Tax Debt of $200k Settled for $1000!

Posted on July 22, 2015 by Kursti Nakagawa

Tax Debt of $200k Settled for $1000! Mr. W is a self-employed individual and the main provider for his family. As a member of the construction industry, his income fluctuates with the housing market which was in a downturn for an extended period of time. As a result, he had difficulty generating enough income to meet his minimum monthly expenses and was hit with one late payment notice after another. With all of his attention focused on keeping his family afloat, Mr. W did not file his tax returns for a number of years, thus acquiring a tax debt of over 200K. With a new edition to his family on the way and the IRS breathing down his neck, he was at loss as to what to do.

Faced with what he perceived as a desperate situation, Mr. W reached out to Professional Tax Resolution for help. During his initial phone consultation, our tax professionals were able to gather enough financial information to relieve some of his anxiety by explaining the available tax resolution options. Pleased with what he learned from this conversation, Mr. W scheduled a face to face appointment with a member of our tax resolution team. At this time, we were able to give him a full breakdown on how to resolve his back tax issues.

The IRS was taxing Mr. W based on his self-employment income without taking into account his business expenses. This naturally resulted in an extremely exaggerated tax liability. Although his business was putting out some very high income numbers, his personal net income was low due to high business expenses. This low income was the primary reason for his tight financial situation and the resulting debt accumulation.

Our tax professionals began the process of resolving Mr. W’s tax debt situation by filing all unfiled tax returns. Although this produced a much more accurate picture of his outstanding tax liability, it showed that he still owed the IRS more than 90K. Since this was an amount that far surpassed his ability to pay given his current income stream, we recommended that he follow up with an IRS Offer in Compromise.

Professional Tax Resolution gathered all of the information necessary to document his specific financial situation and to explain why he would be unable to pay the full amount of his back tax balance. After multiple communications and submitted documents, the IRS agreed to a negotiated Offer in Compromise amount of a mere $1,000!

Mr. W’s case was a financial worst case scenario. He had numerous unfiled tax returns as well late payments on previously filed returns. In addition, he lacked the money to pay the required amount once an accurate back tax balance had been obtained. Luckily, Professional Tax Resolution represented him throughout the entire ordeal. Not only did we reduce the amount he owed the IRS to less than 1% of the original back tax balance but we saved him time, allowing him to devote more energy to the business that would continue to earn him even more money! While not every case goes as smoothly as Mr. W’s, our professionals pledge to always go the extra mile for our clients and follow each case though until we achieve the best possible resolution.

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.

Tax Fraud Brings Serious Consequences

Posted on July 15, 2015 by Kursti Nakagawa

Tax Fraud

Tax Fraud Brings Serious Consequences

It turns out that tax fraud brings serious consequences as evidenced by the sentencing, earlier this year, of Rashia Wilson to 21 years in prison for multiple counts of aggravated identity theft and wire fraud. Ms. Wilson, otherwise known as the “Tax Fraud Queen,” was originally convicted and sentenced in 2013 when she plead guilty to stealing over $3 million dollars in a tax refund scam. Her original sentence, which was thrown out on appeal in 2014 due to errors in applying sentencing guidelines, was reinstated earlier this year.

From April of 2009 through September of 2012, Rashia Wilson and several accomplices were successful in carrying out a scheme that defrauded the federal government of approximately $3.1 million in tax revenue. They did this by obtaining personal information from medical billing records and financial statements and using this to generate fraudulent tax returns without the knowledge or permission of the taxpayers whose information was being used. Once the returns were filed, they collected the tax refunds in the form of U.S. Treasury checks and prepaid debit cards. This scheme continued successfully for over three years and four tax seasons until investigators finally cracked the case in the fall of 2012. Throughout most of this time, Wilson bragged about her tax crimes on various social media sites and taunted the IRS, saying that they would not be able to indict her. In her own words, she proclaimed, “I’m Rashia,the queen of IRS tax fraud … So if you think indicting me will be easy, it won’t.”

The filing of false tax returns as Ms. Wilson and her accomplices did is treated very harshly by the legal system. While failing to file a return is considered a misdemeanor, the filing of a fraudulent return is a felony and is typically given a much more severe consequence. Although the national average sentence for identity theft is 43 months, the sentencing judge handed down a much longer sentence in the case of Rashia Wilson. U.S. As U.S. District Judge James Moody Jr. said at her sentencing hearing, “She knew she was doing wrong (and) … reveled in the fact that is was wrong.” He cited a formula that takes into account the seriousness of the offenses as well as the defendant’s prior criminal convictions as the reason for her harsh sentence.

In response to the case of Rashia Wilson and others like it, the IRS has stepped up its efforts to combat identity theft as well as other types of tax fraud. As recently as this week the Financial Crimes Enforcement Network issued a Geographic Targeting Order requiring check cashing companies in two Florida counties to verify the identification of any person cashing a federal income tax refund check. These types of restrictions are aimed at identifying and stopping tax fraud schemes such as the one described above.

IRS Announces Online Security Breach

Posted on June 1, 2015 by Kursti Nakagawa

New IRS Security Breach

IRS Announces Online Security Breach

On Tuesday, May 26, 2015, the IRS announced the detection of a huge security breach affecting over 100,000 United States taxpayers. This appears to be a significant online breach that occurred during the course of the 2015 tax season. According to the IRS, thieves used an online IRS agency service to obtain the previous year’s tax return information for about 100,000 individuals and families.

These identity thieves have been very persistent and sophisticated. From February to May, they have been using stolen social security numbers and other relevant personal information to access tax agency systems in order to file tax returns and get refunds. IRS Commissioner John Koskinen issued a statement saying that approximately 200,000 tax transcripts were downloaded with approximately 104,000 of those successfully accessed. Apparently the attempts by the thieves to gain access to the remainder of the downloaded returns were unsuccessful. However, the IRS plans to inform all 200,000 taxpayers whose returns were in any way involved in the breach.

This is not a typical hack or data breach involving one account number or piece of personal information. Instead, these thieves are sitting on piles of personal information that they can use at any time. In order to access the desired accounts, they had to clear a multi-phase questionnaire which involved providing such information as the taxpayer’s social security number, birthdate, address and tax filing status. Even more puzzling is the fact that the thieves had to answer personal questions about such things as the maiden name of the taxpayer’s mother, their high school mascot and where they attended college. The IRS believes that the thieves obtained some of this information by looking at public social media sites.

The thieves were hoping that their criminal efforts would go undetected by the IRS and that they would gain access to full tax returns that would give them vital personal information to use in the future. However, their attempts to stay under the radar have failed. The IRS has identified, not only those 104,000 tax returns that were actually accessed, but also the 100,000 returns where access was attempted but unsuccessful. They have responded by providing free credit monitoring services to all of the taxpayers that were in any way affected by the breach. According to IRS officials, the budget cuts that they have recently experienced have made it increasingly difficult to fight the fraud issues that have been occurring at a rapid rate over the last several years.

Smart Ideas for Spending an IRS Tax Refund

Posted on May 13, 2015 by Kursti Nakagawa

Smart Ideas for Spending an IRS Tax Refund

Tax Refund Time?

After paying the government all year long, many taxpayers will see some money coming their way now that it is tax refund time. Even better is the fact that tax refunds have been on the rise over the past several years. The average tax refund check has risen from $2,371 in 2009 to $2,893 in 2015. However, before these funds are used to pay for an expensive vacation or a finance a wild spending spree, it might be wise consider some of the following smart ideas for putting your IRS tax refund dollars to work:

Invest in your home. Has your leaky roof been worrying you? Has your garage door not been working as well as it used to? First things first! Since your home is often the largest investment you have, it might be wise to use tax refund money to take care of home repairs and even some upgrades. Your tax refund is a nice chunk of money that is not part of your ordinary household budget and may very well be enough to take care of most minor home maintenance issues. You may be even able to get that fresh coat of paint on the outside of your house that you have been wanting to get for years! Being proactive about taking care of your home will usually save you money in the long run and is nearly always a good investment decision.
Get a home energy audit. Investing in a home energy audit is actually an excellent way to use tax refund Such an audit consists of hiring a professional to come into your home to assess energy consumption and suggest ways of making the home more energy efficient. After the inspection, the professional will issue a report suggesting such energy saving measures as sealing holes and adding insulation that can potentially result in significant savings on utility bills for years to come. Although a home energy audit can cost anywhere from $50 to a few hundred dollars, it is an investment that will more than repay itself over time. Go to https://energy.gov/public-services/homes/home-weatherization/home-energy-audits for more information on this money saving measure.
Contribute to your retirement account. Most individuals have access to some type of employee sponsored retirement plan such as a 401(k), a 403(b) or a 457. Even if you are already contributing to such a plan, your scheduled monthly contributions may not equal the maximum yearly contribution which is $18,000 ($24,000 for individuals over 50). If this is the case, you can use your tax refund to make a one-time contribution. This is an especially wise spending choice if your yearly contributions are under an amount matched by your employer. Similarly, if you are not working for a company that offers one of these retirement plans, you can use your tax refund dollars to contribute to a traditional IRA. Both of these investment choices defer taxes on the money in the year in which it is received and are a great way to boost savings since they allow the money to grow over time.
Invest in your career or education. If you want to get ahead in your career, your tax refund is a great way to invest in yourself. Take those extra college courses you have always wanted to take or enroll in a continuing education program. Although these educational opportunities may cost as little as a few hundred dollars, they can enhance your career skills and increase your earning potential. Weekend conferences may be another worthwhile career investment. There are actually numerous ways that tax refund dollars can be put to good use to advance a prudent taxpayer in their chosen field. Sometimes a little money up front goes a long way toward increasing future earnings!
Take care of everyday items. Do you need new tires? Is there some dental work you have been putting off? It may be a good use of tax refund dollars to take care of these types of chores, before they catch you off guard. Then maybe, if there is anything left after you have made an investment in your future, you can spend a little of your tax refund frivolously!

Common Misconceptions about the IRS

Posted on May 5, 2015 by Kursti Nakagawa

A Few Common Misconceptions about the IRS

Audits are not as common as they may seem. Although many taxpayers worry that their tax return might be selected for an IRS audit, the fact is that less than two percent of personal tax returns are audited by the IRS each year. On top of this, even if a return is selected for further examination, the IRS usually just contacts the taxpayer by mail and asks them to provide documentation to support certain specific items. Following this communication (aptly labeled a correspondence audit), there are three possible outcomes, none of which are accompanied by a serious consequence. An additional tax amount will be assessed, the return will be accepted as originally submitted or, in some cases, a tax refund may even be issued.

Making an honest mistake on a tax return usually has no serious consequences. When

Common Misconceptions about the IRS

the IRS detects a mistake on a tax return, their normal procedure is to contact the taxpayer through some form of written communication and request that the error be corrected. Although the taxpayer will be expected to pay any additional tax amount owed, there is usually no penalty for making an honest mistake on a tax return. Taking legitimate tax deductions does not flag a return for audit. The tax code provides taxpayers with certain tax credits and tax deductions with the expectation that they will make use of them. In fact, provided that they have the necessary documentation, taxpayers should claim all tax credits and tax deductions to which they are entitled because, to not do so, almost certainly means that they will be paying a higher tax bill than they would otherwise need to pay. Unless that sum total of the tax breaks claimed on a return is excessive compared to the reported income, it is unlikely that they will cause the return to be flagged for an IRS audit.

It is better to file a tax return even when resources are not available to pay the taxes owed. Although the IRS assesses a penalty for failing to pay an outstanding tax liability, they assess an additional penalty for failing to file a tax return by the filing deadline. Because of this late filing penalty, it is always advisable for a taxpayer to either submit a completed tax return by the due date or apply for an automatic six-month extension even when funds are not available to pay tax amounts owed. By doing so, the taxpayer avoids the late filing penalty which is calculated as 5% of the back tax balance for each month or partial month that the return is late up to a maximum penalty of 25 %. Once the return has been filed, there are numerous options available for resolving any back tax balance. These include setting up a payment plan or negotiating one of the various other tax settlement options offered by the IRS.