Tax Tips: IRS Tax Relief Solutions

Do you need IRS tax relief? Collection actions by the IRS for federal income taxes or the Franchise Tax Board for California income taxes can be overwhelming to a taxpayer. When faced with a major IRS tax problem, taxpayers can turn to a tax attorney or CPA for assistance. Arranging IRS tax relief for individuals and business owners is what they do every day.

The IRS is basically a collection agency with a great deal of power granted by Congress to collect what they think the taxpayer owes. Once a tax debt gets into the IRS system, they are relentless in collecting the taxes due plus penalties and interest. Unless the taxpayer pays the full balance owing, penalties and interest will accrue each month there is an outstanding balance.

Some of the powers they have include:

• Wage garnishment – this can be very embarrassing to the taxpayer as the garnishee notice goes to the taxpayer’s employer who will deduct the tax amount from the pay checks and remit it to the IRS.
• Bank account levies – this can cripple a taxpayer financially, especially if self employed. The funds can come right out of the taxpayer’s bank account at lightning speed.
• Tax liens on assets and property seizure – if the wage garnishment and the bank account levies don’t satisfy the tax debt, the IRS will seize assets such as your home, car or business assets—then sell them at public auction.

The IRS and the Franchise Tax Board realizes that individual taxpayers and business owners can find themselves in financial difficulty and are unable to pay the full balance of the IRS tax debt. There are a number of options such as tax repayment plans that can be negotiated. Taxpayers should not procrastinate about tax debt as the collection actions will just get more severe.

Taxpayers looking for effective IRS tax relief should consider engaging an experienced tax debt attorney and/or CPA to solve the problem. John Spurgeon is both a CPA and tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates have the proven knowledge and experience to effectively represent taxpayers when dealing with the IRS tax or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

Tax Tips: When You Really Need a Tax Debt Attorney

There are circumstances when your really do need a tax debt attorney. If the IRS is literally knocking at your door there are certain specific actions that you should do and some not to do.

There are two types of IRS agents:

1. For collection matters, it would be a Revenue Officer
2. For examination and audit matters, it would be a Revenue Agent

Here are the things to do:

1. Be “business like” in your communications with them
2. Don’t invite them into your home or interior business offices
3. Ask for their business card and the purpose of their call
4. Inform the agent that you will have your tax professional (give name and contact information) contact you
5. Do not invite them for coffee or otherwise try to “make friends” with them
6. Even if they request information, do not supply them with anything

Just repeat that your tax professional handles all matters like this. All future communication will go through them.

The Taxpayer Bill of Rights grants taxpayers the right to have a tax professional represent you when dealing with the IRS. The IRS for federal income taxes and the Franchise Tax Board for California Income Taxes have armies of highly trained attorneys, accountants and collection specialists. While they may appear to be there to help you, don’t be fooled by that. Their sole purpose is to collect taxes.

After the agent leaves, contact your tax professional to brief them on what happened and provide any needed documentation to deal with the matter. Then turn the matter over to them.

Taxpayers should consider engaging an experienced tax debt attorney and/or CPA to solve IRS tax problems. John Spurgeon is both a CPA and tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates have the proven knowledge and experience to effectively represent taxpayers when dealing with the IRS tax or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

Tax Attorney Advice Regarding Foreclosure

There a four main considerations that a taxpayer must think about when it comes to foreclosure.

1. If a lender suffers greater than $600 loss, they are required to prepare and file a Form 1099-C (Cancellation of Debt) with the IRS.
2. Debt cancellation is treated as ordinary income, even if a long term capital gain would have been recognized.
3. Relief for residential homeowners: The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007. Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence. Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.
4. Relief for investor owners of residential real property or owners of commercial property. Exception to imposition of taxable gain when the sale/loss of the real property made the owner insolvent.

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: IRS Tax Problem Resolution Options

When a taxpayer has an IRS tax problem there are a number of options available to resolve the matter. Ignoring it is not an option. In some situations the tax problem is so severe that the livelihood of the individual or corporation is at risk. The IRS (for federal taxes) and the Franchise Tax Board (for California state taxes) have broad collection powers. They will not back off until:

1. The taxes owing plus penalties and interest are paid

2. An error creating the tax owing in the first place has been resolved and agreed with the IRS or Franchise Tax Board

Congress recognized that the resolution of IRS tax problems has not been handled well by the IRS in the past. A Taxpayer Advocate Service was established as sort of ombudsman within the IRS to assist taxpayers resolve tax problems. “The goals of the Taxpayer Advocate Service are to protect individual and business taxpayer rights and to reduce taxpayer burden. The Taxpayer Advocate independently represents your interests and concerns within the IRS. This is accomplished in two ways: 1. Ensuring that taxpayer problems which have not been resolved through normal channels, are promptly and fairly handled; 2. Identifying issues that increase burden or create problems for taxpayers: Bringing those issues to the attention of IRS management and making legislative proposals where necessary.”

The steps to resolve an IRS tax problem are:

• Is the IRS tax debt correct? The IRS does make errors or the tax assessment was based on incomplete or faulty information provided by the taxpayer. The taxed assessed is based on tax returns filed by the taxpayer which could be in error. In cases where the taxpayer has not filed tax returns, the IRS will file one for you and the tax liability is almost certain to be much higher than a properly prepared return. Tax law is very complex which typically requires a tax attorney or CPA to determine what the real tax liability is.

• If the tax returns are in error then amended returns could be filed or new correct information is submitted to the IRS.

• Once there is an agreed tax liability, the IRS will want to be paid. If the sum is significant or the taxpayer doesn’t have the financial resources to pay right away, there are payment plans that can be negotiated with the IRS.

The thing not to do is to make a payment agreement and then not keep up with the terms. The IRS will take swift action to begin asset seizure starting with your bank accounts.

Taxpayers should consider retaining an experienced tax attorney and/or CPA to solve IRS tax problems. John Spurgeon is both a CPA and tax attorney in Pasadena, California servicing clients in the San Gabriel Valley and the greater Los Angeles area. John Spurgeon & Associates have the proven knowledge and experience to effectively deal with an IRS tax problem or the Franchise Tax Board. Please call 626-440-9518 for a complimentary initial consultation.

How Not To Solve Tax Problems

The follow is a continuation of our series on the audit of tax returns and specifically fraud. Taxpayers should be cognizant of the fact that they will not solve a tax problem through fraudulent actions. These audit guidelines provide examiners with information and techniques designed to assist the auditor in recognizing and detecting indications of fraud reflected on a return. Most of the fraud situations which an examiner will encounter concern omission or understatements of taxable income. Below are some of the most common “badges” of fraud.

1. Omissions of sources of income. Examples: tip income, income from self employment and gambling winnings.
2. Substantial unexplained increases in net worth, especially over a period of years.
3. Substantial excess of personal expenditures over available resources.
4. Bank deposits from unexplained sources substantially exceeding reported income.
5. Failure to deposit receipts to business account contrary to normal practices.
6. Cashing checks representing income at a check cashing services and banks other than the taxpayer’s.
7. False statement, especially if made under oath, about a material fact involved in the examination. For example, taxpayer submits an affidavit stating that a claimed dependent lived in his household when in fact the individual did not.
8. Attempts to hinder the examination. For example, failure to answer pertinent questions or repeated cancellations of appointments, refusal to provide records, threatening potential witnesses, including the examiner or assaulting the examiner.
9. Assets placed in another name.
10. Close relationship between parties to a transfer.
11. Transactions surrounded by secrecy.

When the agent has discovered the “first indications of fraud,” the agent and the agent’s group manager confer with a “fraud coordinator” about the fraud potential of the information obtained. If the facts so warrant, the examiner will then prepare a referral report (Form 2797) to enable the Criminal Investigation Division to determine the criminal potential of the case.

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: CPA Or Tax Attorney?

When confronted with solving a tax problem, taxpayers have a number of choices including dealing with the issue themselves, hiring a CPA or retaining a tax attorney versed in the tax problem being addressed. Due to the intricacies and far reaching impact of income tax law, engaging a CPA or tax attorney may be advantageous to the taxpayer.

A CPA (certified public accountant) has completed the requisite university courses, passed examinations and met all other licensing and experience requirements to be certified by the state. CPA’s are experts in accounting, auditing financial statements and the preparation of income tax returns for corporations, non profits and individuals. CPA’s are also employed in industry, non profits or government as accountants, auditors, treasurers, chief financial officers (CFO) and other accounting, financial or executive positions. For example, the IRS hires an army of professional accountants and auditors.

The individual state boards grant the CPA designation and license. CPAs may also belong to the national association, the American Institute of Certified Public Accountants (AICPA). A CPA can also be a member of the state association. CPAs are mandated to fulfill continuing education requirements and follow the association’s code of conduct.

An attorney is a professional licensed to provide legal advice, practice law or conduct lawsuits on behalf of clients. A tax attorney is a specialist attorney in assisting taxpayers to solve tax problems with the IRS or the state Franchise Tax Board. An attorney can also be called a lawyer or counselor. To be licensed as an attorney, one must have obtained a degree in professional law from an accredited law school and successfully completed a state bar examination.

While the Statement of Principles (National Conference of Lawyers and CPAs 1951) recognizes that nonlawyers may be admitted to practice before the United States Tax Court, it states that a CPA should advise a client who has received a notice of deficiency to consult an attorney, because the client should be advised of the possibility of litigating the matter through a refund suit in the district court of the Claims Court rather than before the Tax Court. When a CPA learns that a client is being investigated for possible criminal violations of the tax laws, he or she should promptly advise the client to seek the advice of a lawyer as to the client’s legal, constitutional rights and the related privileges. An attorney can plead a taxpayer’s case in a court of law. In limited cases a CPA can make a presentation to the Court, however this is not a good idea especially if the accountant prepared the tax return in question.

The Attorney-client privilege is a legal concept that protects communications between an attorney and the client. The attorney is bound to keep these communications confidential. Any communication between a CPA and a client is not held confidential.

When a taxpayer is trying to solve a tax problem it is not a matter of either or. Taxpayers can consider their CPA as vital as their tax attorney and quite so. A taxpayer could utilize the services of both a tax attorney and a CPA to resolve a pressing IRS tax situation. The main difference is that a CPA cannot litigate in district court and a CPA does not have privileged communication with the client.

Taxpayers should consider retaining an experienced tax attorney and/or CPA to solve tax problems. John Spurgeon is both a CPA and 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.