe Stack says at the end of his suicide note he says, “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”

Joe apparently had a history of problems with the IRS where he forgot to file a tax return and was audited because he and his wife forgot to report about $12,700 in income.

The IRS has a few offices on the first floor of the 9400 Block of Research Blvd, N. Austin, TX that Joe flew into. Specifically, it has its civil enforcement and criminal investigation units on the 1st floor with the total building holding about 200 IRS employees.

Right now, all individuals from the criminal division seem to be fine with no word yet regarding employees from the civil unit. Later reports today stated that thirteen individuals were injured with two casualties.

Initially, the Homeland Security Spokesman Matt Chandler confirmed, “At this time we have no reason to believe there is a nexus to criminal or terrorist activity,” but with the suicide letter update it seems that the Homeland Security Department will have to reclassify it as a criminal activity.

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• Information on IRS form 433-A or 433-B is incomplete.
• The information you provided in your filing is not accurate or the IRS has reason to believe it is not accurate. The IRS will check the information you provided against income documents and public records to make sure all information is listed properly.
• The IRS doesn’t trust you will make payments on time, maybe because you had an installment agreement before and you defaulted on some of the payments.
• The IRS thinks your living expenses you listed are not necessary.

If your installment agreement is denied you can still negotiate with the IRS. Many times the issue can be cleared up with some detailed explanations of items that they questioned. It is a possibility that you made a mistake filling out the form and you will need to submit a revised one to include all valid information. The best way to start resolving your problem is by calling the IRS at the phone number that is listed on the document you received that denied your request. Sometimes issues can be cleared up over the phone if you are able to show you are being honest and want to come to a resolution.

If you cannot clear up the problem by calling then you have several other options that should be considered.

• File for an appeal: Before requesting an appeal you must first request a conference with the collection manager to discuss the disagreement. If you cannot resolve the disagreement with the collection manager then you can request Appeals consideration. In order to file a tax appeal you can file IRS form 9423 and check the box that says “Denial of Installment Agreement” and describe why you disagree and attach as much documentation as you can.
• Contact the Taxpayer Advocate: If you cannot get your installment agreement in place and the fact that you are not being entered into an installment agreement will cause financial hardship then it is a possibility that you will qualify to use the Taxpayer Advocate services.
• Contact a tax professional to help: If you do not qualify for an installment agreement could mean that you would be a better candidate for another form of settlement. A tax professional can analyze your financial situation and make a determination as to the best settlement method for you.

Most of the time an installment agreement decision can be turned around by working with the IRS on errors or to clarify things on a filing, so don’t give up if your installment agreement request is denied the first time.

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3. Installment Agreement & Paying On time

The IRS is complex and inefficient. Have you ever tried getting a quick answer or response from the IRS? It is a fact that many people have problems navigating the IRS and getting results. Every year there will be many people that will not be able to resolve their tax problems through the normal IRS channels. The Taxpayer Advocate service was created to help those individuals that have tried resolving their problems on their own and their attempts have failed. There are about 2,500 employees in the taxpayer advocate that are spread out around the country. The employees at the Taxpayer Advocate are trained to better navigate the IRS channels and get answers and results. The normal time to get a tax problem resolved through the Taxpayer Advocate is around 10-30 days, which is excellent compared to the normal navigation channels.

Do I qualify to use their services?

The taxpayer advocate was created in order to help those individuals that are facing economic hardship because of IRS tax problem and they have not been able to resolve their problem through the normal IRS channels. Below are the three factors that the IRS uses to determine if an individual can use the Taxpayer Advocate Services.

1. You are experiencing economic hardship due to your tax problem, even due to the fees of using tax professionals
2. There was a delay of 30 days or more when you tried to resolve your tax problem through normal IRS channels
3. You have not received a response from the IRS by the date that they promised you

If you meet the criteria for any of the 3 items listed above it is likely the Taxpayer Advocate service will help you. The service they offer is free and they will stick with you until your tax problem has been resolved.

How do I contact the Taxpayer Advocate?

There is a Taxpayer Advocate located in each state. If you want to request help you can call, visit, or fax the nearest Taxpayer Advocate Service office. If you don’t know the number of the closest Taxpayer Advocate Service office you can call (800) 829-4059 (locations of Taxpayer Advocate Services). Chances are, you won’t be able to get in contact with a person on the first call, you will be required to leave your information and wait for a response. It is also a good idea to send a letter that clarifies your problem. The more you can detail your problem, the easier it will be for them to decide if you qualify for their services. Once they review your case they will decide if you qualify and will assign an employee to your case.

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Many times individuals realize that they may have fudged some numbers on their tax return and are worried about the chance of an IRS audit, and have a good reason to be. The standard time limit for the IRS to audit a tax return is three years. The clock on the three years starts running on April 15th of the year that the tax return was filed and was due. The time limit never stops if a tax return was not filed. There are several exceptions to this rule though. Sometimes this time period can be extended to 6 years and in certain circumstances there is no time limit for the IRS to audit a return. Below are these exceptions:

1. Income was understated by 25% or more: If this is the case, the IRS can audit the return up to 6 years after the due date if they find that income was significantly under reported.
2. The tax return was fraudulent: If the IRS determines that the tax return was file fraudulently then there is no time limit to them being able to audit the return. Filing a fraudulent tax return means that you filed the return in order to deceive the IRS. Many times there is a fine line between it being fraud and negligent. The IRS must prove fraud if they don’t believe it was filed negligently.

Most likely, if you are going to receive an audit notice it will be between 1 year to 1 and a half years after the tax return was filed. The IRS wants all audits to be completed within a two year period after the return has been filed. The IRS requires that they get done early because of the possibility of individuals filing appeals and documents getting lost etc. The IRS wants to make sure all audit cases are done before the three year period is up. If it takes longer than three years the person that is being audited will no longer be liable if there was wrong doing on their part.

If you have been selected for an audit and you know that you have done something wrong then it is a good idea to get tax audit help. Tax code is complex and there is always the possibility that your error can be offset by some other deduction that you may have missed. Tax audits can be stressful and time consuming which is why it can be a good idea to have professional help.

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Why does an installment agreement end up costing me more money? This is the question you need to ask yourself before you apply and move forward. Generally speaking, with a payment plan you are asking the IRS to let you pay off your debt over the course of many months. There is nothing wrong with this, but since you are carrying debt they are going to charge you interest. So as you can see, the longer it takes to pay back your debt the more money you are going to owe.

Throughout the duration of the payment plan you will be charged interest on the unpaid portion. Sure, this amount will get smaller as time goes by, but nonetheless you are still paying more than just your original debt.

What can I do to avoid paying more? The IRS suggests that you attempt to pay your debt in full. If you have enough cash available to pay your entire debt you should do so. This may deplete your cash reserves, but in the long run you will save money because you will not have to pay penalties and interest to the IRS.

If you cannot pay your taxes in full an installment agreement is a good choice most of the time. If you just don’t pay your taxes you will be charged with multiple other penalties that will make your tax balance grow much faster. It is a good idea to assess your different options and decided which is best for you over the long term.

As you can see, an installment agreement will cost you more than if you decide to pay your tax debt in full. Yes, there are times when an installment agreement is the only way to go. Many times the interest and penalties that you will pay when entered into an installment agreement will be less than if you borrowed money in a different way, such as a credit card. This is why thousands of people wind up with a payment plan. But remember this: if you don’t have to apply for an installment agreement you should avoid it. This way you can get rid of your debt without paying the IRS extra money. Don’t you owe them enough?

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Here is some important tax relief information to consider if you recently been a victim of a disaster:

1. Document all damages. It is important that you do this so you can show your losses instead of just telling the IRS what happened. Be sure to keep receipts, take photographs, and write down all details that are important to your case. By doing all this you can easily calculate your losses. Although you may not feel like putting a lot of time into this portion of the process, it is very important. Difficult as it may be, you want to make sure that everything is properly documented.
2. Meet with a tax preparer. Simply put, you need professional tax assistance in this case. There are entirely too many details for you to think that you can handle them all without the help of an outsider. Anybody who has been a victim of a disaster should meet with a qualified and experienced tax preparer who knows which forms need to be filled out, as well as the details that should be included. Tax codes change all the time, so make sure you are working with a professional who is current with what is going on.
3. Assess value before and after. It is important that you know the fair market value of your property before the damage, as well as afterwards. If your home was destroyed entirely, such by a fire, make sure you know the value of the land.
4. Collect all the proper documents and information. This includes: photo ID, social security card, insurance claims, reimbursement records, FEMA claims, FEMA reimbursement records, SBA claims, SBA reimbursement records, 1099, W-2, police reports, receipts, and a list of all items that were damaged.

Along with the above information it is important to note one more thing: the IRS is usually more willing to abate or reduce penalties with a disaster victim. This includes penalties for failure to file and failure to pay. Of course, you will have to prove that you were a victim of a disaster. Fortunately, the four steps above will help you to do just that.

Disaster victims can and should receive tax relief from the IRS. If you feel that you qualify, the four steps above can help you find out for sure. Once you hire a tax professional with experience you will be moving forward and ensuring that you receive all the proper relief. The IRS is willing to help and work with disaster victims whenever possible. Be sure to take full advantage of everything that is available to you.

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1. Pay your taxes on time: The due date for paying individual taxes is April 15th, if you do not pay your taxes by then you will be hit with the failure to pay penalty. The failure to pay penalty is .5% a month and starts being charged on April 16th if taxes are not paid or paid in full. If the taxes remain unpaid the IRS may increase this to 1% a month. The maximum cumulative penalty this can be is 25% of taxes owed.
2. Enter into installment agreement if you can’t pay in full: The IRS will reduce the failure to pay penalty from .5% to .25% if you enter into an installment agreement to pay back the taxes you owe. The IRS rewards those taxpayers that come forward and work with them on their tax problems, which can be seen by them charging lower penalties. It is common for individuals to not be able to pay taxes in full and the IRS has very good mechanisms in place to help these people get back into full compliance with the IRS.
3. File your taxes on time: One of the worst things you can do and rack up huge penalties is not filing your taxes on time. This rule mainly only applies to those individuals that owe taxes. For each month that goes by and you owe taxes and have not filed a tax return, you will be charged 5% for the failure to file tax penalty. This penalty will max out after 5 months and reach a maximum of 25% total penalty. Many people don’t file their taxes because they cannot pay what they owe, this is the worst thing that can be done since the failure to pay penalty is 10 times less than the failure to file penalty.
4. File for an extension if you can’t pay on time: If you can’t file on time you can file for a 6 month extension. One thing to know is that when you file for an extension to file, this does not allow you an extension to pay. You still must pay at least 90% of the taxes you owe by April 15th. If you don’t pay the taxes by April 15th and you filed for an extension, you will be charged with the failure to pay penalty. The failure to pay penalty is significantly less than the failure to file, so even if you can’t pay or file on time this will save you quite a bit of money in penalties.
5. Remove Penalties: If you have already been charged penalties you can possibly have the removed through penalty abatement. If you can show the IRS that you have “reasonable cause” for not filing or paying your taxes, they will likely remove the penalties. The IRS removes about 30% of the penalties it charges each year.

The best thing you can do in order to reduce or prevent tax penalties is to take action to solve your problem as fast as possible. If you have any questions you should either contact the taxpayer advocate (877-777-4778) or contact a tax professional to help you. Tax penalties are unnecessary and knowing the common causes of these penalties can help you avoid them in the future.

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Being a tax criminal is a white collar crime. Does this mean it is OK to hire people with shotguns to go enforce proper trading of stocks and that and proper handling of other finances? What is next for this country.

Anyways, if you are a shotgun dealer and would like to submit a quote to the IRS then send your best price and delivery capabilities to the following address:

Internal Revenue Service OS: A:P:B:W
Office of Business Operations
1301 Clay Street, Suite 810S
Oakland, CA 94612-5217

For those individuals that are reading this and have committed tax fraud or anything else that would consider you a tax criminal, we can help. You better request help now before the IRS gets those shotguns, your life depends on it. Free Consultation.

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John Elway, the famous NFL Denver Broncos quarterback has been reported to owe taxes to the State of Oklahoma. John Elway is arguably one of the best quarterbacks of all time and is known for the “THE DRIVE,” when he went 98 yards to tie the Cleveland Browns in the AFC championship in 1987. He helped the Broncos win Super Bowl XXXII in 1998 and was inducted into the Hall of Fame in 2004.

Currently, John Elway is reported to owe almost 6,000 in back taxes ($5,885.97 to be exact).  The tax lien was filed 6/20/2007 by the Oklahoma Tax Commission and lists his property in Englewood, Colorado as the main address. We were able to confirm it with Oklahoma County after it was reported by a few sources.

Here is the link to view the actual record on file with Oklahoma County.

Watch Elway’s Top 10 Plays of All-Time

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The IRS has announced a new way for taxpayers to receive their refunds. Instead of receiving cash taxpayers will be able to receive up to $5,000 in US Series I Savings bonds. Does this sound like a way for government to keep funding its massive stimulus or way to help the middle class invest?

The way it works is you can request up to $5,000 in savings bonds which will dealt in multiples of $50. So if your refund is $4010 dollars say, then the remaining $10 dollars will need to be put into a bank account (anything left after dividing your refund by $50).

To elect to receive savings bonds, you will select this option on Form 8888 which has instructions for you to follow. Now the big question is this a good investment? Well, the answer is it depends. US I Savings bonds typically have a low return on investment but are indexed with inflation. Therefore, if the massive Federal spending and borrowing starts to  push up inflation, then your savings bonds will be a good hedge against inflation. However, if inflation remains calm, you might find better uses of your money in terms of an investment. For advice it is best to speak with your investment adviser.

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Evander Holyfield, the legendary boxer, owes the IRS over $145k for back taxes stemming from 00, 05, and 07 and 08.  According to the Detroit News, and public records, the IRS slapped Evander with a tax lien on 8/14/2009 in Fayette County Superior Court which is located in Georgia. Evander’s residence somewhere in Fayetteville, GA was hit with the tax lien it seems.

Evander’s IRS tax problems break down as follows:

• $36,464.42 in back taxes from 2000
• $70.12 in back taxes from 2005
• $45,707.95 in back taxes from 2007
• $63,226.10 in back taxes from 2008

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Once the IRS gets wind of the fact that you failed to pay your taxes the their collection process starts. The IRS collection process is a very automated process and it is starts with being subtle about what is owed and will continue to get harsher and harsher until your taxes have been paid or enough assets have been seized to fulfill the outstanding tax liability. This collection process is very similar for most individuals but it can deviate course a bit depending upon your assets, financial situation, and past run ins with the IRS. Below are the standard steps the IRS collection system will follow.

1. Receive Series of Tax Assessment Letters: These letters will start off by simply stating what you owe in taxes and that you must pay. Each letter following the original will get a bit harsher in tone and a bit more threatening each time. Each time an IRS letter goes ignored you can expect the IRS to increase the severity of their next letter or action. Typically you will receive about 4 different letters that assess tax amounts owed before any actual action is taken by the IRS. These threatening letters will last for a period of 4-6 months before the IRS moves to their next collection tactic.
2. Receive an Notice of Federal Tax Lien: A tax lien gives the IRS legal claim to your assets in order to secure payment. This should not be taken lightly because it is very unlikely you will be able to get any company to lend you money since the IRS has first dibs on proceeds from your assets over other creditors. Many people do ignore the tax lien because it may not effect their everyday life, but if you continue to ignore it you can be assured the IRS will move to a harsher collection mechanism. (Sometimes this step can be skipped and the IRS moves right to #3 if they are dealing with a lot of money or think they are dealing with a very unresponsive taxpayer)
3. Receive notice of intent to levy: A tax levy is the final collection mechanism used by the IRS where they will forcefully seize your assets against your will. Once they issue a tax levy they have already labeled you as an unresponsive taxpayer and take collections into their own hands since you have failed to work with them to pay back the taxes. The IRS has several levy methods they use and they will choose the one that is easiest for them to collect taxes. The three forms of levy they will use are the following:
   • Wage Levy: They will contact your employer and require that they withhold amounts from your paycheck in order to pay down the tax liability.
   • Bank Levy: The IRS will contact your bank and require that they freeze funds in their in order for them to seize what funds are in there to satisfy the tax liability.
   • Asset Seizure: The IRS will seize assets of yours and sell them in order to satisfy the outstanding tax liability.

As you can see the IRS will not stop until they get what is owed to them. Hiding from the IRS and trying to prevent them from getting the taxes owed is extremely difficult. If you cannot pay your taxes it is a good idea to work with the IRS and pay back the taxes you owe on your terms instead of on their terms.

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1. Don’t offer a free consultation or free tax analysis: Many of the more reputable companies will offer this because they want to get to know your tax situation and financial situation before they take you on as a client. There are cases when a tax relief company would not be a good choice for a taxpayer. An ethical company will try to understand your situation before saying they can help you. Some companies rush to get you as a client before even knowing why you owe taxes and what your financial situation looks like.
2. Promise an offer in compromise: An offer in compromise is a great tax settlement that is only available to people who really deserve it. If the tax company promises you an offer in compromise settlement right away, you can turn your back and run. Acceptance rates are very low for this type of filing and even people that are good candidates regularly get denied, so therefore no tax professional can guarantee this type of settlement.
3. You were contacted by the company through a cold call: Companies that use high pressure sales tactics to get clients typically don’t have good services to back up their claims. They will use hard sell tactics and pretty much say anything in order to get you as a client. Hiring a tax relief company should not be rushed and it would be best if you avoided a company with these types of marketing tactics.
4. Watch out for large retainer fees: Some companies will charge large upfront fees before any services have been provided, this is not an industry norm. Sometimes they will require a small retainer fee in order to get started on the case but never a large portion of the total amount that will be owed.
5. You feel rushed when talking to them: This can be a red flag and could mean that they are taking on too many clients and won’t allocate enough time to successfully work on your case. Sometimes it is a good sign when they are a bit busy because it can be a sign that they actually do offer good services and they are in demand, but sometimes they tend to get greedy and take on too many customers. Many times companies will get really busy during the latter part of tax season. If you know you have a problem it is better to contact a company before this time so they don’t try to rush your case.
6. Bad Ratings Online: Many tax relief companies have done terribly with the better business bureau and other online complaint sites. Many top tax resolution companies actually have an F rating, which means there have been many unsatisfied clients and that company has not taken the appropriate actions in order to clear up these problems. It is a good idea to look at reviews and look for bad information written up on the company on sites such as rip off report or the BBB website.

Avoiding any of the above red flags can greatly increase your chance of finding a great tax relief company. Feel free to talk with multiple tax relief companies that offer a free consultation or tax analysis, you will start to get a good feel of which one will provide you the best service as long as you keep the things above in mind. Be sure to ask a lot of questions and move onto the next company if you don’t agree with the way they are handling your case.

If you would like a free tax consultation from us, please contact use by filling out the contact form or by calling the number on the site. Our tax professionals will give you a free tax analysis and an overview of what they feel they can do for you.

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The IRS uses a system called The Information Returns Processing (IRP) System. The IRP system collections information from third parties and stores all that information in one massive master file where it will later match up that information with individual taxpayer information that is provided. If you had any income from anyone else it is very likely that it will be reported to the IRS and this is the information the IRS will sooner or later use to track you down for unreported items or unfiled taxes. Most companies that pay you any type of income such as salary, pension, interest, dividends, etc, will require you to provide them with your SSN and tax information before they pay you anything, which is because the IRS requires they report this information to them annually. Below are some common third parties that report your information to the IRS.

1. Your employer: If you have a job, your income will be reported by your employer.
2. Brokerage: If you own stocks, bonds, money market funds,etc, all proceeds will be reported.
3. Social Security Administration: If you receive social security benefits this information is sent to be stored in the IRS master file.
4. Casino: If you won a large amount of money a casino will likely require you to fill out your information before they pay you out and will later send that info to the IRS.
5. Unemployment: If you received unemployment, this income will be sent to the IRS to be checked off the master list.
6. Business you are a partner of: Are you part of a business? Your K1 information will be reported to the IRS when the business files their annual tax return.
7. Pension Funds: All pension income is reported annual to the IRS.
8. IRA: When you withdrawal from your individual retirement account these amounts are taxable and reported to the IRS.

The above list can go on and on depending upon your situation. It is very likely that you will have at least one company or person that is required to report payments to you over the year and this is the information the IRS will use to eventually find you if you did not file your taxes. It does take time for the IRS to analyze all this data and match off everything, but each year that passes their technology gets better and faster and they have been catching a greater amount of people at an increasing rate.

If you have unfiled taxes it is a good idea to get started right away with getting back on track. Penalties and interest add up very quickly on unfiled returns if you owe money. If you don’t owe money, you only have 3 years to claim a tax refund. So if you ever wondered if the IRS will find out you didn’t file, the answer is yes, it may take time but you can be assured they will be contacting you.

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