Government Employees Have Delinquent Tax Balances

Posted on June 2, 2014 by Kursti Nakagawa

Delinquent Taxes and Government Employees

Government Employees Have Delinquent Tax Balances – Various government workers have been in the news recently for their delinquent taxes. One article reported that over 1100 IRS employees who owed back taxes and had other tax related problems had, in fact, received bonuses. Another recent report divulged that, as of September 2013, various federal government employees and government retirees owed over three million dollars in unpaid taxes. In a nutshell, it appears that government employees are no different than the general population of taxpayers. Some do not pay their tax bills.

A recent audit of the IRS revealed that over 1000 IRS employees who were in violation of one or more of the tax guidelines set by the very agency they work had received bonus pay in spite of their noncompliance. The Treasury General for Tax Administration reported that the IRS employees who had received bonus compensation had various tax violations including back tax balances, the underreporting of income and late tax payments. While the IRS is not currently required to withhold bonuses for tax law noncompliance, it has said that it will work toward changing this policy based on the recommendations of the recent audit. In a recent statement, IRS officials said they “recognize the need for proper personnel policies” and will “strive to protect the integrity of the tax system.”

Another recent report discussed the delinquent taxes owed by government employees in general. According to his study, members of Congress have a higher percentage of delinquent taxpayers than the IRS. While the Treasury Department, which includes the IRS, has a 1.2% rate of noncompliance, the percentages are 3.24% for Senators and 4.87% for members of the House of Representatives. Results of this same study showed that the departments with the highest noncompliance rates were the Department of Veterans’ Affairs and the Department of Housing and Urban Development with rates of 4.38% and 5.29 % respectively. Off the large governmental agencies, the worst offenders were the Smithsonian Institution, the Government Printing Office and the Court Services and Offender Services Agency, all with tax noncompliance rates in excess of six percent. According to the IRS data released in this recent study, approximately 3.3% of federal government employees and federal government retirees owe back taxes.

If you have a delinquent tax bill, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our tax settlement services, call us at 877.889.6527 or visit our website at www.professionaltaxresolution.com. Our experienced CPAs and Enrolled Agents have a thorough understanding of tax law together with the experience to know which tax settlement option will be the best fit for your specific tax delinquency.

The Tax Debt Debate

Posted on May 22, 2014 by Kursti Nakagawa

The Tax Debt Debate

The Tax Debt Debate – One interesting provision of the Tax Extenders Bill that is currently stalled in the United States Senate is the privatization of tax debt collection activities. The Tax Extenders Bill, which is unlikely to be voted on again this month, contains a clause that suggests turning delinquent tax accounts over to private collection agencies. This idea, which has actually been tried before, is the subject of much debate. While proponents believe that private companies specializing in debt collection will be better equipped to collect outstanding tax liabilities, opponents believe that their tactics may be unfair, especially to those taxpayers who are unable to pay their tax debt.

The tax gap, which is the difference between the dollar amount of taxes owed to the IRS and the amount they actually collect, has always been there. In fact, the data shows that it has remained fairly constant over recent years when measured according to the taxpayer compliance rate. Two years ago, the IRS released data comparing the 2006 tax gap to that of 2001. Although the gross tax gap increased over the five year period, from $345 billion to $450 billion, most of that amount was due to an increase in total tax liabilities. The compliance rate remained fairly constant at about 83%. Amounts collected following enforced collection activities by the IRS increased that rate to approximately 86% for both years. The IRS report noted that the compliance rate was highest where there was third party reporting or withholding. As expected, the percentage was much lower in areas such as retail business income where there is little or no information reporting.

In spite of the fact that total dollar amount of the tax gap is significant, many believe that turning the collection of tax debt over to private collection agencies is not the answer. After analyzing tax debt collection activities by the IRS for 2013, National Taxpayer Advocate Nina Olsen released a statement saying that 79% of the delinquent taxes were owed by taxpayers with incomes below the poverty line. Ms. Olsen maintains that these tax debts are not collectible by any method. She further asserts that turning them over to private collections agencies might jeopardize taxpayer rights and still not achieve the intended result of increasing tax revenue. IRS Commissioner John Koskinen is also opposed to the privatized collection of tax debt but cites a different reason. He points out that the last time this method was tried, it did not accomplish its objective. While $98 billion in back taxes was collected by private agencies, it cost more than that amount to administer the collection program and pay the agencies for their efforts!

If you have an outstanding tax liability, contact out tax settlement professionals today to discuss your tax debt resolution options. For more information about our tax settlement services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 for a free consultation. We resolve tax problems all day, every day and have helped many satisfied clients successfully resolve their tax debt issues.

Tax Fraud Phone Scams on the Rise!

Posted on April 28, 2014 by Kursti Nakagawa

IRS Fraud – Phone Scams on the Rise!

Tax Fraud Phone Scams on the Rise! – Although the 2014 tax season is officially over, it appears that tax scams are actually on the rise. In fact, just days after April 15^th tax filing deadline, the IRS issued a warning alerting taxpayers of a phone scam that is the largest one of its kind on record. At the time the announcement was made, taxpayers had already lost over $1 million as the result of scammers impersonating members of the Internal Revenue Service Department over the phone. This recent tax phone scam is not pocketed in in a certain area, but rather has been reported in almost every state in the country!

It appears that these recent scammers have been so successful because they are able to use some very sophisticated techniques. They are often able to give the last four digits of the victim’s Social Security number and, in some cases, are able to make the IRS phone number appear on the taxpayer’s caller ID. In addition to demands for tax dollars, some of those targeted by this recent tax scam have been threatened with arrest, jail time, suspension of a driver’s license and, in the case of immigrants, with deportation. A number of victims who hung up on the original caller have received follow-up calls that look like they are coming from the local police department.

The Treasury Inspector General for Tax Administration (TIGTA) has reported receiving over 20,000 complaints about this recent phone tax scam. In response, they have warned taxpayers that the IRS always makes initial contact about a tax matter through some form of official written communication, not over the phone. IRS Commissioner John Koskinen issued a recent statement saying, “If you’ve never heard from us before and you get a phone call, you’re probably not hearing form us.” Those who get a call from someone claiming to be an IRS agent, are asked to report the incident to TIGTA at 800-366-4484.

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

Taxes Are Due – Better Late Than Never!

Posted on April 14, 2014 by Kursti Nakagawa

Tax Time – Better Late Than Never!

Taxes Are Due – Better Late Than Never: The old saying “Better late Than Never!” applies to the filing tax of returns just as it does to most other aspects of life. With the April 15^th tax deadline on the horizon, many taxpayers are rushing to file either a completed tax return or a request for an automatic six-month extension. Failure to do so will subject the delinquent taxpayer to late filing penalties that will begin to accumulate along with interest that will be charged on any overdue tax balances. Although late filing penalties can be abated in certain specific instances when there is a valid reason for filing late, the reasons for the delay must be well documented. Even when these conditions are met, the IRS does not grant this form of tax relief automatically.

According to IRS tax filing statistics, approximately 75% of those taxpayers who were expected to file a 2013 tax return had already filed a week before the filing deadline. Looking at these figures in another way, about one out of every five tax filers waits until the week leading up to April 15^th to submit their return. Most tax returns (about 90%) are filed electronically. Of approximately 135 million people who will file a 2013 tax return, almost 80 million will receive a refund, The average refund is expected to be approximately $2800. These statistics mean that the IRS will be refunding over $200 billion for Tax Year 2013, about $66 million of this amount through direct deposit.

Regardless of your current or projected filing status, the CPAs and Enrolled Agents at Professional Tax Resolution would like to wish you well on Tax Day 2014. Should you be one of those taxpayers who fail to meet tomorrow’s tax deadline, we are here to help you review your tax filing and tax settlement options and communicate with the IRS on your behalf. Happy filing!

Avoiding an IRS Tax Audit

Posted on March 26, 2014 by Kursti Nakagawa

Avoiding an IRS Tax Audit

Avoiding an IRS Tax Audit: It is important to realize that receipt of an IRS Notice announcing that a tax return has been selected for an audit does not necessarily mean that there is an error on the return or that the IRS suspects the taxpayer or business submitting the return has done something dishonest. An IRS Audit is simply the process used by the IRS to verify the accuracy of a tax return by confirming specific items reported on the return. The audit process is always announced by an official IRS Notice which includes a list of the specific items of documentation being requested and a statement of the deadline by which these items must be provided.

Although the IRS selects tax returns for audit in a variety of ways, including random sampling, there are certain factors that increase the likelihood of a return being selected for further scrutiny. Several of these red flags are outlined below.

Inaccuracies and Omissions

The IRS computer systems are very sophisticated and will pick up any number such as a social security number or a birth date that has been inaccurately recorded. In addition, the Agency receives copies of all 1099’s and W-2’s and will be alerted if the amounts reported on any of these forms are missing or listed incorrectly.

High Income

Although earning a higher income is otherwise desirable, taxpayers with annual incomes in excess of $250,000 are more likely to have their tax returns audited than those with lower incomes.

Sizeable Charitable Deductions

If a taxpayer claims a large charitable contribution or claims charitable deductions that represent a relatively large portion of their annual income, their tax return is more likely to be audited. Since the IRS computers are programmed with the standard charitable contribution for each income level, returns that show deductions in excess of this amount are more likely to be flagged for an audit.

Deductions for a Home Business

Returns that claim home office deductions have a higher than random probability of being selected for an audit. While home office deductions can be great write-offs, it is important to have the proper documentation and to only claim space that is used regularly and exclusively for business.

Foreign Bank Accounts

Because the IRS has recently stepped up its scrutiny of money held in offshore accounts, returns showing foreign assets are more likely than others to be selected for an audit. Taxpayers or businesses holding foreign assets should be especially careful to follow all established reporting procedures set by the IRS.

It is the legal responsibility any individual or business whose return is selected for an audit to substantiate the specific income and deduction items specified in the official IRS Notice announcing the audit. All required documentation must be provided within the specified time period. If additional taxes and interest are assessed by the IRS as the result of the audit, these amounts are usually matched by the State Tax Agency. Although the combined interest and penalty assessments resulting from an audit can be significant, it is important to realize that many properly conducted audits result in no additional tax assessments. If an individual or business disagrees with the results of an audit, they have the right to file an appeal though the IRS Appeals Division provided the appeal is submitted within 30 days of the issuance of the auditor’s report.

If your tax return has been selected for an audit, our experienced professionals can assist you in collecting the necessary documentation and preparing your response. The licensed CPAs, Tax Attorneys and Enrolled Agents at Professional Tax Resolution have extensive experience in the area of audit defense and are authorized to communicate directly with the IRS on your behalf. They have successfully represented many clients in IRS Audits that have resulted in either a refund or acceptance of the original tax return. For more information about our services, call us today at 877.889.6527 or visit us at www.professionaltaxresolution.com.