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.

Audit Reconsideration Eliminates $100,000 Tax Balance

Posted on December 2, 2015 by Kursti Nakagawa

Audit Reconsideration Eliminates $100,000 Tax Balance

When Ms. H contacted our office, she was panicked over how to pay a back tax balance of $101,000. She had recently received an official IRS Letter informing her of a balance due and threatening enforcement action since she had not responded to previous notices. This was followed almost immediately by a Notice of Intent to Audit. It turns out that Ms. H had sold her personal residence in a previous tax year and had forgotten to report the sale of the home on her tax return. Although the IRS had sent various letters informing her of the discrepancy and assessing a tax balance due, she had not received them due to the fact that she had been moving around.

Our office quickly began working on the client’s back tax issues. We filed Powers of Attorney with the IRS and the California Franchise Tax Board and followed up by contacting both tax agencies to ensure that the client’s accounts would not be subjected to any collection activity while our tax professionals the prepared an audit reconsideration packet. Within a few days, we had submitted a complete audit reconsideration request to the IRS and had stopped the CA FTB from assessing Ms. H’s accounts. The final ruling from the IRS was very favorable. Not only did our client not owe a back tax balance, but she received a refund of $8,000 from funds the IRS had withheld from previous tax years!

The tax settlement case of Ms. H illustrates several important points. First and foremost, it shows that a reputable tax settlement firm offers a huge advantage to clients who are trying to resolve on outstanding tax balance. Not only do these professionals know exactly what problems to look for when analyzing a client’s finances, but they have the experience necessary to successfully resolve those problems with the IRS and State Tax Agencies. In addition, this case shows that receiving a Notice of Intent to Audit does not necessarily mean that the recipient will owe a large tax amount. In addition to plain old random sampling, a tax return may be selected for audit for a variety of reasons including a filing error or missing tax information. Such was the case with Ms. H whose return was targeted for closer scrutiny due to her failure to report the proceeds from the sale of a home. Once the error is corrected and an accurate tax situation is presented for examination, the audit may actually result in a reduced tax balance or even a refund as happened in the situation described above.

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.