Tax Debt May Result in Loss of Passport

Posted on February 29, 2016 by Kursti Nakagawa

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.

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.

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.

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.

Expatriates Renouncing Citizenship

Posted on October 10, 2013 by Kursti Nakagawa

In the face of increasingly strict asset disclosure legislation, more and more United States citizens are renouncing their citizenship in order to avoid potential tax consequences. In the second quarter of this year, the number of expatriates turning in their passports to United States embassies abroad was up almost 500% from that same time period the previous year. Compared to the first half of 2008, the number of renunciations in the first half of 2013 was up over 15 times!

The United States is the only county of the 34 members of the Organization for Economic Development that taxes its citizens no matter where they reside. Although this has been the case for quite some time, the government’s fairly recent crackdown on the reporting of foreign assets and income has made more and more Americans aware of their tax reporting responsibilities. As a result, an increasing number of the 6 million plus individuals residing aboard are apparently deciding that holding their United States citizenship is not worth the financial consequences that come with it.

The campaign to identify and tax the foreign income of United States citizens has slowly gathered force since the terrorist attacks in 2001. Foreign income reporting legislation has been on the books since 1970 when the Bank Secrecy Act of 1970 was passed, requiring the filing if an annual Report of Foreign Bank and Financial Accounts (FBAR). However, the reporting rate has historically been very low and, until recently, little was done to force compliance. All this is has change over the past few years. The government has not only stepped up its efforts to enforce the existing tax laws but has passed new legislation to supplement what was already there.

The most significant development in the area of foreign tax compliance has been the passage of the Foreign Account Tax Compliance Act (FATCA) in March of 2010. This legislation increases the disclosure requirements for United States citizens who have money in overseas accounts and for the banks that hold those accounts. Basically, FATCA requires individuals who have more than $50,000 in foreign assets to report those asserts on Form 8038. It also requires foreign banks to disclose information about their U.S. account holders or face stiff penalties for not doing so. Although the enforcement of FATCA has been postponed until July of 2014, apparently the hassle of increased compliance requirements together with the threat of steeper consequences for noncompliance has caused more and more individuals to think twice about the value of their United States citizenship.

If you have questions about the taxation and reporting of foreign assets or income, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Our tax specialists have extensive experience in the area of FBAR reporting and are up to date on the current requirements for FATCA compliance. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 to receive a free, no obligation consultation.

Penalty Abatements and Penalty Waivers. What are they and how to qualify.

Posted on September 6, 2011 by Kursti Nakagawa

Penalty Adjustments and Penalty Waivers

The assessment of penalties and interest are methods designed by the IRS and State Tax Agencies to encourage the timely filing and payment of taxes. These charges are imposed when a taxpayer fails to meet a filing deadline or fails to pay a tax amount when it is due. The assessment of a tax penalty is announced through an IRS Letter, an IRS Notice or a similar written notification from a State Tax Agency. The notice must include the name of the penalty, the reason the penalty is being assessed and an explanation of how the penalty amount has been calculated. The IRS Notice and the IRS Letter as well as notices issued by State Tax Agencies are computer generated so often errors occur. It is therefore important to verify that the reported penalty amount is correct before making payment or proceeding with any type of tax settlement procedure.

Since the accumulation of penalties and interest can represent a significant portion of an outstanding tax liability, obtaining a penalty waiver is often one of the most productive and efficient tax settlement options available. That being said, penalty waivers can be difficult to obtain. As with other tax settlement options, they are only granted under certain very specific conditions and they require strict documentation that those conditions have been met.

Normally, a penalty waver will be granted only under a condition that is called Reasonable Cause Relief. In order meet the requirements of Reasonable Cause Relief, the taxpayer must show (1) that tax filing deadlines were not met or tax payments were not made as the result of some circumstance that was beyond their control and (2) that they took reasonable steps to counter the effects of the uncontrollable event and were still not able to file or pay their taxes.

The short list of events that may satisfy the requirements of Reasonable Cause Relief includes (1) a serious illness or death, (2) a fire, casualty or other natural disaster, (3) the inability to obtain tax records, (4) incorrect advice from a tax professional or (5) incorrect advice directly from the IRS.

In order to obtain a penalty waiver from either the IRS or a State Tax Agency, the taxpayer or their tax settlement representative must first submit a written request for the abatement. Following this, the taxpayer must meet the burden of proof that they acted in a responsible and prudent manner and still were unable to meet their tax obligations. The required burden of proof falls under the following three main headings:

The Uncontrollable Circumstances

– What events happened?

– When did the events occur?

– Were the events such that they could not be controlled or anticipated?

– How did the events prevent the taxpayer from filing or paying the taxes?

The Correlation Between the Uncontrollable Circumstances and the Late Filing or Payment

– Did the taxpayer take steps to mitigate the effects of the uncontrollable circumstances?

– How were other financial affairs handled during the time period in question?

– Did the taxpayer pay creditors other than the IRS or State Tax Agency during the time period in question?

– Is there a direct correlation between the uncontrollable circumstances and the late filing or payment of the taxes?

– Did the taxpayer have a previous record of either late filings or late payments?

The Supporting Documentation

– Is the provided documentation sufficient to show that the conditions for Reasonable Cause Relief have been met?

– Was the documentation provided by an objective third party?

Since penalties are assessed for the purpose of enforcing compliance and creating fairness within the tax system, they are normally waived only when Reasonable Cause Relief can be documented according to the criteria described above. The procedure for obtaining an abatement of tax penalties is specific and complex and may require the assistance of a qualified tax settlement professional.

If you have been assessed penalties due to an existing tax debt, we can help you determine whether the assessed penalties are accurate and whether you meet the qualifications for a penalty waiver. Our experienced tax settlement professionals can also help you submit your penalty waiver request according to established IRS or State Tax Agency guidelines. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.