IRS Targets International Businesses

Posted on August 10, 2016 by Kursti Nakagawa

Over the last few years, the IRS has faced many dramatic cutbacks which have caused them to decrease their services and drastically reduce the actual number of IRS employees. However, in spite of the downsizing, the agency is determined to collect the money they are owed, especially that owed by larger taxpayers. They have responded to slashes in the number of staff members by focusing most of their efforts and resources on going after the big guns while sweeping up any other delinquent IRS taxpayers they can find along the way. Using this creative approach, they hope to recover a large portion of the millions and billions of dollars that are dishonestly and fraudulently withheld from the IRS.

One of the changes recently announced by the IRS in response to the cutbacks is a focus on auditing businesses in the international division, which are some of the nation's largest taxpayers. This is part of their overall plan to spend most of their time and energy focusing on the larger tax issues which will potentially bring in more tax dollars. The agency is currently keeping their eye on such questionable international business transactions as the basket option, which is a cleverly designed tax loophole whereby foreign banks are enlisted by hedge funds for the purpose of converting short term capital gains to long term gains in order to avoid the payment of higher short term capital gains rates. Since the short term capital gains rate is 39.6% compared to 20% for long term gains, practices such as basket option contracts result in a significant loss of tax revenue for the IRS. Therefore, such practices as this as well as other items on the IRS list referred to as the “dirty dozen” are being targeted by the IRS.

This is all part of a new plan by the IRS to kick into high gear programs designed to get the most money possible from delinquent taxpayers. A key component of this plan is improving the audit process. In the case of auditing companies involved in international transactions, the IRS must obtain enough detailed information and data to build a strong case against the taxpayer. The IRS agents going after these particular businesses have gone through a type of advanced IRS training that instructs them in how to obtain this necessary documentation. These new examination agents will conduct and resolve audits on a national level which is an overall change to IRS system and one which will affect any taxpayer selected for an IRS audit. As a result, taxpayers, especially those who own large companies or are operating internationally, would be well advised to stay on their toes. This means keeping all business related documentation and operating under the advice of an attorney or other tax professional who is experienced in the area of international tax law. The IRS is hunkering down on the big players that owe them money!

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.

What Happens If You Can’t Pay Your Taxes?

Posted on April 26, 2016 by Kursti Nakagawa

What Happens If You Can’t Pay Your Taxes?

What Happens if You Can’t Pay Your Taxes?

What happens if you owe tax money to the IRS and you cannot afford to pay it? Most importantly, do not ignore the IRS. They have a lot of information on you and are not going to forget about the money that is owed. To prevent the IRS from initiating aggressive collection techniques such as freezing your bank accounts and garnishing your wages, it best to contact them promptly. A tax problem will not go away. On the contrary, it will only compound and increase over time until it is resolved. There are several options available for resolving a tax debt. Some of these options can be initiated directly with the IRS. However, if your tax problem is complicated, it may be in your best interest to hire a qualified tax resolution specialist to assist you. Here are some steps to take if you owe back taxes and do not have the necessary funds to pay the balance in full:

File Your Taxes on Time (even if you don’t have the funds to pay the balance due): No matter what your financial situation, stick with the same process each tax year and submit your tax return by the filing deadline. Whether you decide to use the services of a CPA/accounting firm or a seasonal tax company or file on-line yourself via tax prep software, always send in your return on time or file for a tax extension. If you fail to do this, you will be assessed a failure to file penalty which will begin to accrue the day after tax day. This penalty will be levied in addition to interest and possible failure to pay penalties on any taxes you may owe. These penalties and interest charges will add up very quickly over time so it is always advisable to avoid the late filing penalty even if your do not have sufficient funds to pay the tax balances owed. Okay, this is good information, but what if you already owe the IRS money?

Set up a Payment Plan: If you owe back taxes, it is best contact the IRS immediately.The IRS would rather work with people who acknowledge owing back taxes rather than chasing around after them around to collect the outstanding tax liabilities. There are several types of installment plans that can be set up to pay off a tax bill over time. To review theses plans as well as other options available for settling a back tax balance, see the following IRS link: https://www.irs.gov/Businesses/Small-Businesses- &-Self-Employed/Filing-Past- Due-Tax- Returns . If this is your first time failing to pay your taxes on time, the IRS may be lenient and waive the penalty. See the following IRS link for information on penalty abatements: https://www.irs.gov/Businesses/Small-Businesses-&-Self- Employed/Penalty-Relief- Due-to- First-Time- Penalty-Abatement- or-Other-Administrative-Waiver.

Seek a qualified CPA or a Tax Resolution Specialist: If your tax problem is too big or too complex for you to solve on your own, a CPA or a qualified tax resolution specialist will be able help you explore your tax settlement options. Such an individual should be able to look at your situation to see which settlement options will work best for your specific set of circumstances. In addition, CPAs and Enrolled Agents have the power to negotiate directly with the IRS on your behalf in order to reach the best settlement agreement possible. Once a tax settlement plan has been set up, it is important that the payments are made according to the payment schedule and that taxes are filed on time each year. Late payments or failing to file tax returns by the filing deadlines will normally negate a previously negotiated tax settlement agreement. Simply make it a habit!

Tax Debt May Result in Loss of Passport

Posted on February 29, 2016 by Kursti Nakagawa

Tax Debt May Result in Loss of Passport

One of the numerous bills passed by Congress toward the end of last year was the Fast Act (Fixing America’s Surface Transportation Act). Executed on December 5, 2015, the main focal points of the bill are improving the county’s transportation infrastructure, strengthening public transportation and improving highway safety. However, in addition to the Fast Act’s focus on these transportation related issues, it contains an important line item which allows the State Department to go after United States citizens who owe back taxes by interrupting their use of a passport. The bill allows the government to refuse to issue a passport, fail to renew a passport or revoke a current passport if a taxpayer owes back taxes in excess of a certain threshold amount. This provision is particularly significant because, for the first time, it allows the IRS to share information with the State Department.

The IRS has been aggressively trying to collect back taxes for the past several years. However, they have recently had to scale back on the number of employees devoted to tax collection in order to deal with such pressing issues such as tax fraud, identity theft and tax scams. In light of this employee shortage, the Fast Act takes a step in the direction of collecting back taxes by interfacing with the State Department. It declares that any United States taxpayer who owes $50,000 or more in taxes, interest and penalties is considered to be in “seriously delinquent debt.” Once this designation has been established, the bill allows the IRS to turn to the Secretary of State to deny a passport when one is about to be issued or renewed by such an individual. Because a passport is a strong representation of freedom for any U.S. citizen, the new bill makes a powerful statement about the government’s focus on collecting delinquent tax payments.

If you are a taxpayer who falls into delinquent taxpayer category described above, it may well be advisable for you to contact a competent tax settlement professional to investigate your tax settlement options. Among other alternatives, these options include an IRS Offer in Compromise or IRS Installment Agreement. While a traditional Installment Agreement simply makes payment of a tax debt more manageable by setting up a payment plan, both the Offer and Compromise and the Partial Payment Installment Agreement settle the debt for less than the full amount owed. An additional option is to request a Collection Due Process Hearing. Once a taxpayer and the IRS have agreed upon a method for paying the back tax balance, the Secretary of State will go through the motions of removing the hold on the taxpayer’s passport. Similar to the IRS revoking a lien or a levy, the Secretary of State will deem the taxpayer’s current passport valid or issue a release allowing a passport to be renewed or a new one to be issued.

Trust Fund Recovery Penalty Averted!

Posted on January 25, 2016 by Kursti Nakagawa

Trust Fund Recovery Penalty Averted!

Professional Tax Resolution latest Success Story: Trust Fund Recovery and Penalty Averted. The owner of BM Corporation contacted our office shortly after receiving a subpoena from the IRS requesting all of their banking records. Unsure of how to respond to the notice and fearful of the potential consequences it might hold, they contacted Professional Tax Resolution for help. Our staff responded immediately by filing a Power of Attorney and contacting the IRS Revenue Officer. Within a matter of three weeks, we had submitted all of the company’s back payroll tax returns and completed the necessary business financial statements. In addition, our tax resolution specialists had negotiated a tax settlement agreement for payoff of Trust Fund monies which included an initial payment together with a payment plan for the remainder the back tax balance owed. All of this work was done prior to the IRS reviewing the client’s bank statements!

As frequently happens, BM Corporation had responded to a cash flow shortage by using payroll tax funds to cover the operating expenses of the business. It was this situation that resulted in them falling behind on their payroll tax obligations. Although they had planned to catch up when their financial situation improved, this had not yet happened at the time they received the IRS subpoena requesting their banking records. Because payroll taxes include amounts that have been withheld from an employee’s paycheck and are being held in trust by the employer until payroll tax payments are due, the IRS purses collection of these taxes very aggressively. Had Professional Tax Resolution not intervened in the case of BM Corporation, the company would likely have been assessed very quickly and heavily.

The tax settlement situation described above illustrates how experienced tax professionals offer a distinct advantage in dealing with the IRS. They not only know the consequences of unpaid tax balances, but they know to resolve them in the quickest and most effective way possible. In the case of BM Corporation, speedy intervention on the part of the tax specialists at Professional Tax Resolution almost certainly avoided an assessment of the Trust Fund Recovery Penalty which is equal to 100% of the back payroll tax balance owed. Not only was the penalty averted and a payment plan put in place, but it was all accomplished prior the IRS even reviewing company bank statements!

Can the IRS Keep Your Refund?

Posted on April 14, 2015 by Kursti Nakagawa

Who Won’t Get a Tax Refund?

It is tax refund time and most taxpayers already have a plan for their tax refund. They will save it, invest it, spend it or maybe do a little of each. However, some taxpayers will file their tax return and never receive a refund. This is due to the fact that the IRS can keep a taxpayer’s refund to cover certain types of debt, some of which are discussed below.

A Back Tax Balance with the IRS: If a taxpayer has a back tax balance with the IRS (even if they are currently enrolled in a payment plan), the agency will keep either all or part of that individual’s tax refund and credit it toward payment of their back tax balance. Although the delinquent taxpayer’s refund is either reduced or eliminated altogether for that tax year, they can at least take comfort in the fact that the IRS is helping them pay their back tax bill. It is important to keep in mind that federal income taxes and state income taxes are connected. Therefore, if an individual has a past due tax bill with the state they live in (or have lived in), they can expect that the IRS will take some or all of their refund to cover any back tax amount owed to the state.

Delinquent Child Support: If an individual is behind on court ordered child support payments, that person’s state of residence is authorized to take any one of a variety of actions. The state can garnish their wages, seize their property or keep a portion or all of their tax refund. These actions are all designed to retrieve the money that is owed in back child support.

Outstanding Student Loan Payments: If an individual falls behind on student loan payments, the federal government can take some or all of their refund to repay a portion of their student loan. This action will normally occur only if a person’s student loan account is more than ninety (90) days past due. As with back tax balances with the IRS and overdue child support, any amount of a tax refund that is withheld will be applied to the existing student loan debt.

Overdue Obamacare Payments: This is obviously a new reason as to why tax refunds can be held by the government. The Affordable Care Act has associated with it two instances where the government can withhold a person’s tax refund. The first instance occurs when an individual has not purchased health insurance coverage for the current year. In this case, the government uses the taxpayer’s refund as payment for their required health insurance coverage. The second instance where a tax refund can be withheld occurs when a subsidy has been received to offset the cost of a health insurance policy. The subsidy is considered to be a tax credit and, just like any other tax credit, it is expected to be repaid. If a taxpayer has received such a tax credit and has not repaid it, the government has several options. They can put a lien on the taxpayer’s property, garnish their wages or keep some or all of their tax refund.