Archive for Non-filed Tax Returns

IRS Centralized Insolvency Operation

June 24, 2011 Back Taxes Owed, Bankruptcy, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Offer In Compromise, Paying Taxes, Self Employ, Small Business, Sole Proprietor, Sub-chapter S, Tax Guidance & Preparation, Tax Relief

  • Call 800-913-9358 to reach the Centralized Insolvency Operation. Hours are 7 a.m. to 10 p.m. eastern time. If the IRS is a creditor in a bankruptcy case, and you determine that IRS was not originally listed as a creditor, notification of the filing should be sent to IRS to prevent violations of the automatic stay. Send notification to:

    Internal Revenue Service- Centralized Insolvency Operation – P. O. Box 7346 – Philadelphia, PA 19101-7346

  • IRS notices are sent to the last known address. This address is determined by the most recently filed tax return, Form 8822, Change of Address, or change of address information obtained from the United States Postal Service. As an official National Change of Address licensee of the USPS, the IRS receives weekly updates of change of address information.

  • Bankruptcy does not prohibit issuance of all IRS notices, and not all IRS notices violate the automatic stay. Some notices, for example inquiries concerning unfiled returns, will continue to be sent to the debtor’s last known address.

  • For individual debtors, the last known address should always remain the debtor’s address. Returns should not be filed “in care of” the trustee. Doing so will change the debtor’s address to that of the trustee and all IRS correspondence relating to that taxpayer will be sent to the trustee.

  • In cases not involving an individual debtor, the debtor’s IRS address of record will be changed to the trustee’s address if the trustee:

    • files a debtor’s tax return in care of the trustee at the trustee’s address, or

    • files a change of address for the debtor with the USPS, or

    • files a Form 8822, Change of Address, with the IRS.

    Any of the above will result in all future IRS correspondence being sent to the trustee. Treas. Reg. §301.6212-2 and Rev. Proc. 2010-16, provide guidance on the procedures for making a change of address and explain the requirements for giving the IRS “clear and concise notification” of a change of address.

  • IRS notices concerning taxes incurred by bankruptcy estates of individuals in chapter 7 and 11 cases, which file separate Form 1041 returns, are properly sent to the bankruptcy trustee. Notices will continue to be sent until the liability is satisfied or the statute of limitations for collection expires.

  • Certain penalties may apply to returns filed by the trustee for taxes owed by the bankruptcy estate. The penalties may be waived if the Bankruptcy Court finds there are insufficient funds to pay administrative expenses. Contact the Centralized Insolvency Operation at the phone number below if you believe any of the penalties should be waived.

  • If you have questions regarding a case where IRS is listed as a creditor, contact the Centralized Insolvency Operation. Be prepared to provide the debtor’s bankruptcy case number or taxpayer identification number. The IRS may only disclose the information permitted by I.R.C. section 6103.

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How to Respond to the ’90 Day’ IRS Letter aka Statutory Notice of Deficiency – IRS Publication 3598

June 7, 2011 Amended Tax Return, Appeals & Audit Resolution, Audit Technique Guide, Back Taxes Owed, Enrolled Agent, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Relief

The IRS publishes a short but precise set of instructions on Audit Reconsideration.  Check it out at IRS Publication 3598. Audit reconsideration is the first avenue I consider when responding to the dreaded ’90 day letter’ or IRS Notice of Statutory Deficiency. Almost 99.9% of Notices of Statutory Deficiency can be settled with the IRS unless the time clock runs down resulting in a default tax judgment if you do not file a petition in tax court.

IF you find yourself ‘running out of time’ on the 90 day period, filing a tax court petition and paying court fees and representing yourself pro-se or hiring a tax court lawyer are last choice decisions. They are costly and tax court I hate to say it usually favors the government. The best solution is to manage the IRS Examination (aka Audit), IRS Appeals, and/or IRS Collections early and often to obtain the BEST outcome.

The problem with the 90 day letter is that it is an uphill battle to get the proposed assessment amount changed. If gone unchecked the assessment will proceed to IRS Collections and Collections will assume the amount is correct. It is possible to get the matter back to IRS Examination, but the IRS does not have to comply with that request. If the amount in the 90 day letter is not correct, and you have the documentation and tax authority backing your position, IRS Examination, Appeals, and/or Collections will want to settle the case. The trouble is that by the time the average taxpayer does anything about the 90 day letter there may not be enough time left to arrive at a resolution with IRS examination. Subsequently if a tax court petition is not filed timely, the taxpayer’s options become limited and resolution becomes potentially more expensive.

All of my cases are settled in IRS Appeals before the Tax Court Hearing date. I prefer not go to Tax Court. Also you are not going to Tax Court immediately if you petition, you will go to IRS Appeals as a docketed case, and you can most likely settle it there. You should try to work it out with the IRS, but you need to be prepared that if the 88th day comes, that you will need to petition the Tax Court to preserve your rights. I’m not a lawyer but I can tell you that filing the petition in tax court is not as daunting as it sounds. The first thing the court does is send the file to IRS Appeals to be worked out and that is where I come in. The tax court petition kicks a taxpayer’s file into appeals from wherever it is in the IRS system. If you can work it out with IRS before the petition is filed, that saves the fees for filing the petition and the additional correspondence required for dealing with the IRS attorneys.

I found ALL the following works to the taxpayer’s advantage when time winds down if proper documentation and tax authority is held: file a reconsideration along with IRS Form 843 to request a refund or abatement; File an amended return Form 1040X to modify IRS assessments (or a 1040 to modify a return that the IRS may have prepared on the taxpayers behalf); Request an Appeal; or as a last resort if you are quickly approaching a time deadline, file a petition in US Tax Court

I must say though that from my own somewhat biased perspective it is much easier to get the total amount of an entire tax liability (covering multiple tax periods) established in IRS appeals where the IRS Appeals Officer can deal with the entire situation rather than spending copious amounts of time on the phone coordinating between IRS examination or IRS customer services (processing the past due or amended returns) and IRS collections for each specific tax matter and tax period.

Most anyone, be they an EA or CPA or a person with no professional training whatsoever, can assist other tax payers in tax court presuming the taxpayer with the court petition is willing to act on their own behalf. Before considering this route go to tax court and sit in that room and hear a proceeding.  This is a valuable experience to learn how the tax court actually operates. Tax court proceedings are not the same as Federal Court. I’ve found the tax court judges offer more room for parties to argue cases which I consider to be a special talent. The proceeding is usually less formal but timeliness and preparation are demanded and the tax rulings themselves have been fairly predictable.

Filing a Tax Court Petition is ultimately a great tool in buying more time to prepare the necessary documents to prove the assessment should not take place. More than likely you will have 6 months after you file the petition before you even hear from an IRS Appeals Agent.

Keep in mind that as long as you have not signed and waived your dispute rights with a ‘closing agreement’ (IRS Form 906); a ‘compromise agreement’ or an ‘appeals agreement’ (IRS Form 870-AD) with the IRS you do not have to go to tax court.  So before you SIGN ANYTHING be sure to consult with someone you trust.

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How to Get a ‘Fresh Start’ with the IRS

June 1, 2011 Alternative Minimum Tax (AMT), Amended Tax Return, Appeals & Audit Resolution, Back Taxes Owed, Business Expense, Colorado Department of Revenue, Disallowed Expenses, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Paying Taxes, Payroll Tax Problems, Rental Real Estate, Self Employ, Small Business, Tax Problems & Requests, Tax Relief

According to IR-2011-20 published on Feb. 24, 2011, in its latest effort to help struggling taxpayers, the Internal Revenue Service announced a series of new steps to help people get a fresh start with their tax liabilities. The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens. The changes include:

  • Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

  • Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

  • Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

  • Creating easier access to Installment Agreements for more struggling small businesses.

  • Expanding a streamlined Offer in Compromise program to cover more taxpayers.

Tax Lien Thresholds

The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. Usually the government is not the only creditor to whom the taxpayer owes money.

A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.

Tax Lien Withdrawals

The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.

Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.

In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.

Direct Debit Installment Agreements and Liens

The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

  • Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.

  • The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.

  • The IRS will also withdraw liens on existing Direct Debit Installment greements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

Installment Agreements and Small Businesses

The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.

Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.

The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.

Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.

Offers in Compromise

The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.

This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

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Being Compliant with Federal Tax Obligations May Soon Be A Requirement For Passport Renewal

May 3, 2011 IRS Collections, IRS Examination, Non-filed Tax Returns, Tax Guidance & Preparation

According to a recent Government Accountability Office (GAO) report, the State Department issued 224,000 passports to citizens who owed approximately $6 billion in income tax in 2008.  Purportedly that amount has increased over the last three years. Most of the perpetrators are both wealthy and from my perspective burdened with inflated hubris. If this is you, may God have mercy on your soul. PAY YOUR TAXES!

The current law stipulates that the State Department cannot decline your application for a new or renewed passport if you still owe taxes. The law also forbids the IRS from revealing your tax information to third parties including the State Department without your consent. The State Department can deny you a passport if there is:

  1. a warrant for your arrest,
  2. a court order disallowing you from leaving the US, or
  3. a request for your extradition.
  4. a failure to pay child support of more than $2,500.

In its report the GAO suggested that tax compliance be added to the list of reasons to decline the application for a passport whether new or renewal with this sentence. “If Congress is interested in pursuing a policy of linking federal tax debt collection to passport issuance, it may consider taking steps to enable State to screen and prevent individuals who owe federal taxes from receiving passports.”

In addition the IRS formed a Global High Wealth Industry office charged with investigating tax compliance of wealthy American taxpayers. The number of audits on the wealthy has risen to 2,458 in 2009 among taxpayers who earn $10 million or more a year, an increase of 905 audits from the 2008 figure of 1,553. Likewise, the number of audits on taxpayers earning between $1 million and $10 million increased by approximately 50% to 21,660 over the same period. If you are professionally or financially successful chances are good that you are being watched and profiled so maintain compliance to protect yourself.

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Do you owe money to the IRS?

August 6, 2007 Appeals & Audit Resolution, Installment Agreement, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Partial Payment Installment Agreement, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxpayer Advocate

The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who have received a tax bill? What do you do if you owe money to the IRS and can’t pay?

The IRS encourages you to pay the full amount of your tax liability on time. If you get a bill for late taxes you are expected to promptly pay the tax owed including any additional penalties and interest. It is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.

You can pay the balance owed by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-729-1040 (also www.pay1040.com). To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System (EFTPS) by calling 800-555-4477 or 800-945-8400 (also www.eftps.gov).

An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement you must first file all returns that are required and be current with estimated tax payments. If you are an employer you must be current with your federal tax deposits.

If you owe $25,000 or less in combined tax, penalties, and interest, you can request an installment agreement using the web-based application, Online Payment Agreement (OPA), found on the Internet at IRS.gov. Or, you can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you within 30 days whether your request is approved, denied, or if additional information is needed.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, may need to be completed.

If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

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7 things to know BEFORE engaging the IRS over a dispute

May 31, 2007 Appeals & Audit Resolution, Audit Reconsideration, Correspondence Audit, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Offer In Compromise, Partial Payment Installment Agreement, Paying Taxes, Payroll Tax Problems, Small Business, Sole Proprietor, Statutory Notice of Deficiency, Tax Abuse, Tax Court, Tax Fraud, Tax Guidance & Preparation, Tax Problems & Requests

1. Stay compliant – file and pay taxes on time

2. IRS employees, specifically those involved with collection matters, are for the most part good and well meaning people. These people are hired and trained with the expectation that they will advocate on behalf of the IRS and the United States Treasury. This is good for the United States Treasury on many levels, particularly when flushing out tax fraud and abuse.

3. Stated another way however, the best interests of the taxpayer involved in an IRS dispute are NOT the concern of IRS Revenue Officers and/or Agents. So don’t expect any advice from IRS Revenue Officers or Agents when engaging with them over a tax dispute.

4. Fully understand what you are being accused of by the IRS before responding.

5. Stay calm. It’s not a conspiracy.

6. Get advice before responding.

7. Respond in accordance with the time frame set by the IRS. “I forgot” is NOT a valid defense.

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