Five Actions That Can Be Taken to Solve Tax Problems
If you are trying to figure out how to solve tax problems, this article will be of assistance. Dealing with the IRS or Franchise Tax Board is not a simple task. They are big bureaucracies with massive resources to collect taxes. While they do offer services to “assist taxpayers” their mandate is to collect taxes.
Five Actions That Can Be Taken to Solve Tax Problems:
1. Representation and Negotiation
As a taxpayer you have rights—one of which is to representation by a tax professional such as an attorney specializing in tax matters or a CPA. If you wish, you don’t even have to talk to the IRS for federal income taxes or the Franchise Tax Board for California income taxes. Tax professionals look out for your interests not the tax collectors. Pick one that is an experienced negotiator as many tax matters can be resolved through negotiation rather than protracted litigation.
2. Tax Return Preparation
It is the taxpayer’s responsibility to prepare and file tax returns in a timely fashion. Tax laws are unbelievably complex and ever changing. Getting your tax returns prepared by a tax professional is a wise investment. There are penalties for late filing of tax returns and very severe penalties and even criminal prosecutions if you attempt to avoid paying taxes by not filing returns.
3. Installment Agreements
If there is tax owing when you tax returns are filed, the IRS expects to be paid right away. However, a payment plan can be negotiated so that the tax owing is paid in monthly installments over a period of time—even years depending on the balance owing. Interest and penalties will be added to your tax bill until it is fully paid. The IRS may also file a tax lien which may hurt your credit rating.
4. Offer In Compromise
An offer in compromise (OIC) is a settlement agreement with the IRS that resolves the tax liability for less than the full balance owed. This alternative is only available under certain circumstances and is not a quick solution to avoid paying taxes due. It is generally not an option if the IRS feels that the taxpayer has or could pay the full liability.
5. Tax Levies, Liens and Wage Garnishment
When the IRS feels that the taxpayer is not cooperating with them regarding the payment of past taxes due, they can take more severe collection action including placing liens on your assets such as your bank accounts, home, car or investments. They may also garnishee your wages or salary which will now involve your employer as they will be forced to deduct additional taxes from your pay check and remit it to the government.
Free Initial Consultation with John Spurgeon
Taxpayers looking to solve tax problems would be wise to engage an experienced tax attorney and/or CPA. 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 skill 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.
Solve Tax Problems Is What We Do
The problem with trying to solve a tax problem is that it will not disappear on its own. Once the IRS for federal incomes taxes or the Franchise Tax Board for California state taxes has you on their radar, you must take prompt and effective action to solve the tax problems. Think of the IRS as a very aggressive, well funded, gigantic collection agency with seemingly unlimited resources.
These are some of the collection actions that the IRS will utilize:
•Telephone calls.They know a lot about you including your telephone number and they are very persistent. Their agents are training to gather information that will help them in their collection process. Do not volunteer information.
•They have sophisticated computer programs that churn out volumes of letters and demands. It is hard to ignore a registered letter.
•Filing a tax lien. If you have received notice that the IRS intents to lien your assets, you must respond in a timely manner.
•Sale of your assets. Once a lien has been obtained, the IRS has free rein to seize and sell your assets. They will firstly go after assets that are quick to convert into cash such as bank accounts, savings accounts, investments, pensions and so on. Then they will work on seizing other assets that can be sold at auction such as cars and real estate.
•The dreaded wage garnishment. The IRS will garnishee your wages which forces your employer into the collection process. While your employer can’t fire you for this, they might classify you as a “risky” employee whose personal finances are out of control.
•Reporting tax liens to credit reporting agencies which could damage your credit rating making it difficult to make a major purchase or get a credit card.
•Show up on your doorstep or at your place of business. This is a tactic that gets people’s attention.
•Installment plan. They will try to get you to pay by installments but keep in mind your payments will firstly go to penalties and interest.
Your Rights
As a taxpayer you have rights:
•The IRS must give you notice of the actions that they plan to take. Do not ignore these notices.
•The IRS may attempt to get you to sign a waiver. Don’t do it as it extends the collection period.
•You have the right to representation by a tax professional typically a tax attorney or CPA. The Taxpayer Bill of Rights and the Internal Revenue Manual mandate that IRS employees respect your right to obtain tax representation. Thus it is not advisable to discuss any tax matters with IRS agents.
Free Initial Consultation With John Spurgeon
Taxpayers looking to solve tax problems would be wise to engage an experienced tax attorney and/or CPA. 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 skill 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 Information Regarding the Sale of a Home
A spouse or former spouse who is excluded from the family residence in connection with dissolution proceedings can still exclude gain when the family home is sold.
Internal Revenue Code section 121 provides for exclusion of gain on the sale of a principal residence. To qualify, a taxpayer must have owned and used the home as his or her principal residence for period aggregating at least 2 years during the 5-year period immediately preceding the sale.
The amount of gain excluded generally may not exceed $250,000. There are exceptions, for married taxpayers who file a joint return for the taxable year of the sale. They may exclude up to $500,000, provided that either spouse has owned the home, and both spouses have used the home as their principal residence, for periods aggregating at least 2 years during the 5 year period immediately preceding the sale, and the exclusion is not being applied to a second sale within any 2 year period occurring entirely on or after May 7, 1997.
Prorated exclusions are available to taxpayers who fail to meet the requirements regarding ownership, use, or time elapsed since the most recent prior sale to which the exclusion applied.
Regarding separation or divorce, an individual will be treated as using property as his or her principal residence during any period of ownership in which in the individual’s spouse or former spouse is granted us e of the property under a decree of divorce or separate maintenance, another form of decree requiring a spouse to make payments for the support or maintenance of the other spouse, or a written separation agreement. This is commonly called a Duke order.
Note that there is a gray area with regards to IRS sections 1041 and 121. If you are separated from your spouse or facing divorce, contact your CPA and discuss these two code sections.
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.
