Research Before You Hire. Protect Yourself From Tax Settlement Scams

Posted on August 26, 2011 by Kursti Nakagawa

You may have read about some recent tax relief scams in the news. Although there is no doubt that a competent tax professional can be a huge asset in reducing a tax bill or resolving an outstanding tax debt, taxpayers should be aware that there are tax settlement companies out there that actually compound existing tax debt issues. The bottom line is that, if advertised promises seem too good to be true, they probably are. While it is true that the IRS offers numerous tax settlement options for taxpayers who have outstanding tax liabilities, these options have specific qualifying criteria and are not granted automatically.

Several tax settlement scams have made the news recently. Among them is American Tax Relief of Beverly Hills, a tax settlement firm that was charged by the Federal Trade Commission with making false promises to consumers and cheating them out of more than $60 million. The company charged up-front fees of up to $25,000 and then didn’t deliver the advertised tax relief. Two other tax settlement companies that have been charged with similar infractions are TaxMasters and Roni Deutch, a California tax attorney. The Attorneys General in Texas and Minnesota charged that most of the calls made to Taxmasters’ toll-free number were answered by sales people who made unrealistic promises in order to trick customers into paying large up-front fees of anywhere from $1500 to $9000. Along those same lines, the Superior Court of California ordered Roni Deutch, who calls herself the Tax Lady on late night television commercials, to reimburse dissatisfied customers who were billed $1600 to $4000 for tax relief they never received.

Many unethical tax relief services have popped up in response to the growing need for tax debt resolution services created by the current economic downturn. In light of recent news headlines identifying tax settlement scams, it is clear that any taxpayer who is looking for help should do the necessary research before hiring a company or individual advertising tax resolution assistance. While the assistance of a qualified tax professional can be an invaluable asset in negotiating with the IRS to resolve a tax debt issue, it is important to do the necessary footwork before deciding who to hire.

Business Tax Debt from Back Payroll Taxes is Devastating to Staff and Owners.

Posted on August 23, 2011 by Kursti Nakagawa

In light of the current economic slowdown and the tightening of credit, it is more common than ever for employers find themselves burdened with unpaid payroll taxes. Business owners generally match the employment taxes withheld from their employees’ pay checks and remit those to the IRS along with the standard federal and state tax withholdings. When times are tough, it is not uncommon for an employer to delay in paying its payroll tax withholdings in the hope of being able to send them later when circumstances have improved. (thereader.com) A business owner may simply be waiting for a contractor or client to pay an invoice or for the bank to approve a short term loan. If one of these improvements doesn’t materialize, the business can unintentionally be left unable to pay the back payroll taxes and can suddenly face a very sizable and unexpected tax debt.

No matter what the cause, delinquent payroll tax returns and unpaid payroll taxes can cause a host of problems. Some portion of a company’s payroll taxes are amounts withheld from employees’ wages to pay their share of federal withholding taxes, Social Security and FICA. In other words, a portion of the total amount owed is actually the employee’s money that the employer is holding in trust to remit to the IRS or State Tax Agency on the employee’s behalf. If a company fails to file a payroll tax return or pay its payroll taxes, the employee’s IRS and State accounts will not be credited at tax filing time.

Because payroll taxes include amounts withheld from an employee’s wages and held in trust by the employer, the IRS pursues collection of a payroll tax debt much more aggressively than it does other tax delinquencies. To encourage compliance with the timely payment of withheld income, employment and social security taxes, the IRS has created a unique and potentially devastating penalty called the Trust Fund Recovery Penalty. This penalty can be assessed against any person responsible for remitting payroll tax payments and can be assessed whether or not the business continues to operate. Since the IRS defines a responsible person as any person or group of people who have the power to direct, collect, account for or pay trust fund taxes, that person may fit any one of the following descriptions:

A corporate director or shareholder
An employee or officer of the business or corporation
A partnership member or employee
A board member of a non-profit organization
Any other person with control or authority over the payment of the taxes

In addition to the steep Trust Fund Recovery Penalties, the collection process for payroll tax debt is accelerated and settlement agreements are much more difficult to obtain.

Due to the combined effect of the factors discussed in the previous paragraph, a payroll tax debt can potentially result in the downfall of an otherwise successful business. In light of this risk, our firm always advises financially troubled business owners to make every effort to comply with all payroll tax filing deadlines and to pay the related taxes in a timely fashion. If a payroll tax debt already exists, we encourage prompt action as the best way to get control of the situation and obtain tax relief. Tax debts arising from unpaid payroll taxes can be very significant since they include the assessment of a substantial Trust Fund Recovery Penalty in addition to the standard failure to file penalties, late payment penalties and interest assessed on the unpaid balance. Obviously the larger the tax debt, the more difficult it can be for a smaller company to recover and find tax relief.

If you are a business with a payroll tax debt, we can help you evaluate the available tax settlement options and resolve your payroll tax debt problem. Because we know the collection laws and have experience negotiating with the IRS, we are in a better position than an individual taxpayer to stop enforced collection activity and to arrive at a reasonable tax settlement with the IRS. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. With over 16 years of experience, we will negotiate with the IRS on your behalf. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

He Owed the IRS $80,000 in Back Taxes. We Reduced His Tax Debt to Zero!

Posted on July 20, 2011 by Kursti Nakagawa

Steve H. came to Professional Tax Resolution after receiving notice of a wage garnishment from his largest customer. Steve, a technology consultant, had failed to file tax returns for six years and, according to IRS calculations, owed over $80,000 in back taxes, penalties and interest. Tax settlement plans for taxpayers with numerous un-filed tax returns always begin with gathering the records necessary to prepare the un-filed tax returns. In this case, the taxpayer was able to gather some information from banking records and some from customers for which he had provided services. Fortunately for this taxpayer, his wife had worked for several years and had had federal and state taxes deducted from her paycheck. We were able to obtain and verify additional tax information by obtaining IRS wage and income transcripts.

After gathering all possible relevant information, we were able to prepare all of the outstanding tax returns. While balances were due in some years, refunds were owed in others. We were able to request that the IRS apply refunds owed to years where balances were due such that the net result was an outstanding tax liability of zero. It is never advisable to wait for a wage garnishment, tax lien or tax levy to resolve an outstanding tax issue. However, even when a tax issue seems practically unsolvable, there are tax resolution options available. Professional Tax Resolution always looks at all available tax settlement options and provides a tax debt resolution plan for even the most complicated cases.

Amazing Tax Settlement – $1,600,000 Tax Debt Reduced to Zero!

Posted on July 14, 2011 by Kursti Nakagawa

Karen M. was recently divorced and owed the IRS over $1,600,000 for a joint IRS liability she had incurred with her ex-husband. The debt had accumulated over many years and, as is usually the case, included a significant dollar amount of assessed penalties and interest. The taxpayer was newly single, lived on a modest income and had no possibility of settling the debt owed to the IRS. After looking at the taxpayer’s situation and all of the available tax settlement alternatives, we determined that filing for Innocent Spouse Relief gave the taxpayer the most realistic chance of one day being free of the tax debt.

Innocent Spouse Relief provides a taxpayer relief from tax debt if their spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits. While the benefits from obtaining this tax settlement option can be significant, it is usually difficult to obtain. Generally, a taxpayer requesting Innocent Spouse Relief must claim and document that he or she had no knowledge of the unreported income and did not receive the benefits of that income.

In the case of Karen M., we were able to provide documentation demonstrating that our client had no knowledge of the unreported income and had limited involvement in the financial matters of the family. We were also able to prove that she did not receive the benefits of the income that was never reported and that the non-innocent spouse had a history of hiding income from both her and the IRS.

Professional Tax Resolution and the taxpayer were thrilled when a letter was received from the IRS indicating that the Innocent Spouse filing was accepted and that the $1,600,000 tax debt was reduced to zero. This is another good example of why CPAs, Enrolled Agents, and Attorneys are often so passionate about what they do. In most cases there are tax settlement options available even in the most complicated situations.

IRS Debt – How did that happen? Now what do I do?

Posted on July 1, 2011 by Kursti Nakagawa

Incurring an IRS Debt

Most people who have IRS debt do not find themselves in that situation due to an unwillingness to pay their fair share of taxes. It is much more common that taxpayers find themselves owing the IRS either due to a mistake on a previously filed income tax return or some unavoidable circumstance such as a lost job, a decrease in earned income or an illness. While the initial IRS debt may have been the result of an unfortunate turn of events or a simple mistake or unreported item, it has often been compounded over time by the addition further taxes, penalties and interest. It is not uncommon for penalties and interest, which are often applied retroactively when the IRS or state tax agency makes an adjustment to a return from a prior year, to account for as much as 50% of an outstanding IRS debt balance.

Resolving an IRS Debt

The first and most important thing that a taxpayer should do to resolve an IRS debt is to stop avoiding the issue. Taxpayers often think they can simply ignore their IRS debt because collection efforts begin mildly with letters simply stating the outstanding balance. Generally, the IRS has 10 years from the date a tax return is filed to collect an IRS debt. While collection efforts begin with passive techniques such as sending an IRS letter or IRS notice, as the 10 year collection period progresses, the methods get more aggressive. Collection attempts eventually lead to the possibility of filing a lax levy on bank accounts, wage garnishments or the filing of a tax lien. Any of these actions can have a drastic effect on a taxpayer’s credit rating and financial wellbeing. When faced with an IRS debt, a taxpayer may be best served by contacting a tax settlement professional to help resolve the issue.

How a Tax Debt Settlement Firm Can Help

The most obvious way to avoid an escalating IRS debt is to not incur the debt in the first place. While this may seem obvious, it is easier said than done. Mistakes are made and life events occur that are sometimes unavoidable. However once an IRS debt is incurred, it may be a good investment to enlist the help of a qualified professional to resolve the issue. Without professional help, individuals often find themselves overwhelmed by the barrage of letters from the IRS and confusion over how to proceed.

Why Professional Tax Resolution is a Good Choice

There are many different types of tax settlement firms and some, unfortunately, make promises they can’t keep and resort to unethical practices. For this reason, it important to research a potential tax resolution firm in order to select one that is reputable and has had a history of success settling IRS debt issues. To insure that a firm meets these qualifications, it is a good idea to verify their current licensure with the state certification agency and the Better Business Bureau. It is also advisable to review references if any are available. At Professional Tax Resolution, we encourage you to check our licenses, memberships and reviews. Our licensed CPAs and Enrolled Agents represent our clients before the IRS and State agency from start to finish. We work with our clients to prepare all un-filed tax returns, confirm and correct balances as reported by the IRS and provide our clients with the best tax settlement option available.