http://taxaudit419.com/
Showing posts with label IRS Penalties. Show all posts
Showing posts with label IRS Penalties. Show all posts
Vebaplan.org helps with IRS audit issues of 419e, 412i, tax shelter penalties, IRS fines of listed transactions & material advisors. Retirement, benefit plans experts for small business and CPAs, financial advisors,419 plan,captive Insurance plan
Vebaplan.org helps with IRS audit issues of 419e, 412i, tax shelter penalties, IRS fines of listed transactions & material advisors. Retirement, benefit plans experts for small business and CPAs, financial advisors,419 plan,captive Insurance plan
http://taxaudit419.com/
http://taxaudit419.com/
IRS audits, IRS tax penalties, IRS Offers in Compromise, IRS representation, employee benefit plans, listed transactions, abusive tax shelters, IRS appeals, tax settlements, benefit plan reviews, insurance company plan loss recovery, benefit plan remediation, 419(e) and 412(i) benefit plan audits, 6707A, Section 79, Captive insurance and abusive tax shelter
IRS Facts and Issues
Facts
There is no such thing as a hopeless tax case. Citizens really have so many rights, if you know just a few of them you will never pay taxes, interest or IRS penalties you don't owe."
If you are presently embroiled in IRS conflict and need word of encouragement, then read the following...
FACT ONE:
Last year the IRS cancelled 4.9 million penalties, saving taxpayers $11.13 billion in penalties they didn't owe..
FACT TWO:
When properly challenged, the IRS cancels 60 cents of every dollar assessed in employment tax penalties.
FACT THREE:
There are four IRS approved programs of tax debt forgiveness.
FACT FOUR:
The IRS settles delinquent tax debt for between 10 to 20 cents on the dollar when a proper request is made for tax debt forgiveness.
FACT FIVE:
By asserting the right to a correspondence audit, the average tax audit bill was reduced by as much as 58%.
FACT SIX:
Last year, millions of citizens won installment agreements, thus avoiding wage and bank levies and property seizures.
FACT SEVEN:
IRS auditors have NO POWER to change your tax liability without YOUR approval.
IRS ISSUES
Much has been made of recent restructuring legislation pointed at ending IRS errors and abuse. Historically, such legislation has had little impact on the agency. The reason is the IRS simply does not tell the truth about taxpayers' rights. Consequently, if you do not understand your rights in a given situation, you cannot expect the IRS to explain them. For example, when was the last time you received a kind letter from the IRS explaining that you paid too much in taxes or overlooked certain rights that might cut your bill? Such letters are rare indeed!
On the other hand, millions of citizen are confronted by the agency for alleged legal failings. Each year the IRS...
- issues some one hundred million computer notices affecting nearly $200 billion in accounts;
- issues over thirty-four million penalties against individuals and businesses;
- executes over four million wage and bank levies;
- files about four million general tax liens;
- seizes tens of thousands of businesses, autos, homes, and other property, and audits nearly 2 million business and personal income tax returns.
Nearly everybody has gone through some kind of IRS enforcement difficulty and we all know somebody who is going through it now. But few have effective solutions. Too often, professional advice from tax accountants is, "well, it's the IRS. You just have to pay." Unfortunately, precious few take the time to understand that there are solutions to every IRS problem. Indeed, there is no such thing as a hopeless tax case. There is always a way to solve the problem.
For many people, this Problem Solver provides an immediate solution to a pressing IRS problem. Simple solutions are provided to problems such as wage and bank levies, IRS computer notices and penalty assessments. In other cases, this Problem Solver serves as a guide to what you must do to ultimately solve your problem. And even if you owe taxes, penalties and interest you cannot pay, you can be forgiven of all or part of your debt.
Because the IRS resists directing you to solutions to most tax problems (especially the problem of excessive tax debt) this IRS Common Problems Solver is designed to fill that void. It describes numerous taxpayer rights and remedies and shows you the steps to take to determine which solution best suits your situation. In addition, you will be introduced to an array of affordable, effective self-help materials and services to help you end your problem.
Too often, the biggest IRS problem for millions of people is the fact that it costs more to fight the agency than it does to just pay the tax. For those who cannot pay the tax or afford professional help, they live only with the promise of life-long indebtedness to the IRS--a hopeless situation. Now there is a solution.
Now, at last, the price of tax freedom is not out of reach for anyone. However, the IRS is always working to close the door to freedom that we have worked so hard to open and expose. The IRS is always working behind the scenes to limit your rights thereby ensuring you are always a slave to tax debt. Therefore, if you have a tax problem, now is the time to address it. It only gets worse as time goes on. As you read this Problem Solver, draw encouragement from the testimonials found throughout the text and act now to solve your problem once and for all.
You may have read about how the IRS gives problems to political organizations. That is nothing compared to the honest hard working people that the IRS will, or has already harmed. To read more, click the link below.
Or contact Lance Wallach for more information at a convenient time for you at 5169385007 or at vebaplan@gmail.com
Don't Become A "Material Advisor"
Accountants, insurance professionals and others need to be
careful that they don’t become what the IRS calls material advisors.
If they sell or give advice, or sign tax returns for
abusive, listed or similar plans; they risk a minimum $100,000 fine. They will
then probably be sued by their client, when the IRS finishes with their client
The McGehee Family Clinic enrolled in the 419 Plan in May
2001 and claimed deductions for contributions to it in 2002 and 2005. The
returns did not include a Form 8886, Reportable Transaction Disclosure
Statement, or similar disclosure. The IRS disallowed the latter deduction and
adjusted the 2004 return of shareholder Robert Prosser and his wife to include
the $50,000 payment to the plan.
The IRS assessed tax deficiencies and the enhanced 30
percent penalty under Section 6662A, totaling almost $21,000, against the
clinic and $21,000 against the Prossers. The court ruled that the Prossers
failed to prove a reasonable cause or good faith exception.
In rendering its decision, the court cited Curcio v.
Commissioner, in which the court also ruled in favor of the IRS. As noted in
Curcio, the insurance policies, which were overwhelmingly variable or universal
life policies, required large contributions relative to the cost of the amount
of term insurance that would be required to provide the death benefits under
the arrangement. The 419 Plan owned the insurance contracts. The excessive cost
of providing death benefits was a reason for the court’s finding in Curcio that
tax deductions had been properly disallowed.
As in Curcio, the McGehee court held that the contributions
to the 419 plan was not deductible under Section 162(a) because the
participants could receive the value reflected in the underlying insurance
policies purchased by insurance company—despite the payment of benefits by the
company seeming to be contingent upon an unanticipated event (the death of the
insured while employed). As long as plan participants were willing to abide by company’s
distribution policies, there was no reason ever to forfeit a policy to the
plan. In fact, in estimating life insurance rates, the taxpayers’ expert in
Curcio assumed that there would be no forfeitures, even though he admitted that
an insurance company would generally assume a reasonable rate of policy lapse.
Companies should carefully evaluate their proposed
investments in plans such as the 419 Plan. The claimed deductions will be
disallowed, and penalties will be assessed for lack of disclosure if the
investment is similar to the investments described in Notice 95-34, that is, if
the transaction is a listed transaction and Form 8886 is either not filed at
all or is not properly filed. The penalties, though perhaps not as severe, are
also imposed for reportable transactions, which are defined as transactions
having the potential for tax avoidance or evasion.
Insurance agents have been selling such abusive plans since
the 1990's. They started as 419A(F)(6) plans and abusive 412i plans. The IRS
went after them. They then evolved to single-employer 419(e) plans, which the
IRS also went after. The latest scams may be the so-called captive insurance
plan and the so called Section 79 plan.
While captive insurance plans are legitimate for large
corporations, they are usually not legitimate for small business owners as a
way to obtain a tax deduction. I have not yet seen a legitimate Section 79
plan. Recently, I have sent some of the plan promoters’ materials over to my
IRS contacts, who were very interested in receiving them. Some of my associates
are already trying to help defend some unsuspecting business owners who are
being audited by the IRS with respect to these plans.
Similar, though perhaps not as abusive, plans fail after the
IRS goes after them. Niche was one example. The company first marketed a
419A(F)(6) plan that the IRS audited. They then marketed a 419(e) plan that the
IRS audited. Niche, insurance companies, agents, and many accountants were then
sued after their clients lost their deductions, paid fines, interest, and
penalties, and then paid huge fines for failure to file properly under 6707A.
Niche then went out of business.
Millennium sold 419A(F)(6) plans and then 419(e) plans
through insurance companies. They stupidly filed for a private letter ruling to
the effect that they were not a listed transaction. They got exactly the
opposite: a private letter ruling saying that they were a listed transaction.
Then many participants were audited. The IRS disallowed the deductions, imposed
penalties and interest, and then assessed large fines for not filing properly
under Section 6707A. The result was lawsuits against agents, insurance
companies and accountants. Millennium sought bankruptcy protection after a lot
of lawsuits.
I have been an expert witness in a lot of the lawsuits in
these 419, 412i, etc., plans, and my side has never lost a case. I have
received thousands of phone calls over the years from business owners,
accountants, angry plan promoters, insurance agents, etc. In the 1990's, when I
started writing for the AICPA and other publications warning about these
abusive plans, most people laughed at me, especially the plan promoters.
In 2002, when I spoke at the annual national convention of
the American Society of Pension Actuaries in Washington, people took notice.
The IRS chief actuary Jim Holland also held a meeting, similar to mine on
abusive 412i plans. Many IRS agents attended my meeting. I was also invited to
IRS headquarters, at the request of the acting IRS commissioner, to meet with
high-level IRS officials and Treasury officials to discuss 419 issues in depth,
which I did after the meeting.
The IRS then set up task forces and started going after 419
and 412i plans. I have been warning accountants to properly file under 6707A to
avoid the large fines, but most do not. Even if they file, if they make a mistake on the forms the IRS fines.
Very few accountants have had experience filing the forms, and the IRS
instructions are difficult to follow. I only know of two people who have been
successful in properly filing the forms,
especially after the fact. If the forms are filled out wrong they should be
amended and corrected Most accountants call me a few years later when they and
their clients get the large fines, either after improperly filling out the
forms or not doing them at all, but then it is too late. If they don’t call me
then, then they call me when their clients sue them.
Lance Wallach, National Society of Accountants Speaker of
the Year and member of the AICPA faculty of teaching professionals, is a
frequent speaker on retirement plans, abusive tax shelters, financial,
international tax, and estate planning.
He writes about 412(i), 419, Section79, FBAR, and captive insurance
plans. He speaks at more than ten conventions annually, writes for over fifty
publications, is quoted regularly in the press and has been featured on
television and radio financial talk shows including NBC, National Pubic Radio’s
All Things Considered, and others. Lance has written numerous books including
Protecting Clients from Fraud, Incompetence and Scams published by John Wiley
and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and
Gift Taxation, as well as the AICPA best-selling books, including Avoiding
Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He
does expert witness testimony and has never lost a case.
Contact him at 516.938.5007, lawallach@aol.com or visit
www.vebaplan.com.
Help with Common IRS Problems: 412i Tax Shelter Fraud Litigation - How It Works
Help with Common IRS Problems: 412i Tax Shelter Fraud Litigation - How It Works: Lance Wallach PARTIES: Typically, these transactions will include an Insurance company, accountant, tax attorney, and a promoter (someon...
Help with Common IRS Problems: Help with Common IRS Problems
Help with Common IRS Problems: Help with Common IRS Problems: There are many problems you can run into with the IRS. The following is an overview and helpful information on some of these confusing issue...
lance wallach
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412i-419 Plans
FBAR_OVDI
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Reportable Transactions .com
Captive Insurance
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Introduction Lance Wallach, CLU, ChFC, CEO & Pres. Veba Plan LLC Website: http://VebaPlan.com ****** Lance Wallach, Managing Director, is the nation's leading expert on employee benefit plans, tax problem resolution and IRS audit defense. Mr. Wallach is a member of the AICPA faculty of teaching professionals & a renowned national expert in many court cases. He is the author of many best selling financial & law books, including: * "Wealth Preservation Planning" by the National Society of Accountants * "The CPA's Guide to Federal Estate & Gift Taxation" published by Bisk * The AICPA's "The team approach to Tax,Financial & Estate planning." * "The CPA's Guide to Life Insurance" by Bisk CPEasy * Avoiding Circular 230 Malpractice Traps and Common Abusive Small Businesss Hot spots by the AICPA, author/moderator Lance Wallach **** 68 Keswick Lane Plainview, NY 11803 Ph.: (516)938-5007 Fax: (516)938-6330 www.vebaplan.com
lance wallach
My Photo
View Full Size
Contact me
My Web Page
On Blogger since November 2010
Profile views - 246
My blogs
412i-419 Plans
FBAR_OVDI
Court Case
Reportable Transactions .com
Captive Insurance
About me
Gender Male
Industry Consulting
Occupation Expert
Location United States
Introduction Lance Wallach, CLU, ChFC, CEO & Pres. Veba Plan LLC Website: http://VebaPlan.com ****** Lance Wallach, Managing Director, is the nation's leading expert on employee benefit plans, tax problem resolution and IRS audit defense. Mr. Wallach is a member of the AICPA faculty of teaching professionals & a renowned national expert in many court cases. He is the author of many best selling financial & law books, including: * "Wealth Preservation Planning" by the National Society of Accountants * "The CPA's Guide to Federal Estate & Gift Taxation" published by Bisk * The AICPA's "The team approach to Tax,Financial & Estate planning." * "The CPA's Guide to Life Insurance" by Bisk CPEasy * Avoiding Circular 230 Malpractice Traps and Common Abusive Small Businesss Hot spots by the AICPA, author/moderator Lance Wallach **** 68 Keswick Lane Plainview, NY 11803 Ph.: (516)938-5007 Fax: (516)938-6330 www.vebaplan.com
IRC Section 6707A, Form 8886
CPA’s Guide to Life Insurance
Author/Moderator: Lance Wallach, CLU, CHFC, CIMC
Below is an excerpt from one of Lance Wallach’s new
books.
IRC Section 6707A, Form 8886
.1 Form
8886, Reportable Transaction Disclosure Statement, is required to be
filed by any taxpayer who is participating, or in some cases has participated,
in a listed or reportable transaction.
What attracted the most attention with respect to it, until very
recently, were the penalties for failure to file, which were $100,000 annually
for individuals and $200,000 annually for corporations. Recent legislation has reduced those
penalties in most cases. There is still
a minimum penalty of $5,000 annually for an individual and $10,000
annually for a corporation for failure to file.
If the minimum penalties do not apply, the annual penalty becomes 75
percent of whatever tax benefit was derived from participation in the listed
transaction, and the penalty is applied both to the business and to the
individual business owners. Since the
form must be filed for every year of participation in the transaction, the
penalties can be cumulative, i.e., applied in more than one year. For example, a corporation that participated
in five consecutive years could find itself, depending on the amount of claimed
tax deductions, looking at several hundred thousand dollars in fines, even
under the recently enacted legislation, before even thinking about back taxes,
penalties, interest, etc., that could result from an audit. Even the minimum fine would be $15,000 per
year, again in addition to all other applicable taxes and penalties, etc.
Help With Common Tax Problems
Published in Coatings Pro Magazine
It is tax time. There are many problems you can run into with the IRS. This article is a generalized overview of some of these confusing issues:
• IRS Penalties
• Unfiled Tax Returns
• IRS Liens
• IRS Audits
• Payroll Tax Problems
• IRS Levies
• Wage Garnishments
• IRS Seizures
When dealing with the IRS, it can seem like they have all the power. That is not always true. As a small business owner--and a taxpayer--it is vital that you know your options and your rights.
IRS Penalties
The IRS penalizes millions of taxpayers each year. In fact, they have so many penalties that it can be hard to understand which penalty they are hitting you with.
The most common penalties are Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time.
To make matters worse, the IRS charges interest on penalties. Many taxpayers often find out about IRS problems many years after they have occurred. As a result, the amount owed the IRS is substantially greater due to penalties and the accumulated interest on those penalties. Some IRS penalties can be as high as 75% to 100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, but the extra penalties make it impossible to pay off the entire balance.
The original goal of the IRS imposing penalties was to punish taxpayers in order to keep them in line. Unfortunately, the penalties have turned into additional sources of income for the IRS. So they are happy to add whatever penalties they can and to pile interest on top of those penalties. Your loss is their gain.
It is important to know that under certain circumstances the IRS does abate, or forgive, penalties. Therefore before you pay the IRS any penalty amounts, you may want to consider requesting that the IRS abate your penalties.
Unfiled Tax Returns
Many taxpayers fail to file required tax returns for a variety of reasons. What you must understand is that failure to file tax returns may be construed as a criminal act by the IRS--a criminal act punishable by up to one year in jail for each year not filed. Needless to say, its one thing to owe the IRS money but another thing to potentially lose your freedom for failure to file a tax return.
The IRS may file “SFR” (Substitute For Return) Tax Returns on your behalf. This is the IRS’s version of an unfiled tax return. Because SFR Tax Returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions to which you may be entitled, such as exemptions for a spouse or children, interest on your home mortgage and property taxes, cost of any stock or real estate sales, business expenses, etc.
Remember that regardless of what you have heard, you have the right to file your original tax return, no matter how late it is filed.
IRS Liens
The IRS can make your life miserable by filing Federal Tax Liens on your business or property. Federal Tax Liens are public records indicating that you owe the IRS various taxes. They are filed with the County Clerk in the county from which you or your business operates.
Because they are public records, they will show up on your credit report. This often makes it difficult to obtain financing on an automobile or a home. Federal Tax Liens can also tie up your personal property, meaning that you cannot sell or transfer that property without a clear title.
Often taxpayers find themselves in a Catch-22 in which they have property that they would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan. Should a Federal Tax Lien be filed against you, a CPA can help get it lifted.
IRS Audits
The IRS conducts multiple types of audits. They can audit you by mail, in their offices, in your office or home. The location of the audit is a good indication of the severity.
Typically, Correspondence Audits are conducted to locate missing documents in your tax return that have been flagged by IRS computers. These documents usually include W-2s and 1099 income items or interest expense items. This type of audit can typically be handled through the mail with the correct documentation.
The IRS Office Audit--held in IRS offices--is usually conducted by a Tax Examiner who will request numerous documents and explanations of various deductions. During this type of audit you may be required to produce all bank records for a period of time so that the IRS can check for unreported income.
The IRS Home or Office Audit--held in your home or office--should be taken very seriously as these are conducted by IRS Revenue Agents. Revenue Agents receive more training and learn more auditing techniques than typical Tax Examiners.
Of course, all IRS audits should be taken seriously as they often lead to examinations of other tax years and other tax problems not stated in the original audit letter.
Payroll Tax Problems
The IRS is very aggressive in their collection attempts for past-due payroll taxes. The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase the total amount you owe in just a matter of months.
I believe that it is critical for business owners to have an attorney present in these situations. Your answers to the first five IRS questions may determine whether you stay in business or are liquidated by the IRS. We always advise clients to avoid meeting with any IRS representatives regarding payroll taxes until you have met with a professional to discuss your options.
IRS Levies--Bank and Wage
An IRS Levy is an action taken by the IRS to collect taxes. For example, the IRS can issue a Bank Levy to obtain the cash in your savings and checking accounts. Or, the IRS can levy your wages or accounts receivable. The person, company, or institution that is served with the levy must comply or face its own IRS problems.
When the IRS levies a bank account, the levy can only be honored on the particular day on which the bank receives the levy. The bank is required to remove whatever amount of money is in your account on that day (up to the amount of the IRS Levy) and send it to the IRS within 21 days unless otherwise notified by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Levy.
An IRS Wage Levy is different. Wage Levies are filed with your employer and remain in effect until the IRS notifies the employer that the Wage Levy has been released. Most Wage Levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t even have enough money remaining to meet basic needs.
Both Bank and Wage Levies create difficult situations and should be avoided if possible.
Wage Garnishments
The IRS Wage Garnishment is a very powerful tool used to collect taxes that you owe through your employer. Once a Wage Garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The funds that would have otherwise been paid to the employee will then be paid to the IRS.
The Wage Garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment. Having wages garnished can create other debt problems because the amount left over after the IRS takes its cut is often small, so you may have difficulty with bills and other financial obligations.
IRS Seizures
The IRS has extensive powers when it comes to seizures of assets. These powers allow them to seize personal and business assets to pay off outstanding tax liabilities. Seizures typically occur when taxpayers have been avoiding the IRS.
Similar to levies and garnishments, seizures are one of the IRS’s ultimate invasive collection tools. They can seize cars, television sets, jewelry, computers, collectibles, business equipment, or anything of value, which can be sold in order to acquire the money the IRS wants to pay off your tax debts. If you are facing a seizure, you have a serious problem.
Hopefully this tax season will begin and end without any of these IRS issues coming into play. But if they do, help is out there. CPAs and attorneys can help you negotiate your rights should it become necessary.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexpert.com.
It is tax time. There are many problems you can run into with the IRS. This article is a generalized overview of some of these confusing issues:
• IRS Penalties
• Unfiled Tax Returns
• IRS Liens
• IRS Audits
• Payroll Tax Problems
• IRS Levies
• Wage Garnishments
• IRS Seizures
When dealing with the IRS, it can seem like they have all the power. That is not always true. As a small business owner--and a taxpayer--it is vital that you know your options and your rights.
IRS Penalties
The IRS penalizes millions of taxpayers each year. In fact, they have so many penalties that it can be hard to understand which penalty they are hitting you with.
The most common penalties are Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time.
To make matters worse, the IRS charges interest on penalties. Many taxpayers often find out about IRS problems many years after they have occurred. As a result, the amount owed the IRS is substantially greater due to penalties and the accumulated interest on those penalties. Some IRS penalties can be as high as 75% to 100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, but the extra penalties make it impossible to pay off the entire balance.
The original goal of the IRS imposing penalties was to punish taxpayers in order to keep them in line. Unfortunately, the penalties have turned into additional sources of income for the IRS. So they are happy to add whatever penalties they can and to pile interest on top of those penalties. Your loss is their gain.
It is important to know that under certain circumstances the IRS does abate, or forgive, penalties. Therefore before you pay the IRS any penalty amounts, you may want to consider requesting that the IRS abate your penalties.
Unfiled Tax Returns
Many taxpayers fail to file required tax returns for a variety of reasons. What you must understand is that failure to file tax returns may be construed as a criminal act by the IRS--a criminal act punishable by up to one year in jail for each year not filed. Needless to say, its one thing to owe the IRS money but another thing to potentially lose your freedom for failure to file a tax return.
The IRS may file “SFR” (Substitute For Return) Tax Returns on your behalf. This is the IRS’s version of an unfiled tax return. Because SFR Tax Returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions to which you may be entitled, such as exemptions for a spouse or children, interest on your home mortgage and property taxes, cost of any stock or real estate sales, business expenses, etc.
Remember that regardless of what you have heard, you have the right to file your original tax return, no matter how late it is filed.
IRS Liens
The IRS can make your life miserable by filing Federal Tax Liens on your business or property. Federal Tax Liens are public records indicating that you owe the IRS various taxes. They are filed with the County Clerk in the county from which you or your business operates.
Because they are public records, they will show up on your credit report. This often makes it difficult to obtain financing on an automobile or a home. Federal Tax Liens can also tie up your personal property, meaning that you cannot sell or transfer that property without a clear title.
Often taxpayers find themselves in a Catch-22 in which they have property that they would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan. Should a Federal Tax Lien be filed against you, a CPA can help get it lifted.
IRS Audits
The IRS conducts multiple types of audits. They can audit you by mail, in their offices, in your office or home. The location of the audit is a good indication of the severity.
Typically, Correspondence Audits are conducted to locate missing documents in your tax return that have been flagged by IRS computers. These documents usually include W-2s and 1099 income items or interest expense items. This type of audit can typically be handled through the mail with the correct documentation.
The IRS Office Audit--held in IRS offices--is usually conducted by a Tax Examiner who will request numerous documents and explanations of various deductions. During this type of audit you may be required to produce all bank records for a period of time so that the IRS can check for unreported income.
The IRS Home or Office Audit--held in your home or office--should be taken very seriously as these are conducted by IRS Revenue Agents. Revenue Agents receive more training and learn more auditing techniques than typical Tax Examiners.
Of course, all IRS audits should be taken seriously as they often lead to examinations of other tax years and other tax problems not stated in the original audit letter.
Payroll Tax Problems
The IRS is very aggressive in their collection attempts for past-due payroll taxes. The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase the total amount you owe in just a matter of months.
I believe that it is critical for business owners to have an attorney present in these situations. Your answers to the first five IRS questions may determine whether you stay in business or are liquidated by the IRS. We always advise clients to avoid meeting with any IRS representatives regarding payroll taxes until you have met with a professional to discuss your options.
IRS Levies--Bank and Wage
An IRS Levy is an action taken by the IRS to collect taxes. For example, the IRS can issue a Bank Levy to obtain the cash in your savings and checking accounts. Or, the IRS can levy your wages or accounts receivable. The person, company, or institution that is served with the levy must comply or face its own IRS problems.
When the IRS levies a bank account, the levy can only be honored on the particular day on which the bank receives the levy. The bank is required to remove whatever amount of money is in your account on that day (up to the amount of the IRS Levy) and send it to the IRS within 21 days unless otherwise notified by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Levy.
An IRS Wage Levy is different. Wage Levies are filed with your employer and remain in effect until the IRS notifies the employer that the Wage Levy has been released. Most Wage Levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t even have enough money remaining to meet basic needs.
Both Bank and Wage Levies create difficult situations and should be avoided if possible.
Wage Garnishments
The IRS Wage Garnishment is a very powerful tool used to collect taxes that you owe through your employer. Once a Wage Garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The funds that would have otherwise been paid to the employee will then be paid to the IRS.
The Wage Garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment. Having wages garnished can create other debt problems because the amount left over after the IRS takes its cut is often small, so you may have difficulty with bills and other financial obligations.
IRS Seizures
The IRS has extensive powers when it comes to seizures of assets. These powers allow them to seize personal and business assets to pay off outstanding tax liabilities. Seizures typically occur when taxpayers have been avoiding the IRS.
Similar to levies and garnishments, seizures are one of the IRS’s ultimate invasive collection tools. They can seize cars, television sets, jewelry, computers, collectibles, business equipment, or anything of value, which can be sold in order to acquire the money the IRS wants to pay off your tax debts. If you are facing a seizure, you have a serious problem.
Hopefully this tax season will begin and end without any of these IRS issues coming into play. But if they do, help is out there. CPAs and attorneys can help you negotiate your rights should it become necessary.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexpert.com.
You Could Be Facing IRS Penalties of $200,000 a Year.
Can you or your business afford to pay the IRS $200,000 a year?
Did you get a letter from the IRS threatening to impose this fine? If you haven't already, you still may. Consider yourself lucky if you have not because this means that you have more time to straighten this situation out. Do not wait for this letter to come from the IRS before you call an expert to help you. Even if you have been audited already, you could still get the letter and/or fine. One has nothing to do with the other, and once the fine has been imposed, it is not able to be appealed.
Many businesses that participated in a 412i retirement plan or a 419 welfare benefit plan are being audited by the IRS. Many of these plans were not in compliance with the law and are considered abusive tax shelters. Many business owners are not even aware that the welfare benefit plan or retirement plan that they are participating in may be an abusive tax shelter and that they are in serious jeopardy of huge IRS penalties for each year that they have been in this type of plan.
Insurance companies, CPAs, sellers of these 419 welfare benefit plans or 412i retirement plans, as well as anyone that gave tax advice or recommended participation in one or more of these plans, also known as a material advisor, is in danger of being sued, fined by the IRS, or both.
There is help available if you think you may be involved with one of these 419 welfare benefit plans, 412i retirement plans, or any abusive tax shelter. IRS penalty abatement is an option if you act now. Feel free to contact me for more information.
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Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems, and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007, wallachinc@gmail.com, or visit: www.taxadvisorexperts.org
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