November 20, 2013

IRS Offer in Compromise Saves Biz Over $1 Million Dollars

Extra Extra.jpgOkay, it's true. News-worthy reductions of tax liability with the IRS Offer-in-Compromise (OIC) program can actually happen. Most tax practitioners know that an OIC tax reduction is available for individuals and, only about 1/3 of Offers have been accepted by IRS. But recently, one of my business tax clients enjoyed a major success with an IRS Offer.

The company had accumulated a large amount of tax debt, after having filed a few returns with unpaid liability. Through the offer process, the client received a 7-figure reduction of tax, penalty and interest. IRS agreed to write-off more than $1 million dollars, and still allowed the client to stay in business. Very good results:

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October 22, 2013

Purpose of IRS Fresh Start Initiative?

A Fresh Start.jpgGood Question. The IRS Fresh Start Initiative is part of IRS's refined collection process. This fairly new program has been implemented since early 2011. The goal: to make tax collection more efficient for the government, and to make IRS tax payment easier for hard working people. We have to focus on the "easier for hard-working people" part.

Portions of this program deal with payment agreements, tax liens, Offers-in-Compromise. Today, here are a few good notes on Direct Debit Installment Agreements.

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October 14, 2013

What is "Alter-Ego" to IRS?

Hint: This allows IRS to levy against company assets for the owner's personal tax liability.

IRS gives its collection agents the authority to ignore the protection of corporations against someone's personal liability. Most tax professionals have been told that a corporation (or LLC) limits that company's owner from taking on the company's debts. But when does a company's bank accounts become subject to the debts of its owner?

Flashlight.jpgIn this instance, a company is vulnerable when IRS determines that the company is the "alter ego" of the individual owner. Let's shed some light on this IRS-favored classification.

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August 12, 2013

Does Bankruptcy Stop IRS Levy?

Taking Money.jpgIRS has the power to collect someone's unpaid tax by seizing the funds in his bank account. A person's paycheck can also be garnished. And even funds owed by third parties (ie: customers, rental property tenants) can even be ordered to pay directly to IRS. This IRS tactic is called the tax levy.

Usually, the government will try to work with someone before it begins enforcement to collect tax. But what if it's too late and the levy has already begun? Here's an option:

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August 1, 2013

Tax Refunds for Married Gay & Lesbian Couples?

Have recent court cases that invalidated part of the Defense of Marriage Act (DOMA) created tax refund opportunities to LGBT couples? Well, for married couples, I think so. Let me explain.

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July 22, 2013

Cash Wages: Paying Employees "Under the Table"

Cash in Envelope.jpgAt least once a month, someone asks me whether he can pay his employees cash, without reporting the income to the government. It seems simple enough - no payroll taxes, no quarterly tax forms, no paper trail.

Lots of people are paid this way. Maybe there are some benefits, but there are definitely some serious, negative consequences to handling your payroll this way. Let's look.

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February 27, 2013

How Do You Calculate OIC Reasonable Collection Potential?

In an earlier blog entry, we wrote about the IRS Offer in Compromise ("OIC"). One of the most misrepresented items in an OIC is the minimum offer. This amount is determined by the reasonable collection potential.

Your reasonable collection potential (RCP) is your magic number. This "RCP" is the amount that, based upon IRS's standards, is the amount of money that the government believes it can collect from you. Your offer amount must equal or exceed this reasonable collection potential amount. This amount is a combination of two separate calculations:

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February 20, 2013

How Do You Calculate the Offer in Compromise?

Cash 2.jpgYesterday a caller asked me about an Offer in Compromise with IRS. He wanted to know if the radio and mail ads were true, that he could pay "pennies on the dollar" to settle with IRS. So let's discuss what you really have to pay.

Many of my tax collection clients have received mailings from "tax resolution experts". These mailings suggest to the potential client that they could pay 10% or 20% of the tax liability shown on an IRS tax lien. Those liens get filed, and the "experts" come calling. Okay, let me explain how this OIC thing really works.

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February 11, 2013

Correcting the Unfair Advantage of Dishonest Return Preparers

CPA's and Tax Professionals: Has anyone noticed that there are more and more tax return preparers that will cheat the tax return system? They will file returns with fraudulent deductions and credits, and allow magically large refunds for their numerous lower-income clients. So why is this a problem for you?

Waiting in Line.jpgYour would-be clients use these dishonest preparers by the thousands, because the dishonest tax return yields a much bigger refund than your honest return. You, on the other hand, prepare returns with integrity, accountability, and accuracy. And often, that accuracy does not yield the large refunds achieved by those "other" preparers. So your potential clients seek out those preparers willing to cheat to get large tax refunds. This unlawful practice creates, for you, unfair competition during tax prep season. But IRS could actually correct this unfair competition. Please read further.

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February 6, 2013

How to Avoid Tax Settlement Scammers !

Scam 1.jpgThere are lots of companies that try to trick you to get your business. One sure scam tactic is the misleading mail piece. Yes, I have details, to help you spot these scams.

Every week, potential clients call about something received in the mail. The mail looks official, even reads like something from the IRS, but it is definitely not official. Stay away from firms that use trickery to get your attention! Instead, rely on professionals that are knowledgeable, honest and well-known. Read below, as I explain how to spot this scam mail.

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January 18, 2013

Give My Personal Living Expenses to an IRS Auditor?


Tax professionals representing clients in audits are asking this big question: Is the IRS Form PLE, or "Estimated Personal Living Expenses" necessary for the client (taxpayer) to complete in an audit?

Accounting is Hard Work!.jpgTypically, during an IRS examination, the auditor wants to do a full, thorough review of the taxpayer's items on the tax return. That review could probe whether there is undisclosed (unreported) income. Then, when the exam is nearly complete, the IRS agent seeks a closing agreement with the taxpayer on the amount of tax increase, if any. So why does IRS need to receive a Personal Living Expenses statement? Well ...

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January 16, 2013

Reducing Illinois Franchise Tax: Amending Paid-in-Capital

A CPA colleague recently asked me a technical question regarding filing Illinois Form C-289, Domestic Corporation Annual Report. Her client reported too much paid-in-capital, and was therefore paying too much Illinois Franchise Tax. The client did not know how to reduce either amount.

Below I summarize the background of the situation. Afterwards, I outline the options and steps for the tax professional to handle this tax reduction, if necessary. This could apply to nearly any small, for-profit business corporation in Illinois.

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January 3, 2013

"Fiscal Cliff Agreement" - Tax Relief for Middle-Class Families

President Obama and Congress forged a plan to control middle-class taxes and help financial growth in the U.S. The January 1, 2013 agreement was designed to avoid the 2012 year-end "fiscal cliff" heard so much in the media.

This agreement, however, is only a temporary fix, as more negotiations must occur by late February to raise the debt ceiling. The final agreement, called an "across the board sequester", still does the job of avoiding middle-income tax increases. Below lists the terms important to most families.

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