Security Summit Focuses on Identity Theft

Posted on November 23, 2015 by Kursti Nakagawa

In March of this year, all of the major players in the tax industry came together to focus on the problems of identity theft and tax refund fraud. Their aim was to have safeguards in place before the beginning of the 2016 filing season. This convocation, identified as the Security Summit, includes the IRS, state tax authorities, and representatives from the tax software and financial services industries. Tax Commissioner John Koskinen, who has called the Security Summit an “unprecedented effort,” maintains that income tax fraud “is not a battle the IRS can fight alone.” He went on to say that identity theft has “become a serious threat to the nation’s tax system” and one that must be dealt with aggressively.

Tax fraud has become an increasingly serious problem as the percentage of e-filed returns has multiplied. Currently, almost every business and tax professional, as well as a significant number of individual taxpayers, files electronically. With this increase in convenience, comes a whole host of associated problems surrounding the issues of taxpayer identification, the sharing of information and internet security. It is exactly these topics that are the focus of the Security Summit. According to remarks made by Koskinen at an October 20th press conference, the Security Summit “now covers virtually the entire population of taxpayers who e-file their tax returns.”

The Security Summit has made significant progress since their initial meeting in March. To date, they have identified and tested more than 20 security items related to the electronic filing of taxes. These items, which focus on all aspects of tax return and tax refund fraud, will be made available to both the IRS and State Tax Agencies to be used in the prevention of identity theft and are expected to be in place by the time the 2016 filing season opens. They target such things as the time it takes to produce a return and identifying instances where multiple returns are generated automatically. The Summit has announced that implementation of these measures is internal. While they will serve to enhance the security of the transmission process, they will not affect how taxes are filed.

In addition to measure designed to enhance the security of e-filed returns, the Security Summit has made recommendations in several other areas. In particular, the Tax Professional Work Group, which is one of the working committees of the larger effort, is investigating other means by which tax preparers themselves can contribute to the prevention of identity theft. On top of this, the United States Tax Commissioner has asked Congress to pass legislation requiring W-2s, 1099s and other information returns to be sent out earlier, thus allowing more time for the matching of these items with the information submitted on tax returns.

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.

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.

Tax Debt Reduced by Filing Past Due Returns

Posted on September 8, 2015 by Kursti Nakagawa

Tax Debt Reduced Through Filing of Past Due Tax Returns

Sometimes resolving a back tax balance is as simple as filing past due tax returns. The case of Mr. P involved just that! When he contacted our office, he had not filed either his corporate tax returns or his personal income tax returns for the last 10 or 11 years. Unsure of how to proceed and fearful of the potential consequences of his negligence, he contacted the tax settlement specialists at Professional Tax Resolutions for advice and help. Our team informed Mr. P that it would be necessary to contact the government immediately in order to collect the specific details necessary to come up with an appropriate plan of action. Among other things, we needed to know exactly which tax returns had not been filed as well as what back tax balances were showing for each year. In addition, it was imperative that we obtain a list of the official tax documents that the government had on file for each year that tax returns had not been submitted.

Anxious to put his tax problems behind him, Mr. P was eager to get started on his case. Within a few days, our tax professionals had contacted the government, received the requested information and were ready with a plan of action. Once our client had compiled the accounting records for his corporation, we compared them to those we had already received from the IRS and began to prepare the corporate income tax returns. Concurrently, we prepared M. P’s personal income tax returns for all years where one had not been filed. After all was said and done, the corporation was set up on a payment plan with the IRS and the FTB balance was lowered to the amount of the franchise fee plus accumulated penalties and interest. In addition, the client’s personal back tax balance was reduced by 80% with both the federal and state tax agencies.

As is evident from reviewing the case of Mr. P, it is important to select a tax professional who has a thorough understanding of the specific back tax issues one is facing. In particular, when a business entity is involved, it is important to choose a tax specialist who understands business accounting and entity taxation as well as the effect business income has on the individual’s personal tax balances. The tax team at Professional Tax Resolution is well equipped to resolve both personal and business tax issues. When a business is involved, they understand the interconnectedness of personal and business taxes and realize that it is important to consider both in order to come up with the best possible plan of action.

Franchise Tax Board Assessment Stopped

Posted on August 26, 2015 by Kursti Nakagawa

Franchise Tax Board Assessment Stopped

Just one month after finalizing an Offer in Compromise with the Internal Revenue Service, Mr. C contacted Professional Tax Resolution with another tax settlement issue. Having successfully settled his federal income tax debt for less than 20% of the initial amount owed, he now needed our services to help with resolving an outstanding tax liability with the State of California. Just prior to contacting our firm for the second time, he had received and official notice from the California Franchise Tax Board informing him that he owed a back tax amount of 80K for tax year 2005. This amount included both penalties and interest that had been compounding over time.

Mr. C was both confused and upset when he received the tax delinquency notice from the California Franchise Tax Board. Having just settled his federal tax debt for this same year, he was taken by surprise when he received a notice from the state informing him that he still had an outstanding tax liability with them. A member of our staff quickly reviewed the notice and realized the assessment was based on the results of IRS audit. After ruling out the possibilities of fighting the audit based on proof of expenses or of submitting an Offer in Compromise proposal with the state, our staff decided to match the state’s assessment to the Internal Revenue Service transcripts. It was this match that provided the solution to Mr. C’s back tax issue with the California Franchise Tax Board.

We quickly came to realize the Franchise Tax Board was over-assessing Mr. C. Not only was their assessment based on a higher income then the IRS transcripts reported, but it incorrectly included taxes on income that was produced outside the state. In response, our professionals quickly prepared a letter of protest informing the Franchise Tax Board of the amount of income that was not produced in California and recalculating the tax amount based on the IRS transcripts. After one month and a close review of our protest, the Franchise Tax Board recalculated their assessment based on the correct income amount and came to the conclusion that our client did not owe any additional tax. The end result was that the case was settled and closed with the most favorable outcome possible. Not only did M. C walk away without paying one dime in back taxes, but the Franchise Tax Board actually owed him money!

Pros & Cons of Outsourcing the Collection of Tax Debt

Posted on August 24, 2015 by Kursti Nakagawa

Pros and Cons of Outsourcing the Collection of Tax Debt

Pros & Cons of the Outsourcing of Collection of Tax Debt

Pros & Cons of Outsourcing the Collection of Tax Debt

The Senate Finance Committee has recently revived their discussion of outsourcing the collection of back taxes. According to certain estimates, turning the collection of delinquent taxes over to private collection agencies would save the government more than two billion dollars over a period of ten years. However, opponents of privatization maintain that this would not be the case. In addition to emphasizing the potential threat to taxpayer security, they point to attempts at outsourcing the collection process that have not worked particularly well in the past. Time will tell whether the Treasury Secretary, who currently has the authority to make such a switch, will give it another try.

Those who favor privatizing the collection of tax debt say that it will raise more revenue that it costs. While this did not happen in a previous attempt at outsourcing that was made between 2006 and 2009, proponents say that the powers that be have learned from their past mistakes.They say that turning IRS collections over to private collection agencies will generate extra revenue that The IRS can use to hire new employees. In addition, they point to the fact that removing the task of debt collection from the IRS will allow the understaffed agency to focus its human resources on other important tax matters that have suffered in recent years.

On the other side of the fence, opponents of outsourcing say privatizing the collection of tax debt will not work. The National Treasury Employees Union points to data from the previous attempt at outsourcing which shows that the IRS collected over 60% more in the first two years of the program than the private collection agencies did – $139 million compared to $56 million. Although the private companies did better at collecting from cases where the amount owed was not in dispute, they lacked the authority to collect in the more difficult cases. The Center for Effective Government maintains that private companies will never be as effective as the IRS at collecting back taxes. According their spokesperson. “Collecting back taxes is an inherently governmental function, something that the government is uniquely positioned to do.” The IRS is the only collection agency that can garnish wages, levy bank accounts, Social Security benefits and 401k plans, place tax liens on property and even seize assets, all without judicial approval! These powers indeed make it the most powerful collection agency in the county, a fact that opponents of outsourcing tax debt collection are quick to point out.