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Tax Knowledge

Inviting IRS to audit you

June 21, 2011 by

By John Bullis
The Nevada Appeal
June 21, 2011

IRS does not have the people and resources to audit every individual income tax return. It varies, but about 1 percent of all returns are audited each year.

IRS has a good computer “matching” program. They record information from banks and companies that pay you under your Social Security number. Then, when you file your return, the computer looks to see if you reported all of the income the IRS has knowledge of.

You are inviting IRS to audit or at least send a notice if you don’t report all of the forms 1099 on your return.

Now, some forms — 1099 — are issued in error or by mistake. If you get a form that is not correct, contact the folks that sent it to you. Ask for a corrected form.

The forms are sent to you about the end of January or so, but IRS is not sent the forms until later — the end of February or so.

Some forms are from stock brokers about sales of stock, bonds, etc. The information sent to IRS only covers the sale part of the transaction. Your cost is not sent to IRS. You have to claim it on your return.

By the way, the original cost of the stock plus dividends you received in the form of more shares is the tax basis you can claim. We suggest a “spreadsheet” listing is best to show the total cost and dividends reinvested and show the total number of shares.

The problem with a form 1099 that is not correct is it is time consuming and no fun to get a corrected form. On the other hand, it is easier to correct than to deal with the IRS audit or Notice.

Just like we suggest every IRS Notice should be responded to in a timely manner, it is important to work on getting the corrected form 1099 as quickly as possible.

That means you need to keep your own records in most cases, to know if the form 1099 you received is correct.

All returns are open for audit or you can amend (correct) your return for three years from the filing date (as a general rule). Save all of your tax records for at least four years. IRS doesn’t start the matching program, doesn’t send Notices, etc. until about a year or so after you file the return, sometimes later than that.

Don’t get upset if you get an IRS Notice or audit. Just deal with it in a timely manner or get help to respond correctly.

Did you hear “You are not responsible for the thoughts that pass your door. You are responsible for those you admit and entertain.”

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What to Do If You Owe the IRS

May 5, 2011 by

By Princess Clark-Wendel
Published May 03, 2011, FOXBusiness.com

April 18 has come and gone, but many taxpayers are facing a large tax bill that they aren’t able to pay. But there are steps they can take to work with the International Revenue Service to develop a payment plan.

After the IRS has made an assessment on what you owe, you have 10 days to pay it in full or be subject to collection action.

Although an account is technically considered delinquent after 10 days, no one will show up at your door on the eleventh day. A series of threatening notices will be mailed to you, and eventually you will be contacted in person by a revenue officer.

What Power Does the IRS Have?

Dealing with the IRS is different than dealing with other debt collectors. Unlike other creditors that have to go to court to obtain a judgment against you and then go back to court to have that judgment enforced, the IRS doesn’t. The agency is vested with the power to seize your property without a court order; the only requirement is that it has a valid assessment, give notice with a demand for payment (which has to be sent to your last known address) and give notice of intent to seize.

In addition to seizing your property, the IRS can also place a levy on your bank accounts and on your salary. This means that both your bank and your employer must turn over all funds being held for you to the extent of the levy. (Note: Special rules apply to levies against salary.)

Certain types of property are exempt by law from levy including:

1. Apparel and schoolbooks (expensive items of apparel such as furs are luxuries and are not exempt from levy);

2. Fuel, provisions, furniture, and personal effects, not to exceed $1,500 in value (for the head of household);

3. Books and tools used in your trade, business or profession, not to exceed $1,000 in value;

4. Unemployment benefits;

5. Undelivered mail;

6. Certain annuity and pension payments (including Social Security benefits);

7. Workers’ compensation;

8. Salary, wages or other income subject to a prior judgment for court ordered child support payments;

9. A minimum amount of wages, salary, and other income – $75 per week – plus an additional $25 for each legal dependent.

The IRS has been seizing personal residences more frequently in recent years. After a “notice of seizure” is placed on the front door of your house, you have 10 days to come up with the owed money, or there is an excellent chance your home will be sold at auction to satisfy the tax bill. You can redeem the house at any time within 180 days after the sale by paying the purchaser the amount paid for the property plus interest; by law, the purchaser must sell.

Act Now

The IRS cannot put you in jail because you owe money, even if the debt has been outstanding for years, unless you fraudulently conceal your assets or otherwise conspire to beat the government out of its money. No crime has been committed merely because you cannot afford to pay your taxes.

But don’t burry your head in the sand if you can’t pay your tax bill, respond immediately to all notices sent requesting payment and make every attempt to speak to someone at the IRS and follow up the conversation with a confirmation letter.

Depending upon your circumstances, the IRS may be willing to enter into an installment agreement for payment of the outstanding taxes. Usually, such a partial-payment agreement requires a down payment, followed by monthly payments over a year or 18 months. If you fail to comply with the terms of the partial-payments agreement, which also requires that all current taxes be paid on time, the agreement becomes void and your property is then subject to levy seizure.

The beginning of the collection process is the best time to try to get the IRS to offer you an installment agreement. If you have ignored the IRS’ attempts to work out an arrangement and you now have a “notice of seizure” on your door, it is extremely unlikely that the agency will create a partial payment agreement with you.

How to Negotiate with the IRS

The first step in negotiating a settlement of taxes owed is to provide the IRS with a current financial statement. Without a statement verifying your financial situation, the IRS will not even consider a settlement. If you don’t want the IRS to know about certain assets, don’t furnish the financial statement, it is better to offer no statement than offer one that is misleading or fraudulent.

If the IRS already knows about all of your assets, and there is no disadvantage in providing a financial statement, then go ahead and submit the statement. The IRS will be interested in knowing how much money you receive each month, and how and where it is being spent. When you complete the personal living expense portion of the form, it is generally a good idea to arrange for some money to be left over each month to pay taxes. The IRS is more inclined to go along with a partial payment offer if it feels confident there is money available to make the agreement work.

If you have no assets and no income, there is nothing the IRS can levy. If you are in this predicament, the agency does provide an opportunity to discuss an “offer in compromise,” which is a little publicized procedure where the IRS will accept a one-time payment of as little as 10 cents for each $1 owed.

If IRS officials think they will receive more money from you in the long run by entering into an offer in compromise than a collateral agreement, (an agreement whereby you agree to pay a certain percentage of your income for five to 10 years), it may agree to the compromise.

The best chance of successfully agreeing to an offer in compromise is when the tax debt has been on the books for a number of years. The IRS must be convinced that conventional collection procedures will not work, so don’t expect a relatively-recent tax obligation to be settled this way.

However, if the IRS has had a chance to collect and has not succeeded, it is likely to accept your compromise offer.

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What Records Every Taxpayer Needs to Keep

May 5, 2011 by

By Bonnie Lee
Published May 05, 2011, FOXBusiness.com

If you filed your taxes on time this year, it’s time to put away your tax file.

And while you may be looking at the cartons of tax records sitting in the garage and wondering if you can shred some of them, we live in an age of complexity so the answer is: it depends.

The IRS states that you must retain your tax returns for a minimum of three years, which is generally how long it has to audit a tax return. However, three years may not be long enough if you live in a state that levies an income tax. The window of opportunity for audit in most states is four years, so save your tax returns and all the supporting documents to prove your income and deductions for at least that length of time. This includes every bank statement for all your accounts.

The audit clock starts ticking after you file the tax return. For example, you may have filed your 2010 income tax return on April 18, 2011. You should keep a copy until 2014 to make the IRS happy and 2015 to keep the state happy. After that, you can destroy the file.

But wait…don’t roll out the shredder just yet.

The IRS says that if you underreported your income by 25% of the gross income shown on your tax return, you should keep that tax return for six years. It also says that if you have filed a fraudulent tax return you need to keep it forever (no joke). Perhaps you should have it mounted and framed.

But there are other reasons to keep a tax return and other supporting documentation including:

1. If you have a capital loss carry forward, you should keep the tax return on which the original loss was reported. Also keep the documentation that supports the original loss. Keep these documents up to four years after the loss has been used up.

2. If you sold rental real estate via a 1031 exchange you need to keep the tax returns and supporting documents until four years after the disposition of the final property in the exchange sequence.

3. If you sold your previous home before May 7, 1997, and deferred tax on the gain from the sale (rolled it into the basis of your new home) you should keep indefinitely, those escrow closing papers and a copy of IRS Form 2119, which establishes the basis of your new home.

4. If you have passive loss carry forwards, credit carry forwards, net operating loss carry forwards, – or any other type of carry forward, you will need to retain the tax return where the carry forward originated.

Other documents to keep:

1. Receipts for all major improvements made to your home for four years after the sale of your home. The cost of capital improvements is added to the basis of your home when determining if there is a taxable gain upon sale. Especially maintain records proving certification of any energy-efficient products for which you took an energy tax credit.

2. IRA contribution statements Form 5498, Form 1099-R, and IRS Form 8606, should be kept until you take the last distribution from your IRA.

3. Physician’s statement(s) stating you were permanently and totally disabled on the date of your retirement if you are taking the Credit for the Elderly or the Disabled.

4. Keep the last paystub of the year. Union dues, health insurance premiums, charitable contributions withheld from your pay may be deductible and in the event of audit you may need proof of payment.

5. Photographs may be an element necessary to your tax file to help prove certain deductions such as home office or casualty or theft losses.

You may need to keep records even longer for nontax purposes. Your creditors or insurance company may need the data supplied on certain transaction receipts. For example, you purchased the Hope diamond at auction. If it is stolen from you 10 years later, you may need the receipt to prove to the insurance company how much you paid for it.

For more information on record keeping, refer to IRS Publication 552.

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Don’t Lose Your Tax Refund Because of Your Spouse’s Debt

May 5, 2011 by

By Bonnie Lee
Published March 17, 2011, FOXBusiness.com

“Injured Spouse” is an IRS term for the husband or wife who is forced to watch a tax refund fly out the window instead of into the bank because of debts or taxes owed by the other spouse.

The IRS and many state tax agencies have a habit of taking tax refunds to satisfy other debts, and if your filing status is married-filing joint, your well-earned income tax refund may be in jeopardy if you married someone who:

1. Owes back child support,

2. Is delinquent on student loan payments or other federal agency debts,

3. State income tax liabilities,

4. Repayment of overpaid unemployment benefits.

Instead of a refund check, you may receive a letter from the Treasury’s Financial Management Services Department [FMS] telling you the original refund amount, the amount taken and the agency who received your money. If you did not receive a letter or if you have questions about the offset, you can contact the FMS at 1-800-304-3107 or TDD 1-866-297-0157.

If you feel your tax refund is mostly your money, it would be unfair (even if you live in a community property state) for the funds to be applied to a debt that isn’t yours. What to do? First of all, you may want to change the exemptions you claim on your form W4 on file with your employer so that you will have a break-even situation rather than a refund that can be absconded at tax time. Use the worksheet on form W4 or speak with your tax pro to determine the number of exemptions you should claim to net either no refund or a small amount of tax due. This can result in a bigger paycheck and the knowledge that the government hasn’t had your money tax free all year.

A second option is to use married-filing-separate filing status. While this may not be beneficial for maximizing the refund you could receive, there are many good legal reasons for using this filing status. Check with your attorney and/or tax pro to determine if this will provide the best protection for you.

Right now, you may be looking at a refund situation for 2010 or prior years and wonder how you can guard your refund against the tax man. Well, there is help!

File form 8379 Injured Spouse Allocation with your tax return. Part 1 contains a series of questions that qualify you for using the form and Part II asks for the names and Social Security numbers of the two spouses in the order listed on the tax return. Check the box to indicate which spouse has been injured.

Part III is an allocation of income, adjustments to income, itemized or standard deduction, exemptions, other taxes (such as self-employment tax, tax on early withdrawal from a retirement plan, etc) and credits (except the Earned Income Tax Credit) between the spouses. Basically, the tax return data is split out to see who should get the lion’s share of the refund. The amount allocated to the spouse that owes the debt will be snatched to satisfy it. The remainder will be refunded to the now happy couple. If you file electronically the refund will be held up for about 11 weeks while the IRS processes it. If you are filing a paper copy, then write “INJURED SPOUSE” and highlight it in yellow at the top of page 1 of Form 1040. Make sure you also sign and date Form 8379 at the bottom of page 2. It will take approximately 14 weeks to get your refund from a paper-filed return.

If you’ve already filed your income tax return, you may file Form 8379 separately. Mail it to the IRS service center where you filed your original return. It takes approximately eight weeks for the IRS to process the separately filed form. And it may be too late to apply it to this year’s income tax refund. Do it anyway. And every year you file, be sure to include a new Form 8379 if you are expecting a refund.

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Can’t Pay Your Taxes? How To Set up an Installment Agreement

May 5, 2011 by

By Bonnie Lee
Published February 17, 2011, FOXBusiness.com

If you owe current year taxes or liabilities from prior years, you may want to consider setting up an installment agreement with the IRS.

But know this: It’s a revolving payment arrangement and the interest and penalties that accompany the unpaid balance can be killers. Not only that, but there is a one-time user fee (currently $52 for direct debit agreements and $105 for non-direct debit agreements).

If you qualify as a low-income individual, the fee is $43, and if you default on the agreement, the IRS will charge you a $45 fee to reinstate the agreement and they may consider seizing your bank account or garnishing your wages.

Even if you set up an installment agreement, The IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make your final payment. This could play havoc with your credit rating.

So if mom, dad, your BFF, the local loan shark, or your banker, is willing to cut you a deal to front the balance owing, take it. You will be better off.

If you owe for the current year only and need less than 120 days to come up with the money, don’t bother applying for an installment agreement. Simply pay what you can with the tax return.Then over the course of the next several months, continue paying off the balance. During the first six months of delinquency, your account is handled by Simon, a giant IRS computer, which generates letters requesting then demanding payment. Simon is nothing to fear.

A real person at the IRS will not be assigned to your account until you have fallen very far behind. It varies of how long the IRS waits until they send someone a callin;’ I’ve seen the IRS loom like predators over some taxpayers and ignore others for years and years.

All that said, if you are still interested in setting up an installment agreement, the process can be fairly easy. If you owe less than $25,000, go to www.irs.gov and complete Form 9465. If you propose a monthly payment amount that will satisfy the debt within a three-year period, your request will likely be accepted automatically.

If the debt is your current year liability, attach the Form 9465 to the front of your tax return. To limit interest and penalties, send as much money as possible with the tax return. Make sure you indicate the tax year and your Social Security number on the memo line of the check.

There are other ways to request an installment agreement. To set up a plan online go to www.irs.gov and from the pull down menu, select “I need to set up a payment plan.” Or call the phone number on the most recent collection letter and set up one over the phone.

I normally recommend you low ball the proposed monthly payment. This will give you some leeway if you experience a lean month and you can always pay extra each month. Just don’t try paying any less than what you propose or you will hear from them.

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7 Tips for Negotiating With The IRS

May 5, 2011 by

By Bonnie Lee
Published January 27, 201, FOXBusiness.com

From time to time every taxpayer will have to go head to toe with the IRS. Whether you are setting up an installment agreement, facing the auditor from hell, resolving a misunderstanding, or dealing with collectors on the phone or worse yet, on your doorstep, you would be well advised to heed the following suggestions.

1. You get more flies with honey. Dealing with bureaucracy can be very frustrating, but park your bad attitude and anger at the door. Take a deep breath, demonstrate a cooperative attitude, and proceed in an orderly fashion to resolving your issue. In my 28 years of dealing with the IRS, I have found that most IRS personnel are compassionate humans that bend over backward to find ways to resolve issues and help taxpayers. Of course you are going to run into that power-hungry, condescending, surly agent from time to time, but if you do, you can always trade up to a more understanding and respectful model by asking for the manager.

2.Use IRS lingo. When you use IRS lingo the agent you are speaking with will find you knowledgeable and may treat you with a little more respect. Here is some verbiage you may find useful:

Ask for penalties to be “abated” rather than removed. Tell them, if it’s the case, that your failure to (pay or file or comply with a document request) was due to “reasonable cause.” Use this term if you didn’t just flake and have a good reason, which could include such things as unemployment, losing your records, losing your home, health problems, etc.

If you can’t pay a tax bill because you are suffering financial reversals, you can ask to be deemed “currently not collectible.” If you are granted this status, they will leave you alone for an entire year while you get it together.

If you feel a spouse or former spouse should be responsible for a tax matter, ask to be treated as an “innocent spouse.” There are certain criteria to this status; do some research or discuss the issues with your tax pro.

If defending business deductions during an audit, the term “ordinary and necessary” business expense will help–but only if that’s really the case.

3. Don’t talk too much. IRS agents are trained to draw as much information from you as possible. Answer questions truthfully, but keep your answers short, succinct and to the point. There is no need to elaborate or discuss your personal life or disclose too much. This will only lead to misunderstandings and maybe even investigations.

4. Always tell the truth. Lies have a way of uncovering themselves. Once you are caught in a lie, you will always be suspect. And when you are suspect, you lose the cooperation you would normally receive. Don’t hide assets, don’t run for cover. There are many ways to resolve tax problems using a straightforward and honest approach. Lies may lead to jail time.

5. Only make promises you can keep. This is especially true when it comes to paying your liability. If an IRS agent asks you if you can pay $200 per month on a tax balance and you know you can only afford $100, tell him so. Indicate that you will try to pay extra when you can, but you are not going to set yourself up for failure by promising more than you are able. Throw that in with the fact, (if it’s the case), that you have always timely filed and paid liabilities in the past and now you need a break. Note that this will not work if their analysis of your financial situation indicates you can pay more.

6. Go to them before they come at you. If you are unable to keep a promise you make, tell the IRS immediately. The agency is usually so happy with the cooperation it will likely grant you the extensions you need. The collections department notes your file whenever you or your representative calls.

7. Stop the Interview. If at any time during an audit or a phone conversation you feel intimidated, disrespected, or out of your depth, simply say so and end the interview. Tell the IRS that you will be seeking representation and will get back with them soon. This will give you a chance to take a deep breath and discuss the matter with your tax pro. If you felt disrespected, you can always request a different auditor. Or if it was a matter of a surly customer service rep you were speaking with on the phone, you can hang up and call again in hopes of getting someone kinder or a little more understanding.

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IRS Tax Levies: What You Need To Know

April 29, 2011 by

William Freudenthal owed the IRS some money. Quite a bit of money, actually – just over $16,000. And Freudenthal hadn’t been exactly timely about paying his tax obligation. He’d ignored notice after notice from the IRS. Finally, the IRS took action. They were going to seize some of Freudenthal’s assets – namely his classic 1965 Chevy Chevelle – to settle the debt.

This was not news that Freudenthal took well. His wife wasn’t exactly thrilled, either, and as you can imagine, the couple had an argument. Events escalated tragically, and Freudenthal struck his wife. The blow killed her.

Now, William Freudenthal is in prison. His wife is dead and his life is wrecked – and the real tragedy here is that the situation was completely avoidable. It didn’t have to end that way. Freudenthal, like every other American taxpayer, was entitled to the protections and procedures that are built into the tax code.

What is a Tax Levy?

A tax levy is the procedure the IRS uses to get money from taxpayers after they’ve exhausted every other avenue available to them. If you won’t voluntarily turn over the money to pay your tax obligation, the IRS will come and get it.

Let’s say you have some outstanding tax debt on the books – taxes that you were supposed to pay, but just didn’t, for whatever reason. The IRS will send you several notices, reminding you that you need to pay your taxes. If it remains unpaid, the IRS will eventually send you a Final Notice of Intent To Levy. This is your final warning to pay your taxes. If you don’t, the IRS is going to seize some of your assets to settle the debt.

What Type of Assets Can The IRS Seize?

The IRS has been given a great deal of latitude in their mission to collect revenue for the government. They can seize many different types of assets, including money from your bank account, real estate, vehicles, or personal property. The IRS can also garnish your paycheck, taking their share of your earnings before you even see it! This is known as a wage levy.

What Should You Do If You Receive A Final Notice of Intent To Levy From The IRS?

If you have received a Final Notice of Intent to Levy from the IRS, you have 30 days to respond. During those thirty days, the best thing you can do is find an expert tax problem solver. You are entitled to file a Collection Due Process Appeal in response to the Final Notice of Intent to Levy. However, it must be filed within 30 days of the date of the Final Notice. This appeal stops the IRS collections process and sends your case to the IRS Appeals Office. At that point, your tax accountant will work with the IRS to find a reasonable solution to your tax problems.

What If More Than 30 Days Have Gone By?

If it’s been more than 30 days since you received the Final Notice of Intent to Levy from the IRS, don’t despair! You still have options. With the assistance of your tax accountant, you can still file a Collection Due Process Appeal. At this point, the IRS collection efforts don’t stop automatically. However, your tax accountant will be working with the IRS to prevent the seizure of your assets.

If a levy has already happened, you still have options. A Collection Appeal, also known as a CAP, can be filed. In order to release the levy, you will have to meet certain conditions. Your tax accountant will let you know what these are, but they generally include filing any outstanding or unfiled tax returns, and submitting a Collection Information Statement along with a proposal of how you plan to resolve your outstanding tax debts. This could include an Installment Agreement, being placed as Currently Uncollectable Status, settling through an Offer In Compromise, or additional time to raise the funds to full pay the outstanding tax liabilities.

What Type of Resolution Can There Be For My Tax Problems?

The IRS has a single goal. They are mandated to collect as much tax revenue as possible, and they are becoming more diligent about this mission with every passing day. However, an experienced tax professional can often work with the IRS to find a resolution you can live with – and that stops the IRS from seizing your bank accounts, property, or classic cars!
Installment Agreements are a common resolution, as are Offers In Compromise to settle the tax debt for a fraction of the original amount owed. If you have to full pay your outstanding tax liabilities, a great tax problem solver will work to see if there is reasonable cause to abate any interest and penalties, which can save you thousands of dollars.

Solving Your Tax Problems

William Freudenthal learned the hard way that the one thing you don’t want to do in this situation is ignore the IRS. The IRS moves slowly, but it doesn’t stop – once they have you in their sights, they’re going to pursue you until the tax debt is settled. Having an expert tax problem solver on your side can help you get the debt resolved and the threats of levies and seizures behind you. Don’t lose everything. Get help for your tax problems!

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Will Declaring Bankruptcy Solve Your Tax Problems?

February 24, 2011 by

These days it seems as if you can’t turn on the television, flip open the newspaper, or surf the web without running into an advertisement for bankruptcy lawyers. For people in tough financial circumstances, bankruptcy can seem like a magical solution for all of your financial problems. Advertisements tout the marvel of having all of your debts dissolved – even outstanding tax obligations!

Is this true? Can declaring bankruptcy erase your tax obligations to the IRS or state taxing agency?

The answer is a qualified “it depends”. Before you decide to go forward with filing for bankruptcy, you need to get accurate information about your tax problems and whether or not they can be resolved more favorably through filing bankruptcy. There are alternate ways to handling outstanding tax debts, tax levies and wage garnishments without the need to file bankruptcy. Sometimes these alternate methods get a better result than by filing bankruptcy. Other times bankruptcy is the better alternative. It really depends on the facts of each person’s case since each person’s case is different. Having someone who is well versed in resolving tax problems analyze your case will allow you to choose the most favorable option to resolve your tax problems.

Bankruptcy is not always the easy fix-it that the advertisements promise in many cases. Many people with outstanding tax issues have been shocked to find out that they’ve gone through the pain, stress, and never-ending paperwork of a bankruptcy only to discover that they still owe the IRS and state taxing agency every penny – and now there are additional penalties and interest involved!

Qualified Tax Professionals

A bankruptcy attorney (or bankruptcy specialist, as they are often called) has many qualifications, but there’s something you should know. Generally, these people do not specialize in tax law or resolving tax problems. They’re not tax accountants, CPA’s, or focused on successfully resolving your tax problems. They focus on bankruptcy.
Here’s the truth of the situation. Certain types of federal and state tax debts may be discharged under the bankruptcy code. Other types are not dischargeable under the bankruptcy code. Ever. Knowing the difference between the two is critical in deciding whether or not filing a petition for bankruptcy is an option. Those types of taxes that can be dischargeable in bankruptcy must also meet three critical timing rules before they can be dischargeable in a bankruptcy proceeding.

The first rule states that the bankruptcy petition must be filed more than 3 years from the due date of the tax return, including extensions. However, caution should be taken in determining whether this rule has been met as there are several actions that can lengthen this 3 year time period and require you wait longer than 3 years from the due date of the returns. Determining whether any actions have taken place that could have lengthened this time period is critical in knowing whether this rule has been met.

The second rule states that the bankruptcy petition must be filed more than 2 years from the date the tax returns were filed. Only the filing of an original tax return can start the 2 year time period running. A substitute tax return, or SFR, filed by the IRS or state taxing agency does not qualify. As with the 3 year rule, certain actions can lengthen this 2 year time period. Therefore, determining when the original tax return was filed and whether or not anything has extended this 2 year time period is critical in knowing whether this rule has been met.

The third rule states that the bankruptcy petition must be filed more than 240 days from the date of assessment. Bear in mind that there can be multiple assessment dates for a given tax year where the IRS or state tax agency has audited or adjusted the original tax return amount or an amended tax return showing an additional balance due has been filed by the person filing bankruptcy. Therefore, determining all of the appropriate assessment dates for each tax year is critical. As with the first two rules, some actions can lengthen the 240 day time period. Determining whether anything has extended this time period is critical before filing the bankruptcy petition.

Lastly, the tax returns filed cannot be fraudulent and the person cannot have willfully attempted to evade or defeat the taxes owed.

If you have outstanding tax debt and are considering filing bankruptcy, consult with tax experts first! A qualified tax expert who resolves tax problems full time will know how to analyze whether your taxes can be discharged now or at some date in the near future and help you avoid costly mistakes. Bankruptcy can solve some financial problems, but to discharge taxes in bankruptcy you must meet the above rules as well as certain financial conditions the court requires to qualify to file for bankruptcy.

Although bankruptcy can sometimes be a solution, it isn’t always a solution. Make sure the tax expert you select has knowledge of the above rules. Interview and question any attorney you select to file your bankruptcy petition about the above rules. If they cannot tell you the basic rules, run don’t walk to another attorney! I have seen too many supposed bankruptcy attorneys file bankruptcy for someone, not knowing the basic rules, and after the bankruptcy is over, their client still has the same tax problem they did when they first filed. Don’t make that mistake. Make sure your attorney is qualified and knows what they are doing.

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What To Do When Someone Else Messes Up Your Taxes

February 10, 2011 by

“My dad has always done my taxes,” Elaine R., a Boston resident, said. “Ever since I was sixteen years old and had my first job. But last year, something happened. I don’t even know what. But the IRS is sending me all of these notices about an adjusted return and how I have to send them all of this money – plus interest!”

One of the most common reasons people get into trouble with the IRS is when they have an unqualified individual prepare their tax returns. Tax law is really complicated, and it changes every year. Even if the tax law changes don’t affect you, you could be in the same boat as Elaine – the returns that were perfectly adequate when she was a teenager with a single job just don’t cut the mustard now that she’s a homeowner who needs to itemize. It’s easy to make a mistake if you’re not a professional tax preparer.

When Your Income Tax Expert Lets You Down

It can come as a shock when you discover that the person you trusted to do your income taxes didn’t do a great job. You may feel anger, resentment, stress, and fear. After all, the IRS has a great deal of power: they can audit you, levy your bank accounts, and impose significant penalties – and you might not even know what was wrong in the first place.

If you’ve gotten notices from the IRS about errors in your tax return – or if you trusted someone to file tax returns or pay payroll taxes on your behalf and they failed to do so – you need the best tax help available right away. The IRS isn’t going to go after the person who prepared your return: they’re going to go after you. Prepare yourself and protect your interest by working with a team of tax professionals who can solve your problems fast!

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PunxsutawneyPhil Says An Early Spring – The Weatherman Says Snow This Weekend: How Do You Know Who To Trust?

February 4, 2011 by

Earlier this week, PunxsutawneyPhil – thought by many to be the Groundhog In The Know – let the world know to expect an early spring. Meanwhile, a massive storm unloaded snow, ice, and freezing rain over much of the country. More snow is expected to arrive this weekend.

Maybe Phil’s story is just too good to be true. Spring, early, late or otherwise, seems like nothing more than a dream when everything is covered in nearly two feet of snow!

For many people, the news that there is help for their tax problems seems like that dream: too good to possibly be true. If you’re struggling with unpaid taxes, unfiled returns, or the IRS threatening to levy your wages or place a lien on your property, the thought that there may someday be relief doesn’t have to be a dream. It can be a reality.

Knowing Who To Trust With Your Tax Problems

When you’re searching for someone to solve your tax problems, you have to decide: do you want a PunxsutawneyPhil, who makes promises that sound great but lack detail, or your local weatherman, who might not offer a totally rosy forecast but can provide you with dependable information you can use to make good decisions?

Most of us choose to depend on the weatherman. When it comes time to consider your tax problems, you have the same type of choice to make. Do you want the rosy projections or the accurate forecast guiding you in your dealings with the IRS?

Some tax resolution companies offer almost magical results – but they’re very short on details about how they’re going to solve your tax problems. The disconnect between promises made by companies like TaxMasters, American Tax Relief, J K Harris, and Roni Deutch has been so great that both organizations have run into legal trouble. Do a Google search and check it out for yourself!

Choose instead a tax solutions company that listens to your circumstances, explains your options, and gives you a realistic set of expectations. When you’re armed with expert assistance and accurate tax information, you have a much greater chance of resolving your IRS issues successfully.

Filed Under: Tax Problem Resolution Blog
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