Archive for Tax Relief

Coming Clean

April 8, 2012 John R. Dundon II Tax Fraud, Tax Guidance & Preparation, Tax Preparer, Tax Problems & Requests, Tax Relief

Quite often people approach me with their tax problems talking in terms of “coming clean” telling dramatic and deeply personal stories, many of which have little or nothing to do with the tax matter at hand. People seem to want to essentially ‘get issues off their chest’ or ‘confess their sins’ as it were which presupposes that I also serve as a pastor, priest, minister, rabbi etc. This has always proven troubling in that I am not formally trained to help people seek relief in these regards.

Having spent years talking to many good friends and fellow tax experts about directing taxpayers when their conversation drifts away from taxes the general conclusion is to redirect and stay focused on the area of expertise, tax. Often taxpayer conversation distills down to the immediate costs associated with correcting mistakes of the past and many people wrestle with whether there is more benefit in ‘doing nothing’ thinking that if they are ‘lucky’ they may ‘get away with it like (friend) or (relative).’ This certainly is one alternative.

My license however requires me to inform taxpayers of their delinquencies as they are reported so ignoring a mistake or problem is not a permanent solution in my reality. That aside there are more important reasons to ‘come clean’ as reflected in these two very true stories that when read together bring an understanding that action (and even inaction) have corresponding consequences reaching far beyond the mechanics of defending or correcting a tax return. I don’t know who authored the following text to give credit but it is worth reading. Let me know what you think…

STORY NUMBER  “ONE”

Many years ago, Al Capone virtually owned Chicago .  Capone wasn’t famous for anything heroic. He was notorious for enmeshing the windy city in everything from bootlegged booze and prostitution to murder.

Capone had a lawyer nicknamed “Easy Eddie.” He was Capone’s lawyer for a good  r eason.  Eddie was very good!  In fact, Eddie’s skill at legal maneuvering kept Big Al out of jail for a long time.

To show his appreciation, Capone paid him very well.  Not only was the money big, but Eddie got special dividends, as well.  For instance, he and his family occupied a fenced-in mansion with live-in help and all of the conveniences of  the day.  The estate was so large that it filled an entire Chicago City block.

Eddie lived the high life of the Chicago mob and gave little consideration to the atrocity that went on around him.

Eddie did have one soft spot, however. He had a son that he loved dearly.  Eddie saw to it that his young son had clothes, cars, and a good education. Nothing was withheld.  Price was no object.

And, despite his involvement with organized crime, Eddie even tried to teach him right from wrong.  Eddie wanted his son to be a better man than he was.

Yet, with all his wealth and influence, there were two things he couldn’t give his son; he couldn’t pass on a good name or a good example.

One day, Easy Eddie reached a difficult decision. Easy Eddie wanted to rectify wrongs he had done.

He decided he would go to the authorities and tell the truth about Al “Scarface” Capone, clean up his tarnished name, and offer his son some semblance of integrity.  To do this, he would have to testify against The Mob, and he knew that the cost would be great.  So, he testified.

Within the year, Easy Eddie’s life ended in a blaze of gunfire on a lonely Chicago Street .. But in his eyes, he had given his son the greatest gift he had to offer, at the greatest price he could ever pay.  Police removed from his pockets a rosary, a crucifix, a religious medallion, and a poem clipped from a magazine.

The poem read:

“The clock of life is wound but once, and no man has the power to tell just when the hands will stop, at late or early hour.  Now is the only time you own. Live, love, toil with a will. Place no faith in time.  For the clock may soon be still.”

STORY NUMBER  “TWO”

World War II produced many heroes. One such man was Lieutenant Commander Butch O’Hare.

He was a fighter pilot assigned to the aircraft carrier Lexington in the South Pacific.

One day his entire squadron was sent on a mission.  After he was airborne, he looked at his fuel gauge and realized that someone had forgotten to top off his fuel tank.

He would not have enough fuel to complete his mission and get back to his  ship.

His flight leader told him to return to the carrier.  Reluctantly, he dropped out of formation and headed back to the fleet.

As he was returning to the mother ship, he saw something that turned his blood cold; a squadron of Japanese aircraft was speeding its way toward the American fleet.

The American fighters were gone on a sortie, and the fleet was all but defenseless.  He couldn’t reach his squadron and bring them back in time to save the fleet.  Nor could he warn the fleet of the approaching danger. There was only one thing to do.  He must somehow divert them from the fleet.

Laying aside all thoughts of personal safety, he dove into the formation of Japanese planes.  Wing-mounted 50 caliber’s blazed as he charged in, attacking one surprised enemy plane and then another.  Butch wove in and out of the now broken formation and fired at as many planes as possible until all his ammunition was finally spent.

Undaunted, he continued the assault.  He dove at the planes, trying to clip a wing or tail in hopes of damaging as many enemy planes as possible, rendering them unfit to fly.

Finally, the exasperated Japanese squadron took off in another direction

Deeply relieved, Butch O’Hare and his tattered fighter limped back to the carrier.

Upon arrival, he reported in and related the event surrounding his return.  The film from the gun-camera mounted on his plane told the tale. It showed the extent of Butch’s daring attempt to protect his fleet.  He had, in fact, destroyed five enemy aircraft
This took place on February 20, 1942 , and for that action Butch became the Navy’s first Ace of W.W.II, and the first Naval Aviator to win the Medal of Honor.

A year later Butch was killed in aerial combat at the age of 29. His home town would not allow the memory of this WW II hero to fade, and today, O’Hare Airport in Chicago is named in tribute to the courage of this great man.

So, the next time you find yourself at O’Hare International, give some thought to visiting Butch’s memorial displaying his statue and his Medal of Honor.  It’s located between Terminals 1 and 2.

SO WHAT DO THESE TWO STORIES HAVE TO DO WITH EACH OTHER? Butch O’Hare was “Easy Eddie’s” son!!!!!

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IRS Tax Refunds in Excess of $1 Billion Await Delinquent Returns. Deadline Approaches

February 23, 2012 John R. Dundon II Tax Guidance & Preparation, Tax Preparer, Tax Problems & Requests, Tax Refund, Tax Relief

The IRS just posted the following news wire IR 2012-26 which states as follows – “Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012. The IRS estimates that half of these potential 2008 refunds are $637 or more.”

If you want to go after this money do it soon! If you need help getting started holler out at me or shoot me an email.

The news wire goes on to state – “Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury. For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.”

The biggest catch however is that you must file tax returns for 2009 and 2010 and the refund will be applied to any amounts still owed or used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a 2008 tax return by this April 17, 2012 the refund is foregone.  The News wire also posted the following chart which I found quite eye opening …

Individuals Who Did Not File a 2008 Return with a Potential Refund

State

Individuals

Median

Potential

Refund

Total

Potential

Refunds ($000)*

Alabama

18,400

$641

$15,738

Alaska

5,800

$641

$5,952

Arizona

29,000

$558

$24,913

Arkansas

9,600

$620

$8,152

California

122,500

$595

$112,201

Colorado

20,500

$589

$18,909

Connecticut

12,500

$697

$13,893

Delaware

4,200

$644

$3,784

District of Columbia

4,000

$642

$3,791

Florida

70,400

$650

$66,974

Georgia

35,800

$581

$30,661

Hawaii

7,600

$714

$8,307

Idaho

4,700

$541

$3,878

Illinois

40,800

$692

$40,712

Indiana

21,800

$664

$19,590

Iowa

10,600

$658

$9,295

Kansas

11,500

$631

$10,084

Kentucky

12,300

$640

$10,501

Louisiana

20,500

$662

$18,859

Maine

4,000

$579

$3,248

Maryland

24,600

$641

$22,591

Massachusetts

23,900

$699

$22,957

Michigan

33,300

$660

$30,903

Minnesota

15,200

$584

$12,772

Mississippi

9,900

$591

$8,254

Missouri

21,600

$593

$18,213

Montana

3,600

$599

$3,192

Nebraska

5,100

$623

$4,371

Nevada

14,500

$619

$13,381

New Hampshire

4,300

$733

$4,518

New Jersey

31,300

$716

$31,185

New Mexico

8,000

$611

$7,420

New York

60,300

$686

$61,240

North Carolina

30,800

$558

$24,997

North Dakota

2,000

$625

$1,895

Ohio

36,400

$622

$31,018

Oklahoma

16,800

$620

$14,787

Oregon

18,500

$527

$14,819

Pennsylvania

38,700

$695

$35,565

Rhode Island

3,400

$674

$3,040

South Carolina

12,200

$547

$10,158

South Dakota

2,300

$669

$2,234

Tennessee

18,400

$626

$16,130

Texas

96,200

$689

$97,057

Utah

7,800

$536

$6,676

Vermont

1,700

$647

$1,410

Virginia

30,800

$624

$28,670

Washington

29,900

$705

$32,138

West Virginia

4,300

$687

$4,068

Wisconsin

14,100

$592

$11,885

Wyoming

2,600

$773

$2,919

Grand Total

1,089,000

$637

$1,009,905

*Excluding the Earned Income Tax Credit and other credits.

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How to Choose a Tax Expert

January 10, 2012 John R. Dundon II Estimated Taxes, PTIN, Tax Abuse, Tax Fraud, Tax Guidance & Preparation, Tax Preparer, Tax Relief, Taxpayer Advocate

With the fallout taking place in the financial services sector as represented by rampant layoffs everywhere you might have noticed that more and more people are going out on their own and hanging their shingle as having a certain tax expertise. It is a natural transition for many but beware usually these people lack acumen as a novice to most any industry would. Worse still many of these sales people are used to working for commissions and as such can only think in terms of wringing money our of your pocket and dripping it into theirs. It never ceases to amaze me what people will stoop to in chasing the almighty dollar. As the Vice President of the Colorado Society of Enrolled Agents I routinely find myself getting reports of specific and egregious allegations of tax practitioner misconduct in violation of United States Treasury Department Circular 230. The point of this blog post is to choose your tax ‘expert’ with care. Take ownership of the process. Make sure that you trust the person you are choosing to be reliable and consistent. Also make sure this person has a reasonable knowledge base and a solid support network. Ultimately you are legally responsible for what is reported on your tax return.

To make an effort at mitigating fraud and abuse starting this year the IRS has mandated that tax preparers who sign tax returns must enter their required IRS Preparer Tax Identification Number (PTIN). The following are some other helpful points to ponder as most recently produced by the IRS.

1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility.

3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

4. Ask if they offer electronic filing.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.

5. Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing it.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint; Form 3949-A, Information Referral (PDF 94K). Or directly contact The Office of Professional Responsibility (OPR). Also be sure to check out - Where Do You Report Suspected Fraud Activity?

Videos: Choosing a Tax Preparer – English | ASL  

Podcast: Choosing a Tax Preparer

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IRS Request for Miscellaneous Determination – IRS Form 8940

December 15, 2011 John R. Dundon II Charitable Contribution, IRS Examination, Non-profit, Tax Guidance & Preparation, Tax Relief, Uncertain Tax Position

The IRS has released Form 8940, Request for Miscellaneous Determination that tax-exempt organizations will use to request certain determinations about their tax-exempt status.  In addition to foundation status issues, organizations will use this new form to obtain advance approval of certain activities and exemption from IRS Form 990 filing requirements.  Organizations applying for recognition of exemption and at the same time requesting advance approval of scholarship procedures or exception from filing Form 990 should include their request with their Form 1023, Application for Recognition of Exemption Under Section 501(c)(3), rather than file Form 8940.

The simple one-page form is accompanied by instructions that specify what information is required to support each of the nine types of requests that may be submitted.  A user fee must accompany most requests.

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Tax Deductible Job Search Expenses

October 18, 2011 John R. Dundon II Tax Deductible Expenses, Tax Guidance & Preparation, Tax Relief

If you invest money seeking employment in your current vocation by taking such action as updating your resume and/or attending career fairs you may be able to deduct some of the expenses as miscellaneous deductions on the Schedule A of IRS Form 1040 based on the following general criteria.

  1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.

  2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.

  3. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers as long as you are looking for a new job in your present occupation.

  4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

  5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

  6. You cannot deduct job search expenses if you are looking for a job for the first time.

  7. The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income.  You figure your deduction on Schedule A.

For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions.

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What taxes can be discharged in bankruptcy

October 17, 2011 John R. Dundon II Bankruptcy, Tax Fraud, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief

Bankruptcy tax law is complicated and involves a firm grasp of time lines. Getting it right is complicated and requires reflective consideration. I learned this first hand back in 2004. If you get it wrong you loose the privilege of a more thorough ‘fresh start’ as it were.

Generally speaking for a tax debt to be discharged in bankruptcy, the tax return creating the tax liability must have been due for at least three years, including any extension that may have been filed. The due date is typically April 15 of the year following the relevant tax year — or Oct. 15 if an extension is requested. But holidays and extensions will extend the deadline. This year, for instance, taxes were officially due April 18 because of a holiday in Washington, D.C. So the three-year deadline is April 19, 2014. If an extension was requested, the three-year period will end in October 2014.

For example if you owed taxes for the 2007 tax year, the due date was April 15, 2008. If you didn’t request an extension, your taxes may be eligible for elimination after April 18, 2011. You still have to overcome other restrictions.

You must have filed the tax returns at least two years prior to filing the bankruptcy. Some may think this is redundant. It is not. Let’s say you owed taxes for the 2005 tax year, but did not file your returns until this year, 2011. Right after you file the 2005 return, you file for bankruptcy. The taxes owed aren’t dis-chargeable. You would have to wait two years from the date you filed the returns to declare bankruptcy if you want to try to get taxes discharged.

If the Internal Revenue Service filed a return for you by filing a substitute for return, the taxes will not be dis-chargeable. Even if you filed a return after the IRS assessed these taxes, the IRS takes the position that such a return is not a valid return, so these taxes are not dischargeable. It is very important to consult an Enrolled Agent if the IRS filed a return for you.

Your taxes must have been assessed at least 240 days prior to filing bankruptcy. This is most commonly an issue when a taxpayer is audited, or when an amended return is filed. Normally the taxes are assessed shortly after your return is filed. But if you end up getting audited, an additional assessment may take place years later. With audits, it’s common for a state to issue a new assessment after the IRS issues its assessment. A common trap is to file bankruptcy 241 days after the federal assessment. The problem: The state assessment might have been just 90 days in the past. In that case, while the recent IRS assessment may be discharged, the state assessment isn’t eligible to be discharged.

The deadlines above can be extended, also known as being “tolled,” by various events. Filing a prior bankruptcy, filing for an offer in compromise or filing for a collection due process hearing are all things that can extend some or all of these deadlines.

If you file a fraudulent return or are guilty of willfully evading your tax liability, you cannot eliminate those taxes in bankruptcy. The IRS can review this issue on a case-by-case basis. You could comply with all other conditions, but still be unable to discharge the taxes due to fraud or evasion.

Even if the tax is discharged, the case isn’t necessarily over. If the IRS has filed a notice of federal tax lien, it will retain that lien, which may cause you future problems. The IRS will sometimes voluntarily remove a tax lien after a bankruptcy if the tax was discharged and the debtor has very little in assets. However, if the debtor has real estate that may have equity, or an interest in a pension or 401(k) plan, the IRS will keep the lien in place.

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Time Period for Collecting Taxes

June 26, 2011 John R. Dundon II Appeals & Audit Resolution, Back Taxes Owed, Bankruptcy, Cancelled Debt, Self Employ, Small Business, Statutory Notice of Deficiency, Sub-chapter S, Tax Abuse, Tax Court, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief

By law, the IRS has the authority to collect outstanding Federal taxes for 10 years from the date your tax liability was assessed. The 10-year collection period is suspended:

●  while the IRS and the Ofice of Appeals consider a request for an installment agreement or an offer in compromise.

●  from the date you request a CDP hearing until Appeals issues a CDP Notice of Determination or, if you seek review in the Tax Court, until the Tax Court’s decision becomes final, including appeals to a United States Court of Appeals.

●  from the date you request innocent spouse relief until a final Notice of Determination is issued or, if you seek review in the Tax Court, the date the Tax Court decision becomes final and for 60 days thereafter. If, however, you appeal the Tax Court’s decision regarding your right to innocent spouse relief to a United States Court of Appeals, the collection period will begin to run 60 days after the filing of the appeal unless a bond is posted with the appeal.

●  for tax periods included in a bankruptcy while the automatic stay is in effect, plus an additional six months.

●  while you are residing outside the United States, if you are absent for a continuous period of at least six months. The amount of time the suspension is in effect will be added to the time remaining in the 10­year period. For example, if the 10-year period is suspended for six months, the time left in the period we have to collect will increase by six months.

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IRS Centralized Insolvency Operation

June 24, 2011 John R. Dundon II 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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