Having Tax Trouble Does Not Make You A Bad Person!

August 5, 2017 by

You don’t often hear about the emotional side of dealing with the IRS or state tax authorities — yet the truth is that our emotions play a huge role in creating and resolving tax issues! There are any number of reasons that people get into difficulties — from not understanding what has to be filed or paid, to not knowing that someone you trusted failed to perform tasks they said they were going to, to plain old human error.

Guess what? None of that makes you a bad person. Many times, it’s the burden of shame, guilt, or distress that keeps us from acting — yet these emotional roadblocks actually make the problem worse, not better. Every day we don’t act to resolve a tax situation is a day that the IRS or state tax departments counts against us.

At Matthew J. Previte CPA PC, we’re not going to judge you. We aren’t going to tell you you’re a bad person because you didn’t file your taxes on time. It happens. A very, very small percentage of tax issues are caused by people who willfully intended to deceive the tax authorities or avoid paying — the vast majority of individuals find themselves handling situations that got out of control, one simple mistake snowballing into the next until they can’t see the way out.

We know the way out. We’ll work with you to find a way to resolve your tax issues with the IRS. We understand that life happens and that the important thing is NOT assigning blame — it’s fixing the problem in the fastest, most efficient way possible to give you peace of mind and remove a huge stress from your life.

Put down that guilt. Put down the shame. You don’t need to keep carrying it anymore: you can call us and start solving your tax problems today!

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Where’d My Paycheck Go? Understanding IRS Wage and Income Levies

August 28, 2013 by

When Tom S. got a call from HR, he knew it wasn’t good news. “They wanted me to go down there, so I went down there and they told me that they’d gotten a notice from the IRS. Because I had unpaid taxes, the IRS was levying my paycheck. I’d have 125 dollars left after the levy was taken out from each paycheck until all my back taxes were paid off – so I was looking at the next 3 months with hardly no money to live on!”

IRS Wage and Income Levies: Your Employer Has To Comply!

“I asked HR if there was some way they could let things slide, just for a week or two, so I could get prepared for the financial hit,” Tom said. “But they told me no way. If a company doesn’t do what the IRS tells them, they could get hit with huge penalties and fines.” Tom sighed. “By the time that conversation was over, it was pretty clear to me that I was lucky to have a job at all.”

Many people don’t know that it’s perfectly legal for your employer to terminate your employment if you have tax trouble with the IRS or MA DOR.  Having tax problems can be seen as a motivation to commit embezzlement – and no one wants to have a potential criminal working for them!

Types of Wage and Income Levies

There are two types of IRS wage and income levies. A continuous levy is generally brought against someone who has an employer and receives a regular paycheck. A non-continuous levy is generally brought against someone who receives a form 1099-MISC, and is considered self-employed. If you’re self-employed, you can imagine how embarrassing and stressful it would be to have the IRS contacting the people you do business with directly trying to collect your tax debts. It’s the type of thing that can ruin your business reputation.

What Can Be Done About Wage and Income Levies

If you receive notice that the IRS is going to levy your wages or other income, you want to get help right away. An experienced tax professional can work with the IRS on your behalf to resolve your tax issues and have the wage or income levy released. This can mean setting up a payment plan with the IRS, making an offer in compromise, or taking advantage of other legal means to solve your tax problems.

You have to take action! A wage or income levy won’t go away on its own, and every day it’s in place is a day that’s damaging your reputation with your employer or customers. If you’re dealing with a wage or income levy now, and you want the pain to stop, give us a call. We’re here to help!

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All IRS Payment Agreements Are Not Equal

July 7, 2011 by

By Matthew J. Previte CPA MST
www.taxproblemsrus.com
July 7, 2011

If you owe back taxes to the IRS, you have undoubtedly wondered how on earth you’re going to get a mountain of back IRS taxes off your back so you won’t have to live in fear anymore. Living with IRS tax problems is stressful and can cause many problems in your life. One of these IRS tax problems is having an IRS tax levy placed on your wages or bank accounts which leaves you with little to no money to live on. An IRS tax lien can also be filed against you in the public record (usually the county recorder or registry of deeds) which not only lets the world know about your IRS tax problems but severely damages your credit rating by a good 100 points or more, leaving you unable to get a loan. So what can you do to resolve your IRS tax problems?

Although Offer In Compromise is advertised heavily on late night TV, it is rarely an option for most people with back IRS tax debts. Roughly 95% of delinquent taxpayers with IRS tax debts do not qualify for the IRS Offer In Compromise program. Unfortunately, these late night TV hucksters tout the OIC as the magical cure-all for your IRS tax debt woes. There is an old saying, if it sounds too good to be true, it probably is. And so it is with the Offer In Compromise program. Although my tax resolution firm has filed many Offers In Compromise over the last 16 years, most of our clients who owe large back taxes to the IRS do not qualify. Simply put, they have too much equity in assets (bank accounts, houses, retirement accounts, etc) and/or cash flow (what’s left over after what the IRS allows for basic living expenses) to qualify. So that begs the question, what are my options?

While bankruptcy can sometimes be a good option, we will leave that discussion for another article (see archives for February 2011). Short of running out the statute of limitations on collection, which is generally ten years, or hitting the lottery or inheriting a boatload of money and paying off the IRS tax debts in full, the only option left is an installment agreement. However, not all installment agreements are equal.

The IRS has two different types of installment agreements to pay off back taxes. The first type is a Full Pay Installment Agreement. In this type of IRS installment agreement, the monthly payments are sufficient to pay off the back taxes (plus any penalties and interest that accrues) until it is paid off in full. With this type of IRS installment agreement, your payments will full pay the back IRS tax debts, as well as all penalties and interest accruing on the debt, within the statute of limitations on collection. The statute of limitations on collection is generally 10 years. However, there are numerous actions that can extend the time the IRS has to pursue collection action (liens, levies, seizures, etc). We will leave that to another article to discuss.

The second type of IRS installment agreement is called a Partial Pay Installment Agreement. Under this type of IRS installment agreement, the monthly payment is insufficient to pay off the back taxes plus accruing penalties and interest by the collection statute expiration date. What does this mean in plain English? Well, it means that you make payments until the statute of limitations on collection (in IRS speak the “CSED”) runs out. So if at the collection statute expiration date there is $10,000 of unpaid back tax debt, it expires to zero and you do not owe it anymore. Nice huh? There is one catch however. As part of the terms of the Partial Pay Installment Agreement, the IRS will review your financial condition every two years to see whether or not your financial condition (i.e. your ability to pay more) has improved. If it has, they will require a higher payment if your financial condition shows you can afford to pay more towards the back tax debt. The downside of this type of installment agreement is it is possible that in the future your financial condition improves and the new monthly payment required becomes sufficient to full pay the back taxes, penalties, and interest by the collection statute expiration date. In other words, it’s possible to start out with a Partial Pay Installment Agreement and end up with a Full Pay Installment Agreement. The positive aspect of a Partial Pay Installment Agreement is that if your financial condition does not improve enough or at all, you could still end up paying less than the full amount owed and end up with a large balance of unpaid back taxes expiring to zero at the collection statute expiration date.

With all IRS Installment Payment Agreements, your financial condition is reviewed via a Form 433-A and/or 433-B depending on whether your tax issues are personal or business tax debts. Individuals and sole proprietorships use the Form 433-A while corporations, partnerships, and LLCs use a Form 433-B. If you owe personal taxes and have income on your personal tax return from a flow through entity (S corporation, partnership, or LLC treated as an S corporation or partnership), you may have to submit both the Form 433-A and the Form 433-B to get your installment payment agreement approved.

There are strategies to minimize your monthly payment amount but that will be discussed in a future article. Also, just because the IRS initially denies your IRS installment payment agreement does not mean you should give up. Many initially rejected IRS installment payment agreements were later accepted upon filing an Appeal to the IRS Appeals Division. Persistence and perseverance are key to obtaining a fair IRS installment agreement that you can live with.

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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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As the Federal Trade Commission and state Attorney Generals crack down on scam tax relief firms, where can consumers turn to for help with their IRS and state tax problems?

November 2, 2010 by

Just last month, the Federal Trade Commission shut down American Tax Relief, a Beverly Hills, California-based company that guaranteed it could settle tax debts for individuals for a fraction of what they owed. The state of California recently filed suit against Roni Deutch, AKA the “Tax Lady”, for a deceptive ad campaign that offers very little proof that the firm’s clients are getting any real-world benefit and overstates claims of winning against the IRS. Suit was also brought against J.K. Harris of Charleston, South Carolina by the state of Massachusetts in conjunction with the attorney generals from 17 other states for false and deceptive trade practices and nonperformance of work. A $1.5 million judgment against J.K. Harris was awarded to the state of Massachusetts and the other 17 states. Are these three isolated cases? Can you believe any firm that says they can help settle your tax debt for less than what you owe?

“These three firms are just the tip of the iceberg when it comes to companies claiming to be tax debt relief specialists who say they can settle your tax debt for pennies on the dollar,” said Matthew Previte, CPA, of Matthew J. Previte, CPA, PC and TaxProblemsRUs.com. “The sad part is that tax representation firms like these create a genuine distrust of any company who can genuinely help delinquent taxpayers with tax debt owed to the IRS or their state DOR.”

Previte, whose Natick, Mass.-based tax representation firm has specialized exclusively in representing individuals and businesses with IRS and state tax problems since 1997, says the real problem with companies like American Tax Relief, Roni Deutch, and J.K. Harris is that they make promises to clients that they can’t possibly deliver on. Says Previte, “The simple fact remains that approximately 95 percent or more of delinquent taxpayers do not qualify to settle their tax debts through an Offer in Compromise.”

So, what options do Americans who owe the IRS or their state DORs have besides representing themselves? Previte suggests there are plenty of reputable tax representation firms out there but consumers must do their due diligence before selecting a firm, such as:

• Avoid firms that guarantee a settlement – There are four main factors involved in settling your tax debts through an Offer in Compromise. The four factors are: (1) your current financial condition, (2) the tax law and IRS procedure, (3) your cooperation in providing the requested information needed to settle your case, and (4) the competency of the tax representation firm you have chosen. A tax representation firm that guarantees settlement is a major red flag since the first three of these factors are completely outside of their control and can change while in the process of trying to settle your tax debts causing an eligible Offer candidate to become ineligible. Meaning, you could start off as a great Offer candidate but later become ineligible due to changes in your financial condition, tax law and IRS procedures, or your failure to cooperate.
• Use a locally based tax representation firm staffed by licensed tax professionals (CPAs, Enrolled Agents (EAs), or tax attorneys) that practices exclusively in resolving IRS and state tax problems – Negotiating with the IRS or state DOR is a unique skill set unto itself. CPAs, EAs, and tax attorneys, although they perform various tax services such as tax return preparation and tax planning, are rarely well versed in the workings of the IRS or state DORs. It is rare if they handle one tax controversy case a year. You want to work with a licensed tax professional whose firm focuses exclusively in representing individuals and business in trouble with the IRS or state DORs, with a physical, brick-and-mortar location that’s within driving distance to you so you can schedule a face-to-face meeting before engaging them to represent you.
• Ask for references – If you don’t know anything about a particular tax representation firm, ask for references. Most will be more than happy to provide contact information for satisfied clients or conventional tax professionals (CPAs, EAs, tax attorneys) who have referred them clients. You can also research a prospective tax representation firm by going to your state’s society of CPAs web site, state bar association web site, or state society of Enrolled Agents web site. The overwhelming majority of licensed tax professionals working at any reputable tax firm will be members of one of these societies. Also, do a search with your local Better Business Bureau and state licensing board (CPAs, tax attorneys) or IRS Office of Professional Responsibility (EAs) as well as a general Google search. You would be amazed at what you can discover about your prospective tax representative online.
• Work with a smaller firm – When it comes to larger vs. smaller firms, you are most likely to get personal attention when working with a smaller firm. Larger firms tend to assign your case to junior staff and there’s a possibility that a senior staff member might not even review your case. For many larger firms, the focus can be more on selling and collecting retainers than getting actual results. With smaller firms like Matthew J. Previte, CPA PC, the principal reviews every case.

“It makes perfect sense that somebody carrying a huge tax debt would turn to one of these tax representation firms for help with their IRS or state tax problems. What you don’t want is an additional problem, like wasting precious dollars on a tax representation firm that makes promises it can’t keep,” said Previte. “By doing a little research before handing over a retainer fee, you prevent your hole from getting any deeper and can feel rest assured you’re taking a positive step forward in resolving your IRS and state tax problems.”

For more information on Matthew J. Previte CPA PC, please visit www.TaxProblemsRUs.com. To schedule a free confidential consultation, call 877-259-8200.

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