Charitable Contributions Require Documention

Posted on November 4, 2015 by Kursti Nakagawa

Charitable Contributions Require Documentation

Although charitable contributions can amount to a significant tax savings, they can also have the negative affect of flagging a return from audit when they are claimed in excess or not reported according to preset IRS guidelines. A case in point is that of Kunkel versus United States Tax Commissioner. In this 2011 United States Tax Court case, the court disallowed over $37,000 in noncash contributions due to lack of substantiation. While the Kunkels maintained that the value of each donation was less than $250, the court questioned the total amount of the contributions. They pointed out that the total donation amount could have only been achieved by making almost 100 trips to various donation sites. In addition, the Kunkels had no dated receipts from any of the receiving charities giving either a value or description of the property being donated.

In order to avoid a situation such as the one described above, it is important to follow the guidelines set by the Internal Revenue Service for reporting charitable contributions. According to these guidelines, increasingly strict documentation requirements are imposed on charitable donations above or below the following preset thresholds:

 Contributions of less than $250

Contributions of less than $250 require 1) the name and location of the charitable organization to which the donation is being made, 2) the date the donation is made and 3) a description of the property being donated. Although it is advisable to get a receipt from the organization to which the donation is being made, this is not required.

 Contributions in excess of $250

In addition to the documentation required for contributions of less than $250, those in excess of $250 must have a written receipt from the charitable organization to which the contribution is made. In addition to a description of the donated property, the receipt must include a good faith estimate of the property’s value as well as a statement indicating whether any goods or services were given in exchange for the contribution.

 Contributions in excess of $500

Charitable donations in excess of $500 require 1) a specific description of the property being donated, 2) the date the property was acquired, 3) the cost basis of the property, 4) the fair market value of the property at the time the donation is made and 5) a statement of the method used to calculate fair market value.

 Contributions in excess of $5000

In addition to all of the documentation required for donations in excess of $500, charitable contributions in excess of $5000 require a qualified appraisal.

With the end of the calendar year fast aproaching, now is as good a time as any to review the IRS guidelines for documenting charitable contributions. Although the IRS sometimes allows charitable deductions even when the reporting taxpayer lacks the required documentation, there is no good reason to take a chance on this being the case. It is better to be safe than sorry! Charitable contributions can amount to a significant savings of tax dollars but proper reporting is essential.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Focus on Trump’s Tax Plan

Posted on October 7, 2015 by Kursti Nakagawa

Focus on Trump’s Tax Plan

Republican presidential candidate Donald Trump recently proposed an innovative new tax plan that he maintains would simplify the tax code and reduce both individual and business taxes while, at the same time, remaining revenue neutral. With Trump currently the front-runner in several of the major polls, Americans were especially interested to hear what he had to say about income taxes. In a nutshell, his plan proposes simplifying the tax code by eliminating loopholes and reducing tax brackets, expanding the 0% income tax bracket for individuals, lowering taxes paid by businesses of all types and eliminating the estate tax.

Here are some of the key provisions of his tax plan:

 Simpler Tax Code

Trump’s plan would drastically simplify the tax code by reducing the number of tax brackets as well as eliminating numerous penalties and loopholes. His plan suggests reducing the current seven tax brackets to four (0%, 10%, 20% and 25 %) as well as eliminating such complicating items as the Alternative Minimum Tax and the marriage penalty, among other things. (https://chacc.co.uk/)

 Lower Tax Rates

The tax brackets suggested by Trump would lower the current income tax rates across he board. In addition, his the expansion of the 0% tax bracket to include individuals with an annual income of less than $25,000 and couples who earn less than $50,000 would esult in an increase in the rolls of those would not owe any income tax. With the institution of the Trump’s tax plan, over half of American individuals and families would not owe any tax at all!

 Reduction in Business Taxes

The Trump tax plan would cap the business tax rate at 15% for businesses of any size or business structure. This would include the self-employed, Partnerships, LLCs, S- Corporations and even large C-Corporations that currently pay more than double that rate. Trump maintains that making the United States more attractive to business by lowering the corporate income tax rate to 15% from the 35% rate that they are currently paying would go a long way toward deterring corporate inversions.

 Elimination of Estate Tax

Trump’s plan would completely eliminate the estate tax, thus allowing heirs to inherit estates of any size without having to pay income taxes. The argument in favor of this tax move is that income taxes are paid at the time funds are earned so taxing them again amounts to double taxation. Although the ceiling on the asset value of estates that can be passed down tax free has been increasing over the past ten years, from $1,500,000 in 2005 to $5,430,000 for the current year, Trump’s plan would amount to a significant tax savings for those who inherit estates in excess of this amount.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement https://professionaltaxresolution.com/services/back-taxes-delinquent-returns/ option will be the best fit for your specific set of circumstances.

Jeopardy Assessments Allow IRS to Freeze Assets

Posted on September 29, 2015 by Kursti Nakagawa

Jeopardy Assessments Allow IRS to Freeze Assets

The recent tax troubles of Barcelona soccer star Neymar da Silva Santos serve to point out the very powerful nature of tax collection agencies. Earlier this month, a Brazilian judge froze almost $50 million in assets to prevent to Neymar from hiding funds that might be needed to cover a tax debt with the Brazilian government. The total amount of the freeze was apparently equal to 150% of the soccer star’s estimated tax debt and included, not only his personal assets, but also those of family members. Although this particular jeopardy assessment was initiated by the Brazilian counterpart of the IRS, we are reminded that our own tax collection agency is equally as powerful. When collection of an outstanding tax liability is in question, the IRS has the authority to freeze whatever assets are necessary in order to cover the debt, even without following normal assessment and collection procedures.

The IRS is given the authority to initiate a jeopardy assessment such as the one recently imposed by the Brazilian government if they determine that following normal collection procedures will place collection of the tax debt in jeopardy. In such a case, the IRS is allowed to immediately levy assets to cover payment of the tax liability without waiting the normal 30-day grace period after a Notice of Intent to Levy is issued. Once an assessment such as this is handed down, the back tax balance, together with any penalties and interest that have accumulated, become immediately due and payable. In the case of income taxes, such jeopardy assessments can even include termination of the current tax year or imposing an immediate deadline on collection of taxes from the previous year.

As would be expected, the issue of jeopardy assessments violating a taxpayer’s right to due process has been challenged in court numerous times. Although the courts normally back the IRS, a 2010 Supreme Court Ruling in the case of Unites States v. Clarke upheld the taxpayer’s right to challenge the authority of the IRS. In this case, Michael Clarke disputed an IRS summons for information, saying that it had been issued as a result of his refusal to cooperate with an IRS audit. The courts agreed that he had a right to question the agent since he had been able to show some evidence of an improper motive. While the ruling did not open the floodgates for the questioning of any IRS summons, neither did it provide the IRS with the blanket protection it had hoped for. In another case, Joe Francis, creator of the pornographic entertainment company, Girls Gone Wild, said that the IRS had violated his taxpayer rights when they issued a jeopardy assessment freezing assets in his Morgan Stanley and UBS accounts. In this case, the courts upheld the actions of the IRS, saying that they were well within their rights in using extreme measures to secure payment of the $23 million back tax balance owed by Francis at that time.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt https://professionaltaxresolution.com/services/back-taxes-delinquent-returns/, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Franchise Tax Board Assessment Stopped

Posted on August 26, 2015 by Kursti Nakagawa

Franchise Tax Board Assessment Stopped

Just one month after finalizing an Offer in Compromise with the Internal Revenue Service, Mr. C contacted Professional Tax Resolution with another tax settlement issue. Having successfully settled his federal income tax debt for less than 20% of the initial amount owed, he now needed our services to help with resolving an outstanding tax liability with the State of California. Just prior to contacting our firm for the second time, he had received and official notice from the California Franchise Tax Board informing him that he owed a back tax amount of 80K for tax year 2005. This amount included both penalties and interest that had been compounding over time.

Mr. C was both confused and upset when he received the tax delinquency notice from the California Franchise Tax Board. Having just settled his federal tax debt for this same year, he was taken by surprise when he received a notice from the state informing him that he still had an outstanding tax liability with them. A member of our staff quickly reviewed the notice and realized the assessment was based on the results of IRS audit. After ruling out the possibilities of fighting the audit based on proof of expenses or of submitting an Offer in Compromise proposal with the state, our staff decided to match the state’s assessment to the Internal Revenue Service transcripts. It was this match that provided the solution to Mr. C’s back tax issue with the California Franchise Tax Board.

We quickly came to realize the Franchise Tax Board was over-assessing Mr. C. Not only was their assessment based on a higher income then the IRS transcripts reported, but it incorrectly included taxes on income that was produced outside the state. In response, our professionals quickly prepared a letter of protest informing the Franchise Tax Board of the amount of income that was not produced in California and recalculating the tax amount based on the IRS transcripts. After one month and a close review of our protest, the Franchise Tax Board recalculated their assessment based on the correct income amount and came to the conclusion that our client did not owe any additional tax. The end result was that the case was settled and closed with the most favorable outcome possible. Not only did M. C walk away without paying one dime in back taxes, but the Franchise Tax Board actually owed him money!

Pros & Cons of Outsourcing the Collection of Tax Debt

Posted on August 24, 2015 by Kursti Nakagawa

Pros and Cons of Outsourcing the Collection of Tax Debt

Pros & Cons of the Outsourcing of Collection of Tax Debt

Pros & Cons of Outsourcing the Collection of Tax Debt

The Senate Finance Committee has recently revived their discussion of outsourcing the collection of back taxes. According to certain estimates, turning the collection of delinquent taxes over to private collection agencies would save the government more than two billion dollars over a period of ten years. However, opponents of privatization maintain that this would not be the case. In addition to emphasizing the potential threat to taxpayer security, they point to attempts at outsourcing the collection process that have not worked particularly well in the past. Time will tell whether the Treasury Secretary, who currently has the authority to make such a switch, will give it another try.

Those who favor privatizing the collection of tax debt say that it will raise more revenue that it costs. While this did not happen in a previous attempt at outsourcing that was made between 2006 and 2009, proponents say that the powers that be have learned from their past mistakes.They say that turning IRS collections over to private collection agencies will generate extra revenue that The IRS can use to hire new employees. In addition, they point to the fact that removing the task of debt collection from the IRS will allow the understaffed agency to focus its human resources on other important tax matters that have suffered in recent years.

On the other side of the fence, opponents of outsourcing say privatizing the collection of tax debt will not work. The National Treasury Employees Union points to data from the previous attempt at outsourcing which shows that the IRS collected over 60% more in the first two years of the program than the private collection agencies did – $139 million compared to $56 million. Although the private companies did better at collecting from cases where the amount owed was not in dispute, they lacked the authority to collect in the more difficult cases. The Center for Effective Government maintains that private companies will never be as effective as the IRS at collecting back taxes. According their spokesperson. “Collecting back taxes is an inherently governmental function, something that the government is uniquely positioned to do.” The IRS is the only collection agency that can garnish wages, levy bank accounts, Social Security benefits and 401k plans, place tax liens on property and even seize assets, all without judicial approval! These powers indeed make it the most powerful collection agency in the county, a fact that opponents of outsourcing tax debt collection are quick to point out.