Back Tax Balance Reduced by 80%

Posted on August 12, 2015 by Kursti Nakagawa

Mr. C was referred to Professional Tax Resolution by a friend who had previously used our services. Having failed to respond to a Notice of Intent to Audit for tax year 2005, he had recently received an IRS Notice informing him that he owed over 150k in back taxes. On top of this, the IRS had initiated enforced collection activities to collect the tax amounts owed. In desperate need of professional tax settlement help, he contacted our firm.

At one time, Mr. C had a flourishing real estate company with offices in three states and a high gross profit. However,once the economy stopped booming, so did Mr. C’s businesses. By the time he contacted our firm, he was barely meeting his monthly expenses, let alone having sufficient funds to pay a large tax debt. After reviewing his financial information, our tax professionals decided that Mr. C would qualify for an Offer in Compromise in spite of the fact there were some special circumstances that we knew would make his case a hard sell with the IRS. Undeterred, our team set to work preparing his most recent corporate and personal tax returns and submitting his Offer in Compromise packet.

As we expected, the IRS questioned many actions of the taxpayer and facts of the case. They stated that Mr. C did not qualify for an Offer in Compromise because he had dissipated 401k assets that would have paid the tax liability in full after he had incurred the tax debt. In addition, they noted that he owned two corporations that could be sold to pay off the full amount of the outstanding tax liability. In response to their first concern, our professionals were able to show that all of the monies withdrawn from the 410k had been put into an income producing asset which was necessary for Mr. (Zoloft) C’s survival. They then went on to address the second concern by producing two business valuations which showed that the value of the business was only equal to the value of the business assets which was not enough to pay off the tax debt. In fact, by not backing down and doing the necessary legwork, our professionals were able to show that final value of all of Mr. C’s assets was approximately 27k, the exact amount of his compromise offer!

After the IRS had verbally agreed to accept the 27k offer, the tax resolution specialist stated that he wanted a collateral agreement based on future annual income over 50k. This would mean that if Mr. C made over 50k in one year, the income in excess of that amount would be taxed at a higher rate to pay off the old tax liability. Our professionals advised Mr. C that signing this agreement would not be in his best interest and quickly submitted a response to the IRS stating that 50k was not a reasonable amount. We were able to show that the client’s cost of living was over 50k and that the IRS had figured the amount incorrectly according to the Internal Revenue Service Manual. After a careful review of our response, the IRS adjusted the collateral agreement to begin at 95K, making it very unlikely that Mr. C would ever be required to pay more than the negotiated Offer in Compromise amount.

Although some tax settlement cases are cut and dried, most have extenuating circumstances that make them more difficult to resolve as was the case with M. C. This makes it important for a delinquent taxpayer to choose a tax resolution team that has a proven track record of negotiating successfully with the IRS. Professional Tax Resolution has such a record. Our staff prides themselves in keeping the client’s best interest in mind and achieving the best tax settlement possible for their specific set of circumstances.

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.

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.

The Tax Extension Option

Posted on April 12, 2015 by Kursti Nakagawa

The Tax Extension Option

Tax Extension is a Very Good Option!

You are not alone if you do not file your tax return on or before April 15th. Although this is the official deadline for the filing of personal tax returns, each year more and more people apply for an automatic six-month tax extension. The number of taxpayers requesting an extension increased from 11 million in 2011 to over 13 million in 2013, an increase of almost 20% over the two-year period! Another interesting fact is that, in tax year 2014, 25% of those individuals who had requested and extension were still working on their tax returns in September, just one month before the October 15^th extension deadline.

Although procrastination is one reason for requesting a tax extension, there are other factors that contribute to tax returns not getting filed by the April 15^th filing deadline. Several of those are highlighted below:

Lacking Necessary Tax Information
Although the deadline for the mailing of brokerage statements is February 15^th, the information these statements contain may not be correct. These initial statements often say that changes may be coming. The mailing of corrected 1099s can actually occur right up until April 15^th which does not give the taxpayer enough time to complete the tax return before the filing deadline.

Missing Required Tax Forms
If a taxpayer holds investments that are structured as partnerships, they must wait for the K-1 Forms that are based on partnership income. These partnerships must first finish their own tax returns which can be extended until September 15^th before these forms are generated. This means that partnership K-1 Forms could be in the hands of taxpayers as late as the month preceding the extension deadline.

Increased Complexity of Tax Code
The increased complexity of the tax code has made tax returns more and more difficult to complete which, in turn, has made it harder to get them submitted by the April 15^th tax filing deadline. In addition to the introduction of such changes as the net investment income tax, two different dividend tax rates and the alternative minimum tax, taxpayers must now report all overseas holdings. All of these changes require increased tax preparation time for certain categories of taxpayers which, in turn, has resulted in an increase in the number of requests for tax extensions.

Although filing a request for a tax extension does not relieve a taxpayer of the obligation to pay any taxes owed, it is definitely a better option than filing an incorrect or incomplete return. As long as the request for a tax extension is either e-filed or postmarked before the end of the day on April 15^th, it will allow the requesting taxpayer to avoid the late filing penalty which usually amounts to 5% of any unpaid tax balance for any month or partial month that the return is late. In addition, it will give the requesting individual six full months to submit a complete and correct tax return.

Do Not Ignore Mail from the IRS….

Posted on June 17, 2014 by Kursti Nakagawa

Ignoring Communication from the IRS Brings Serious Consequences

Why You Should Not Ignore Mail from the IRS – Although the issuance of an IRS Notice of Deficiency is usually the first step in the collection of an outstanding tax liability, ignoring it can have serious consequences. The Notice of Deficiency is an official communication from the IRS informing a taxpayer that the tax amount due shown on their tax return is less than the amount owed according to the calculations of the IRS. Because the IRS is allowed to collect a tax debt without proof that the debt exists, a taxpayer who receives an IRS Notice of Deficiency must either pay the tax liability shown on the notice or file a petition with the United States Tax Court contesting the tax amount owed. The burden of proof rests with the taxpayer.

A Notice of Deficiency is a formal written communication from the IRS. It is sent by certified or registered mail to a taxpayer’s last address of record for the purpose of announcing a tax deficiency. It must include an explanation of the deficiency together with a statement of the total amount of taxes, interest and penalties that have been assessed. In addition, the Notice of Deficiency informs the receiving taxpayer of their appeal rights with the United States Tax Court and states the cutoff date for filing an appeal. Although a IRS Notice of Deficiency is most often sent when there is a discrepancy between IRS calculations and the tax amount due shown a on a tax return, it can also be sent when no tax return has been filed.

A taxpayer must respond to a Notice of Deficiency within 90 days from the date it was mailed or within 150 days if it was mailed to an address outside of the United States. The taxpayer must either pay the assessed tax liability or to file an appeal with the United States Tax Court. Once the appeal deadline has passed, the appeal process is closed and the IRS has the authority to collect the tax amount owed. At this point, the IRS is likely to issue a Notice of Intent to Levy. The Notice of Intent to Levy allows a response time of 30 days (which is not required if the IRS determines that collection of the tax debt is in jeopardy), after which a taxpayer’s property can be seized to cover their tax debt. A taxpayer’s only option once the 90 day appeal deadline has passed is to pay the tax balance owed and apply for a refund, although even this action may not stop the collection process once it is set in motion!

Because tax law is complex and receiving an official communication from the IRS can be intimidating and sometimes confusing, it may be advisable for a taxpayer to enlist the services if a qualified tax professional before responding to a Notice of Deficiency. A CPA or Enrolled Agent will be able to determine whether the tax amount shown on the Notice of Deficiency is accurate and will be able to communicate effectively with the IRS on the taxpayer’s behalf.

If you have received an IRS Notice of Deficiency, a Notice of Intent to Levy or have been officially warned of an impending tax lien or wage garnishment, we can help you stop the immediate collection activity and work toward resolving your tax debt. Visit www.professionaltaxresolution.com to learn more about full range of tax settlement services. Contact us today at (949) 596-4143 or email us at info@protaxres.com to receive a free, no obligation consultation and get the tax relief you deserve.

Help! What to Do if You Receive a Notice of Deficiency.

Posted on December 13, 2012 by Kursti Nakagawa

Help! What To Do If You Receive A Notice of Deficiency

A Notice of Deficiency is a formal written claim by an agency that you owe income taxes with interest and penalty dues. The Notice of Deficiency also explains that an assessment is being calculated in regard to your income taxes owed. A Notice of Deficiency is also referred to as a “ninety day letter”; because once you receive the letter you have 90 days to take action.

Most people react in fear when receive such a notice in the mail. They feel overwhelmed and are not sure how to act appropriately. Keep in mind that not responding to a Notice of Deficiency is the worst possible course of action. If a tax agency does not receive a timely response after issuing an official Tax Notice, they will indeed take action to collect the outstanding debt. During this time, interest and penalties will continue to accrue on the unpaid balance. Moreover, failure to resolve an outstanding tax debt can result in a variety of collection efforts including tax levies, tax liens and wage garnishments.

If you receive a Notice of Deficiency your first step should be to consult with a tax professional on the matter immediately. A tax professional can work with you to resolve such tax debt issues by correcting incomplete or incorrect tax filings or by evaluating and negotiating various settlement or payment options. Settlement options may include Offers in Compromise, Installment Agreements, or Penalty and Interest Waivers.

In some cases, the IRS may declare a taxpayer “currently not collectible” after they have received documentation that the person has no ability to pay the tax debt. If this determination has been made, all collection activities including garnishments and levies must be stopped. In cases similar to this, the help of a qualified Certified Public Accountant is well worth the investment. If you have received a Notice of Deficiency it is important to seek help from a tax expert immediately. To receive a free Notice Consultation with a licensed tax expert simply call us at 877.889.6572.

For more information about our tax debt resolution services visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation.