Tax Tips: Tax Debt Relief

Getting a notice from the IRS or the Franchise Tax Board can be very stressful. Income tax law is very complex and everyone seems to have heard of a horror story of aggressive IRS collection actions. Getting tax debt relief on one’s own is a daunting task as the IRS has the full power and authority of the federal or state government. However, there is tax debt relief by way of tax debt settlement.

Taxpayers need to keep in mind that the IRS has very broad powers to track you down and enforce collection. IRS agents are well versed in the powers vested in them and are quick to utilize them to achieve their objective of collecting your taxes. That is their single focus and they are relentless in their pursuit. Do not expect the IRS or the Franchise Tax Board for state taxes to offer assistance—taxpayers should know their rights and how to exercise them.

This is how it works:

• Congress passes unbelievably complex tax laws that even tax attorneys and CPAs have a difficult time understanding and an even harder time keeping up with all the changes. Add to that all the politics and vested interests and you have a system that is very onerous on taxpayers.
• If someone earns a paycheck, owns a business, rents a building, wins the lottery or a myriad of other income sources, then a tax return must be filed. Refusing to file a tax return is considered tax evasion which is a criminal offense.
• These filing requirements keep an army of tax preparers—CPAs and tax attorneys—gainfully employed. In addition, there is another army of people who work for the IRS or the Franchise Tax Board to ensure that taxpayers prepare their returns correctly, file the returns on time and most importantly pay any taxes due.
• The last part is where things can get nasty. If an individual, partnership or corporation files a tax return and there is tax owing, the IRS will begin the collection process. Procrastination is not an option. They will hound you till the tax is paid.
• If there is no communication from the taxpayer to the IRS, they will assume you are in agreement with the tax assessed and will begin to pursue even more aggressive collection actions. This is an ever escalating process whereby the IRS will request payment, then demand payment and if still no joy, will lien your assets then start seizing your assets without further notice. They will go for the assets like bank accounts and investments as that gets the cash the fastest.

There are a number of options available to the taxpayer such as negotiated installment plans, offer in compromise and dispute of the tax assessed. Taxpayers are encouraged to retain an experienced tax attorney or CPA well versed in the tax debt relief options. John Spurgeon is a tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates, who are both tax attorneys and CPAs, have the proven knowledge and experience to effectively solve tax problems with the IRS or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

The IRS is Tracking You

As a tax attorney and CPA I have noted some interesting changes in IRS behavior. In this series of blogs, I will explore with you the process by which Uncle Sam processes returns for examination.

It is often said that our system of taxation rests upon “voluntary compliance” by the American taxpayer. However, the goodwill of the American taxpayer is not left untried, and compliance is encouraged to promote the highest degree of voluntary compliance on the part of taxpayers.

The IRS reported that for fiscal year 2007 the audits of small businesses organized as corporations rose by 12 percent from the previous year. Audits of high-income taxpayers, i.e., those earning more than $100,000 per year, surpassed the highest figure in 20 years and triple the number of audits completed in 2001. Audits of taxpayers increased by 7 percent from the previous year. Revenue from IRS collection activity in fiscal year 2007 increased to $59.2 billion, an increase of 22 percent from the previous year. The number of criminal prosecutions grew by 6 percent from 2006.

Have you noticed the trend?

The French minister of finance for Louie the 14th stated that the art of taxation is plucking the most feathers from the goose with the least amount of squawks. In the wake of the enactment of the 1998 Act, the IRS developed the National Research Program (NRP). The NRP is a comprehensive effort by the IRS to measure compliance for different types of taxes and various sets of taxpayers, patterns and areas for examination.

The NRP is designed to provide a statistically valid representation of the compliance characteristics of taxpayers. Under the NRP, the IRS places greater emphasis on using its own internal computer generated data and publicly available data associated with each tax return in making the determination of whether a return should be considered for audit.

By maximizing use of data rather than person to person audits, the IRS keeps negative media stories out of the press while building its case against taxpayers.

John Spurgeon is a tax attorney in Pasadena, California servicing clients in the greater Los Angeles area. John Spurgeon & Associates, who are both tax attorneys and CPAs, have the proven knowledge and experience to effectively deal with IRS tax liens or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

Tax Tips: When You Need a California Tax Debt Attorney

A taxpayer faced with a tax debt problem arising from income tax assessments from the IRS and/or the Franchise Tax Board should apprise themselves with the various remedies available. What is not an option is to do nothing. Taxpayers should consider retaining a tax debt attorney in situations where the IRS has begun aggressive collection action such as a tax lien on assets including bank accounts, investments and property. The IRS will go for the taxpayer assets that they can convert into cash as quickly as possible.

Keep in mind that the IRS is basically a collection agency for the Federal Government and have been granted wide powers by Congress. Taxpayers file their tax returns—both individual and corporate, and then the IRS collects for federal income taxes and the Franchise Tax Board collects for the California state income taxes.

The worse thing that a taxpayer can do is nothing. The clock is ticking with the IRS who will only wait so long before filing tax liens and grabbing taxpayer assets.

As a first action, the tax liability owing needs to be determined. The tax assessment from the IRS is not necessarily correct. Unfortunately, the IRS does make mistakes or the taxpayer may have made an error filing a tax return. A tax debt attorney, working with a CPA as needed, can determine if there is an error and write to the IRS requesting that the inaccuracy be corrected.

Taxpayers have rights and there are a number of options available that a tax debt attorney can address to assist the taxpayer deal with any remaining tax debt issues:

1. Installment payment plan – this involves negotiating with the IRS to come up with a payment plan that works for the taxpayer’s financial situation and is agreeable to the IRS.
2. Tax reduction and installment plan – this is also a negotiation with the objective of reducing the tax liability with the balance being paid over a period of time.
3. Offer In Comprise – with this option, the objective is to get a substantial reduction in the tax balance owing. This is only available for special circumstances such as divorce, death in the family, etc.
4. Bankruptcy. This alternative is a formal legal procedure that can be complex. Retaining an attorney is very much recommended. As part of the bankruptcy proceedings the tax debts get discharged along with other liabilities. This relief is typically only available for tax filings that are at least three years old.

A seasoned tax debt attorney would be able to advise on the best course of action to reduce or eliminate tax liabilities. John Spurgeon is a tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates, who are both tax attorneys and CPAs, have the proven knowledge and experience to effectively solve tax problems with the IRS or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

Tax Tips By A Los Angeles Tax Attorney & CPA: Solve Tax Problems

We have noticed that when a tax payer is trying to solve a tax problem there is a hidden factor i.e. the tax agency could be in error. It is not widely known but the IRS makes mistakes. This applies to individual and corporate taxpayers dealing with the IRS for federal income taxes or the Franchise Tax Board for California income taxes. This just adds to the complexity of the IRS debt problem.

Taxpayers have a legal right to arrange their affairs to minimize their tax liability. These are some actions that a taxpayer can take when trying to solve a tax problem:

1. Keep good financial records. This is a good business practice anyway but is vital when dealing with the IRS. If you don’t have good financial records or worse missing records, then it will be difficult to defend your position when trying to solve a tax problem. It is up to the taxpayer to keep good accounting and file tax returns—so the onus is upon the taxpayers. For example, a poorly documented travel trip could result in a legitimate expense being denied.

2. Tax debt Notices from the IRS or Franchise Tax Board. If they don’t make sense to you, then the notice could be wrong. However, you must take action quickly as the notices move into collection actions fairly quickly. You can try to write to them pointing out their error if you can figure it out yourself. Unfortunately tax law is quite complicated and the IRS is not likely going to bend over backwards to help you lower your taxes.

3. There is a statute of limitations regarding collections and audit. Generally the IRS has ten years to collect after an assessment has been issued. So if the tax debt is older than ten years, it may not be collectible. The other important statute of limitations is for an audit which is generally three years. However, we recommend that you keep your financial records for at least six years as the IRS could allege that you omitted income which can extend the audit period. Again, the best defense is precise bookkeeping and accurate tax returns.

John Spurgeon is a tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates, who are both tax attorneys and CPAs, have the proven knowledge and experience to effectively solve tax problems with the IRS or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

Tax Tips From A Tax Attorney & CPA – Tax Debt

A tax debt is a liability that an individual or corporate taxpayer owes to the IRS for federal income taxes or the Franchise Tax Board for California income taxes. Needless to say, the governments of the day desperately need revenue which means they will take aggressive action to collect any tax debt owning.

Even presidential candidates are not immune from the tax collector in pursuit of an overdue tax debt. According to the Washington Post, the Internal Revenue Service has filed a tax lien seeking more than $800,000 from Sen. John Kerry’s 2004 presidential campaign, escalating a dispute over payroll taxes that the lawmaker’s office blames on faulty government paperwork. The episode has left a candidate who fell just a few percentage points short of winning the White House trying to convince the government’s tax collector that his campaign already paid the taxes and doesn’t owe any more.

Now if all the high priced talent working on the presidential campaign are having a rough time with the IRS, you can count on it that any tax debt problem a taxpayer has will be pursued with vigor not seen in recent times.

Here is where a taxpayer often needs a tax attorney or a CPA to come to the rescue. The steps to resolve a tax debt problem:

1. Determine if the tax debt is correct. The fact of the matter is that the IRS and Franchise Tax Board do make mistakes. Taxpayers should not rely on what the tax authority says is due and payable. Get it verified by a tax professional.
2. If the tax debt is not correct, then action must be taken to get the errors corrected before the tax collection gets nasty—like asset seizure or wage/salary garnishment.
3. Once the tax debt has been determined to be correct, then the method and timing of payments needs to be worked out and agreed with the IRS or Franchise Tax Board. There are a number of options available to a tax payer including Offer In Compromise and installment plans.

What a taxpayer should not do is nothing. With regular communication with the tax authorities most tax debt matters can be resolved to the satisfaction of both parties. However, if no action is taken by the taxpayer, collection action will proceed—all the while getting more forceful as time passes. The tax man has many powers to make a taxpayer pay up. Ignore it at your risk.

John Spurgeon is a tax attorney in Pasadena, California servicing clients in the greater Los Angeles area. John Spurgeon & Associates, who are both tax attorneys and CPAs, have the proven knowledge and experience to effectively deal with IRS tax liens or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.