Tax Representation at Geno Law
Many types of IRS Problems are confusing because you can’t always get accurate information. With good reason, most taxpayers don’t feel comfortable calling the IRS for answers. They are threatening, they put you on a schedule which is UNREALISTIC, not to mention that the IRS is confusing. Geno Law has taken clients through all of these situations. Check the list of typical IRS Problems to see what we do and how we might help you.
Here is a sample of the IRS problems we have fought for our clients:
Payroll Tax Problems:
- IRS Liens
- IRS Levies
- IRS Audits
- IRS Seizures
- Wage Garnishments
- Un-filed Tax Returns
- IRS Penalties
- IRS Payment Plans
- Penalty Abatement
- Audit Reconsideration
- Offer in Compromise
- Collection Appeal
- Expiration of Statute
- Innocent Spouse
- Freedom of Information Requests
Payroll Tax Problems:
The IRS is very aggressive in its collection attempts for past due payroll taxes. The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase the total amount owed in a matter of months. It it is critical to have an attorney, or other professional help represent taxpayers in these types of situations. A typical tax preparer, even if a CPA or enrolled agent is hardly better than having no one at all, without the special expertise of handling payroll controversies. With or without an expert, How you or your representative answers the first five questions asked by the IRS may determine whether you stay in business or are liquidated by the IRS. You should avoid meeting with any IRS representatives regarding payroll taxes until you have met with a professional to discuss your options.
The IRS can make your life miserable by filing federal tax liens. Federal Tax Liens are public records that indicate you owe the IRS various taxes. They are filed with the County Clerk in the county from which you or your business operates. Because they are public records, they will show up on your credit report. This often makes it difficult for a taxpayer to obtain any financing on an automobile or a home. Federal Tax Liens can also tie up your personal property and real estate. Once a Federal Tax Lien is filed against your property you cannot sell or transfer the property without a clear title. Often taxpayers find themselves in a Catch-22 where they have property that they would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan.
An IRS levy is the actual action taken by the IRS to collect taxes. For example, the IRS can issue a bank levy to obtain your cash in savings and checking accounts. Or, the IRS can levy your wages or accounts receivable. The person, company, or institution that is served the levy must comply or face their own IRS problems. The additional paperwork this person, company or institution is faced with to comply with the levy usually causes the taxpayer’s relationship to suffer with the person being levied. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS.
When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. The bank is required to remove whatever amount is available in your account that day (up to the amount of the IRS levy ) and send it to the IRS in 21 days unless notified otherwise by the IRS. This type of levy does not effect any future deposits made into your bank account unless the IRS issues another Bank Account Levy.
An IRS Wage Levy is different. Wage levies are filed with your employer and remain in effect until the IRS notifies the employer that the wage levy has been released. Most wage levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t have enough money to live on.
The IRS has extension powers when it comes to Seizure of Assets. These powers allow them to seize personal and business assets to pay off outstanding tax liabilities. This occurs when taxpayers have been avoiding the IRS. The IRS attempts to collect amounts owed with a seizure as the ultimate act of their collection efforts.
The IRS wage garnishment is a very powerful tool used to collect taxes owed through your employer. Once a wage garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The paycheck that would have normally been paid to the employee, will now be paid to the IRS. The wage garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment.
Un-filed Tax Returns:
Taxpayers fail to file required tax returns for many reasons. The taxpayer must be aware that failure to file tax returns may be construed as a criminal act by the IRS. This type of criminal act is punishable by one year in jail for each year a tax return was not filed. Needless to say, it’s one thing to owe the IRS money but another thing to potentially lose your freedom for failure to file a tax return. The IRS may file “SFR” (Substitute For Return) Tax Returns for you. This is the IRS’s version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions which you may be entitled to such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc. Regardless of what you have heard, you have the right to file your original tax return no matter how late it’s filed.
The IRS penalizes millions of taxpayers each year. They have so many penalties that it’s hard to understand which penalty they are hitting you with.
The most common penalties are: Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time. To make matters worse the IRS charges you interest on penalties.
Taxpayers often find out about IRS problems many years after they have occurred. This causes the amount owed to the IRS to be substantially greater due to penalties and interest.
Some IRS penalties can be as high as 75%-100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, however the extra penalties make it impossible to pay off the entire balance.
The original goal of IRS imposing penalties was to punish taxpayers in order to keep them in line. Unfortunately they have turned into additional sources of income for the IRS. The IRS does abate penalties. Therefore before you pay the IRS any penalty amounts, you may want to consider requesting the IRS to abate your penalties.
Many solutions exist for taxpayers facing IRS Problems today. Sometimes the solutions are very simple and can be handled yourself. In more serious situations you should find a local CPA, Attorney, or Enrolled Agent who understands how to use these solutions in your best interest. Check out Who We Are.
The IRS is a Federal Agency that is divided up into local Districts across the country. Each of these local IRS District offices solves standard IRS problems in a slightly different manner. For example some IRS Districts believe that seizing taxpayer assets is a desirable way to collect taxes, while other districts would rather set up a payment plan.
Payment Plans with the IRS The IRS will always accept some type of payment arrangement for past due taxes. In order to qualify for a payment plan with the IRS you must meet the following rules and provide the IRS with this information:
- You must have filed all tax returns. (It’s OK to owe money but you must file)
- You will need to disclose all assets owned including all cash and bank accounts.
- You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
- You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
- You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA’s or 401K’s.
Assuming that you comply with the above list, then you can proceed to arrange a repayment of taxes with the IRS. The negotiation with the IRS will either take place over the phone with ACS (Automated Collection System), or in person with an IRS Revenue Officer.
The total dollar amount you owe usually dictates with whom the negotiations will be handled. Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $20,000. The IRS will ask you to complete a personal financial statement and if a business is involved, then you will need a business financial statement. The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses. The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis.
These monthly payments will continue until your outstanding tax liabilities are paid in full. WARNING! The IRS continues to add penalties and interest while you are making monthly payments.
This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest.
The IRS will not explain this to you! Be careful!
Penalty Abatement The IRS issued over $18,000,000,000.00 (that’s 18 Billion Dollars) in penalties during 1999. This is a huge number.
If you’re one of these taxpayers, there is hope. Taxpayers that are hit with IRS penalties can request the penalties to be abated. Abated means to completely or partially remove. In many cases where a taxpayer requests abatement, the IRS removes 100% of the penalty.
The IRS requires that you have a good reason to request penalty abatement. What qualifies as a good reason? It depends on the circumstances involved with your particular situation.
The IRS procedures for deciding who qualifies for penalty abatement and for what reason seem to differ in each case. The best thing you can do is to request that the IRS abate your penalties by providing the circumstances surrounding your situation.
What is an Appeal? An Appeal is a request by a taxpayer that does not agree with an IRS decision. The action of filing an appeal puts the IRS on notice that the taxpayer doesn’t agree with the IRS and is seeking a meeting to change the IRS decision.
The goal of the IRS Appeal Division is to “settle” disputes between the IRS and taxpayers.
The most common IRS decision which is appealed is that of an IRS Audit where the IRS has increased the taxpayer’s tax liability. Often this increase includes additional penalties and interest.
The taxpayer must file an Appeals request within a certain time frame and follow the IRS guidelines for a valid Appeal’s request. If a taxpayer doesn’t file their Appeal request correctly and on time, they may lose their opportunity to have an Appeals officer listen to their side of the story.
Offers in Compromise The IRS Offers in Compromise program provides taxpayers that owe the IRS more than they could ever afford, a chance to pay a small amount as a full and final settlement. This program also offers taxpayers that don’t agree that they actually owe the taxes in the first place, a chance to file an Offer in Compromise and have those tax liabilities reconsidered.
The Offer in Compromise program allows taxpayers to get a fresh start. All back tax liabilities are settled with the amount of the offer. All federal tax liens are released upon IRS acceptance of an Offer in Compromise and payment of the amount offered.
An offer filed based on the taxpayers inability to pay the IRS looks at the taxpayer’s current financial position and considers their ability to pay as well as their equity in assets. Based on these factors, an Offer amount is determined.
Taxpayers can compromise all types of IRS taxes, penalties and interest. Even payroll taxes can be compromised. The IRS accepts approximately 50% of all Offers filed with the average amount accepted is 14 cents on every dollar owed. If you qualify for this program you can save thousands of dollars in taxes, penalties and interest.
Collection Appeals The Collection Appeal is an Appeal by a taxpayer that has been threatened with an IRS Levy or Seizure. This threat could have been received either verbally or in writing.
The IRS allows you to file a Collection Appeal in these situations before they follow through on their levy or seizure. The Collection Appeal is filed on a one page form where the taxpayer is given the opportunity to explain how they think the situation could be solved without the IRS levy or seizure.
Your Appeal is assigned to an Appeals Officer who is required to make a decision on your Appeal within five days.
Expiration of Statute The IRS has 10 years from the date of assessment (usually close to the filing date) to collect all taxes, penalties and interest from the taxpayer. The taxpayer does not owe the IRS anything after the 10-year date has passed.
As with all IRS rules, there are exceptions to this rule. Some examples are, if the taxpayer agrees in writing to allow the IRS more time to collect from them or if the taxpayer files bankruptcy during the 10 year period. In both of these situations the period for the IRS to collect is extended for a specific time.
Taxpayers that are approaching this 10-year date should request copies of their IRS transcripts to verify the assessment date, so they can accurately compute when the 10-year statute to collect will expire.
If the IRS is attempting to collect a tax liability which has expired under the 10 year statute, then the tax payer must inform the IRS in writing that they no longer have the right to collect this tax liability. If the taxpayer is correct, the IRS will write off the tax liabilities which have expired.
Innocent Spouse Taxpayers often find themselves in trouble with the IRS because of their spouses or Ex-spouse’s actions. The IRS realizes that these situations do in fact occur.
In order to help taxpayers that are being subjected to IRS problems because of their spouse’s actions, the IRS has come up with guidelines where a person may qualify as an innocent spouse. This means that if a taxpayer can prove they fit in those guidelines, then they may not be subject to the taxes caused by their spouses or ex-spouses.
The IRS is currently considering new regulations, which would make it even easier to qualify as an innocent spouse.
The IRS doesn’t like to talk about the use of Bankruptcy to reduce tax liabilities, but the reality is that many IRS taxes, penalties and interest do qualify for complete discharge in Bankruptcy.
In order for a taxpayer to use the Bankruptcy laws to avoid paying income taxes, the taxpayer’s income tax liabilities MUST QUALIFY. Many taxpayers file bankruptcy without first understanding the rules to qualify their own income tax liabilities. This often results in not discharging income taxes that could have been discharged if the taxpayer had understood the Bankruptcy laws.
The most common types of taxes eligible for discharge in bankruptcy are old individual income taxes. Taxes, which are not eligible for discharge in bankruptcy are Civil Penalties for payroll taxes.
Freedom of Information Requests
Many taxpayers just want to know what type of information is in their IRS file without drawing a lot of attention to themselves. Congress passed legislation (FREEDOM OF INFORMATION ACT) that requires government agencies, including the IRS, to disclose such information when requested.
Freedom of Information documents can also be used to explain why, how, when and where a taxpayer’s IRS problems started. Having this information is helpful as it discloses the IRS information used to assess taxes, penalties and interest against the taxpayer.
Any taxpayer having difficulty in sorting out what the IRS is doing to them should consider using the FREEDOM OF INFORMATION ACT to obtain their IRS files. Often the information you receive can help the taxpayer better understand their IRS problems.