Author Archives: Kursti Nakagawa

Business Tax Audit Advice From Former IRS Commissioner

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Audit

 

An audit can be both an alarming and bothersome time for a business. Here are some simple and helpful steps from the Commissioner of the IRS to make the process go as smoothly as possible. These suggestions are especially useful to small and medium sized businesses.

How to Maneuver the Audit Process:

1. Gather your Workplace Organization – Upon receiving the notice, immediately meet with your employees, tax professionals/CPA, and other involved groups. Also, thoroughly examine all documents. It is vital to be prepared in a timely and organized fashion for your first meeting. First impressions can be critical.

2. Courtesy to the Agent – Keep in mind IRS agents have a challenging job. If the agent is treated respectfully, they are more apt to be understanding on your matter.

3. From the Offset Establish the Whole Outlook of the Investigation – This is very important. The IRS is very open about business matters. It pays to have no unknowns or surprises during the audit. Everything should be carefully examined.

4. Be Punctual on Timelines – The IRS will want to establish timelines and target dates for reports and materials. Missing a deadline due to setting an improbable timeline could have serious consequences. That being said the IRS has resource limitations and will want to get the audit done on a prompt schedule. Be prepared in knowing this.

5. Record Preparation and Communication – It is very important to have all of your materials organized and labeled. Everyone involved in the process should be thoroughly prepared and well-informed.

6. Execute your Own Review – Be thorough and go beyond what the IRS expects of you. The results can be advantageous. There have been situations where in fact checks have been received from the Treasury.

7. If it is Imperative, Speak to the Manager – If question’s or complications arise just ask to speak to the IRS agent’s manager. The IRS actually encourages business owners to contact the higher up personnel to seek a resolution.

8. Mediation and Arbitration – The IRS has significantly broadened its opportunity for taxpayers to seek a resolution. When it is applicable mediation and arbitration are great channels to consider for solving a problem.

9. Appeals and Litigation – The minute you receive the audit notice, always know that you might have to seek the final outcome through mediation and arbitration, IRS appeals, or even litigation.

If you have a concern in regards to an audit or any other tax question(s), our tax settlement professionals can help you. For more information about our services, visit us today at  www.professionaltaxresolution.com. 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 option will be the best fit for your specific set of circumstances.

For more information about our tax resolution services, visit us today at www.professionaltaxresolution.com.  Contact us by phone at 877-889-6257 to receive a free, no obligation consultation.

Tax Debt Incurred By Medicaid Providers

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A new study by the Government Accountability Office discovered that the 7,000 Medicaid providers had an estimated $791 million in unpaid federal taxes from 2009 or earlier, but still received about $6.6 billion in Medicaid reimbursements that year. The three chosen states were Texas, Florida, and New York.

Around 40 Medicaid providers were researched.  They consisted of home care providers, dentists, doctors, hospitals, medical suppliers, and others. These businesses and individuals received a total of $235 million in Medicaid reimbursements, while having unpaid taxes of about $26 million. The amount of unpaid federal taxes ranged from approximately $100,000 to over $6 million. According to the report these 40 cases, show “the sizable amounts of unpaid federal taxes owed by some Medicaid providers, are among the most egregious examples of Medicaid providers with unpaid federal taxes we identified.”

About 5.6 percent of the Medicaid providers reimbursed by the selected states during 2009 are represented. The report also stated that the amount of unpaid federal taxes that the Government Accountability Office identified is most likely minimized because taxpayer data from the Internal Revenue Service emulates only the amount of unpaid taxes either reported on a tax return or assessed by the IRS through enforcement. It does not include businesses and individuals that did not file tax returns or underreported their income.

According to the Government Accountability Office two of the providers reviewed by investigators are currently, or were previously, under criminal investigation. One case of criminal behavior was a provider caught in a medical billing fraud scam.  Then, another company was found guilty of “improperly prescribing controlled substances.” Meanwhile other providers had been fined, disciplined, and/or had their licensed revoked by the state regulatory agencies and others.

The senate has vowed to crack down on fraud in the federal health care programs. In reaction to the GAO report the senate introduced the Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayers Dollars Act. It is also known as the Fast Act.

“It is outrageous that health care providers who cheat on their taxes are getting paid with taxpayer dollars through the Medicaid program.” Stated by Carl Levin, D-Mich, who chairs the subcommittee. “The federal government ought to prohibit health care providers with unpaid taxes from enrolling in Medicaid, allow continuous levies on health care providers’ Medicaid payments to recover unpaid taxes, and authorize tax levies on Medicaid payments to Managed Care Organizations whose doctors or other principals are tax delinquent.”

If you have tax debt you are unable to pay or any other questions our tax settlement professionals are happy to discuss you’re tax resolutions free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com. 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.

For more information about our tax debt resolution services  visit us at www.professionaltaxresolution.com. Contact us by phone at 877-889-6527 to receive a free, no obligation consultation

 

IRS – Offer In Compromise Changes To Help Struggling Taxpayers

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The IRS has expanded its “Fresh Start” program by providing more flexible terms in its Offer-in-Compromise program. This will allow more financially distressed taxpayers to clear up their tax problems quicker than in the past. The changes announced by the IRS include revising the calculation for the taxpayer’s future income, allowing taxpayers to repay their student loans, allowing taxpayers to pay state and local delinquent taxes, and expanding the allowable living expense allowance category and amount. The IRS has made other revisions including how it determines a taxpayer’s reasonable collection potential and will look at future income from shorter periods in deciding a taxpayer’s ability to pay a tax liability. Lastly, the expanded allowable living expense standards incorporate average expenditures for necessities, and now include additional allowed expenses, such as bank charges and credit card payments.

The Internal Revenue Service just introduced another expansion of its “Fresh Start” initiative by adding more flexible terms to its Offer in Compromise program that will allow some of the most financially challenged taxpayers to clean up their tax debts faster than in the past.

This new program focuses on the financial analysis used to figure out which taxpayers will qualify for the Fresh Start Program. This program allows some taxpayers to clear their tax issues in as little as two years in comparison to four or five years in the past.

In certain instances, the revisions recently announced include:

• Changing the calculation for the taxpayer’s future income.

• Allowing taxpayers to pay back their student loans.

• Letting taxpayers pay state and local delinquent taxes.

• Broadening the Allowable Living Expense allowance category and amount.

Overall, the Fresh Start program is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. It is usually not accepted if the IRS thinks the liability can be paid in full as a lump amount or a through payment agreement. The IRS reviews the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential.

The IRS understands that many taxpayers are having difficulty paying their bills. As a result, the agency has been working to put in place easier changes to the Fresh Start program to reflect real life scenarios.

When the IRS calculates a taxpayer’s reasonable collection potential; it will look at only one year of future income for offers paid in five or fewer months, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All of the offers need to be fully paid within 24 months of the date the offer is accepted.

Living Expenses Allowed

The Allowable Living Expense guidelines are used in circumstances requiring financial analysis to decide a taxpayer’s ability to pay. The standard allowances allow consistency and fairness in collection determinations by using average expenditures for basic necessities of people in similar geographic areas. These guidelines are used when looking at an installment agreement and offer in compromise requests.

If you have a back tax balance that you are unable to pay, our tax settlement professionals can help you determine if the Fresh Start Initiative would work for you. For more information about our services, visit us today at www.professionaltaxresolution.com. 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.

For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at 888-534-2457 to receive a free, no obligation consultation.

IRS Levy – Must Follow Legal Guidelines

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irs levy formA tax levy is the confiscation of a taxpayer’s property for the purpose of covering a tax debt. It is one of the final steps taken by the IRS in the enforced collection of back taxes and is usually carried out only after all previous attempts to collect a tax debt have failed. Before the IRS seizes a taxpayer’s property, it must follow a set legal procedure outlined in the Internal Revenue Manual. This procedure begins with the issuing of two formal written notices, the official Notice of Tax Due and Demand for Payment and the Final Notice of Intent to Levy. The second notice also informs the taxpayer of their right to a hearing. Once this communication process has been completed, the IRS can seize the levied assets without further notification.

With certain specific exceptions, the IRS can seize one or more of a taxpayer’s physical assets. The physical assets that are exempt from an IRS levy include the taxpayer’s principal residence or any property other than a rental property that is used as a residence by another person. This exception can be overruled with written approval of the federal district court judge to cover a tax debt in excess of $5000. Other categories of physical property exempt from an IRS levy include furniture and personal effects up to a fixed dollar amount and any property used in a taxpayer’s trade or business unless the levy is approved by an IRS Director. The IRS also has the authority to levy such non-physical assets as wages, insurance policies, retirement accounts, dividends and bank accounts although, again, there are certain specific exemptions. The list of exemptions in this category includes workers’ compensation, unemployment benefits, some annuity and pension payments, certain types of Social Security benefits, disability and welfare payments, judgments in support of minor children and certain wages and other income.

Although the levy process is specifically outlined in the Internal Revenue Manual, a recent review of a random sample of property seizures conducted by the Treasury General for Tax Administration revealed that, in some instances, the IRS did not comply with the stated process. A review of 50 out of 747 property seizures conducted in the twelve month period from June 30, 2010 to July 1, 2011 uncovered fourteen instances where the IRS did not comply with the Tax Code. The infractions included not properly advertising the seized property, not correctly stating the amount of the liability on the seizure notice, incorrectly applying the proceeds from the seizure to the taxpayer’s account and incorrectly reporting information related to the seizure of the property to the taxpayer. In response to these findings, The Internal Revenue agreed to revise their Internal Revenue Manual to prevent further errors.

If you have received an IRS Notice of Tax Due and Demand for Payment or an IRS Notice of Intent to Levy, you should realize that confiscation of your property is imminent. Often the most effective response at this point is to enlist the help of a qualified tax settlement professional. Such an individual will understand tax law and will have experience negotiating with the IRS. If you are the target of a tax levy or any other type of aggressive collection activity by the IRS, our experienced tax professionals can help you stop the impending collection activity and resolve the tax debt issue that caused it.

For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877)-889-6527 to receive a free, no obligation consultation.

 

Impact of the Presidential Election on the 2012 Capital Gains Tax Rate

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election impact on capital gainsThe bipartisan tax code signed by President Reagan in 1986 set both income tax and capital gains rates at 28 percent. Since that time, increases in income tax rates together with reductions in capital gains rates have resulted in the 20 percent margin between the two rates that exists today. The capital gains tax rate is scheduled to increase on January 1, 2013 which will reduce that margin to 15 percent. President Obama is in favor of this increase while presidential hopeful, Mitt Romney, is against it. In addition, Obama is in favor of raising ordinary income tax rates while tax settlements Romney is in favor of decreasing them. Any of these proposed changes will be significant and are certain to be taken in to consideration by businesses and individuals when making decisions about the allocation of their assets.

The Current, Scheduled and Proposed Tax Rates

  • Current Rates
    The top capital gains rate is currently 15 percent while the top ordinary income tax rate is 35 percent.
  • Scheduled Rates for 2013
    The top capital gains rate is scheduled to increase to 20 percent for households earning $200,000 or less and to 23.8 percent for households earning more than that amount. There is no scheduled increase for the top income tax rate.
  • Proposed by Obama
    Obama’s most recent budget proposes raising the top capital gains rate to 23.8 percent and the top income tax income tax rate to 39.6 percent.

Proposed by Romney
Romney has proposed eliminating the capital gains tax altogether for households earning $200,000 or less and setting the top rate at 15 percent for households making more than that amount. He proposes reducing the top ordinary income tax rate to

The Arguments

  • In Favor of a Preferential Tax Rate for Capital Gains  – Those in favor of a preferential tax rate for capital gains say the lower tax rate helps to mitigate the double taxation of corporate income that has already been taxed at a 35 percent rate. They argue that raising capital gains taxes will discourage investors which, in the business sector, will have a negative effect on job creation and the economy. Since capital is now more mobile, those who favor a lower capital gains tax rate maintain that raising rates in the United States will drive capital to places that are more attractive for capital investment.
  • Against a Preferential Tax Rate for Capital Gains  –  Those against a preferential tax rate for capital gains say that double taxation is not as big an issue as some make it out to be. They argue that many companies don’t pay the maximum 35 percent tax rate. This group also makes the point that capital gains are earned on many assets such as real estate that are not subject to corporate taxation in the first place. They maintain that historically there has been no direct correlation between capital gains tax rates and the level of capital investment.

If you have questions about the implication of the current and projected income and capital gains tax rates for your specific financial situation, our experienced tax settlement professionals can provide you with the information you are looking for. We can help you make decisions about how to effectively allocate your financial resources for tax purposes. For more information about our tax debt resolution services or any other tax issue, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.