Tag Archives: IRS Notice

Increased Funding for IRS Enforcement Means Avoiding the IRS Is Harder Than Ever

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More Funding on the Way to Collect Outstanding Tax Debt

If you have an outstanding tax liability and have managed to stay under the IRS radar so far, your time may very well be running out. The Obama administration has submitted a $13.3 billion budget request for the Internal Revenue Service for fiscal year 2012, a $1.1 billion increase over the agency’s 2010 budget. The largest portion of this increase ($339 million) and almost half (approximately $6 billion) of the total 2012 budget will go toward enforcement.

Although recently the overall goal of the government has been to cut spending, the reasoning behind requesting increased funds for the IRS is that the extra expenditure will more than pay for itself. Because the IRS is the government’s primary source of revenue, analysts project that increasing the IRS budget will actually reduce the budget deficit by increasing tax enforcement revenues. Economists generally agree that every dollar invested in tax enforcement nets three or four times that in revenue. This would mean that the proposed 2012 budget increase for enforcement initiatives will net over a billion dollars in revenue.

Although enforcement is not the only focus of the proposed IRS budget for fiscal year 2012, all of the recommended changes are aimed at beefing up and streamlining the tax collection process in one way or another. The main budget items in the 2012 budget are outlined below.

  • Enforcement The budget proposes to strengthen enforcement efforts by addressing offshore tax evasion, improving tax debt collection processes and enforcing the information reporting requirements for businesses that were approved by Congress in 2008.
  • Preparer Oversight The budget allocates funds for increasing the examination requirements for tax preparers, enforcing preparer compliance with IRS rules and procedures and pursuing those preparers who engage in unethical conduct or fraudulent behavior.
  • Taxpayer Service The budget requests resources to improve the IRS website and provide new and improved online services. It also requests funds to add additional staff to improve the level of telephone service.
  • System Modernization The budget allocates funds for continuing the implementation of the taxpayer account database and modernizing electronic filing and payment options.

Although the funding requested by the proposed 2012 budget may meet some resistance in Congress, the handwriting is on the wall. With more and more resources bring allocated to the IRS for enforcement and modernization, it is going to become more and more difficult for taxpayers who have not filed or already have an outstanding tax debt to remain under the IRS radar. Since it is always better to approach the IRS before they approach you, the clear message in all this for taxpayers is that they should take whatever steps are necessary to become income tax compliant.

If you have an outstanding tax liability, we can help you resolve it. For more information about our services, visit us today at www.professionaltaxresolution.com. With over 16 years of experience, we have a thorough understanding of tax law together with the experience to know which tax settlement option will best fit with your specific set of circumstances. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

Case In Point-Hiring A Qualified Professional To Handle Your Tax Settlement = A Good Investment

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Although the IRS has numerous programs to assist taxpayers in settling outstanding tax debts, deciding which option to use is not always an easy task. Very specific acceptance criteria must be met in order for an application for tax relief to have any chance of being accepted. In addition, the process of filing the initial paperwork and documentation and following up by submitting the required responses to communication from the IRS can be lengthy and challenging. During the time a tax settlement application is under consideration, interest and penalties can accrue. If the settlement offer is then rejected, not only has there been a waste of time and energy on the part of the taxpayer, but the actual amount of the tax debt may have increased making the taxpayer’s financial situation worse.

Below is the detail of an interesting IRS Tax Court case in which the IRS Appeals Office failed to grant a taxpayer’s request for tax debt relief. The case is interesting because it highlights a number of the potential filing problems described in the preceding paragraph. Susan Fay Mostafa, the taxpayer in question, neglected to verify that she met the acceptance criteria for the type of tax debt assistance she was requesting. Her initial error was then compounded when she failed to file a formal request for tax relief on the correct IRS form and then did not respond to several official IRS letters and notices in an appropriate and timely manner.

The Case of Susan Fay Mostafa

• She received an IRS Notice of Deficiency for $1377 for a 1996 tax return that had not been filed. The notice stated that she was also liable for a 25% failure to file penalty.
• Although she submitted a Tax Court petition to challenge the deficiency notice, she later received an IRS notice of Intent to Levy.
• She then challenged the proposed levy by requesting a hearing with the IRS Appeals Office.
• At the same time, she wrote a check to the IRS for $701 and wrote on the check that endorsing it would mean accepting the 1996 tax return as Paid in Full.
• Once the amount of the check was credited to her account, she spoke with the appeals officer several times indicating that she considered her case closed since the IRS had cashed her check.
• In spite of the payment and the subsequent communication, the IRS Tax Court ruled against her.
• After considering all of the trial evidence, the Court of Appeals argued that she had not followed the specific IRS procedures for submitting an Offer in Compromise and had not received either an IRS letter or an IRS notice indicating that such an offer had been accepted.

The Tax Court case outlined above clearly shows that the assistance of a qualified tax settlement specialist may be helpful when submitting an application for tax debt assistance to the IRS. Each year many taxpayers who truly meet the qualification criteria for specific IRS tax relief programs have their applications rejected for one or more of the following reasons:

• failure to meet the acceptance criteria for a selected settlement option
• failure to file a request for assistance using the correct IRS form(s)
• failure to complete the required IRS form(s)correctly
• failure to provide all of the necessary supporting documentation
• failure to conform to the IRS time constraints for submitting forms and documentation
• failure to respond to formal IRS letters and notices in an appropriate and timely manner

Susan Fay Mostafa made all of the above errors when she tried to resolve her tax debt situation without the assistance of a qualified tax specialist. When the IRS Tax Court denied her appeal, she was no better off than she had been when she submitted her initial Tax Court petition. Had she enlisted the help of a tax professional, it would have been that person’s job to adequately document her inability to pay the full amount of her tax debt. Following that, it would have been the specialist’s responsibility to submit the request for relief with the accompanying documentation, to respond to follow-up communication from the IRS in an appropriate and timely manner and to advocate for Ms. Mostafa before the United States Tax Court.

The bottom line is not to try to handle a complex tax settlement case alone. Hire the right professional to help you achieve tax debt relief. Visit www.professinoaltaxresolution.com for more information about tax settlement options and contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

FAQ about the IRS Notice of Deficiency

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What is an IRS Notice of Deficiency?
A Notice of Deficiency is a formal letter from the IRS informing a taxpayer of a tax deficiency and advising them of their appeal rights with the United States Tax Court. It is required by law and is sent by registered or certified mail to the taxpayer’s last known address. Although a Notice of Deficiency can be issued when no tax return has been filed, it is most often sent when the tax amount shown on a submitted return is less than the actual amount owed according to IRS calculations.

What information is provided by an IRS Notice of Deficiency?
A Notice of Deficiency must include an explanation for the deficiency together with a statement of the tax, interest and penalties that have been assessed. The notice should also include the final date on which the taxpayer can file a petition with the United States Tax Court appealing the assessment. However, it should be noted that failure by the IRS to specify the last day on which to file a petition will not invalidate an otherwise valid deficiency notice if the taxpayer was not prejudiced by the omission.

How does a taxpayer respond to a Notice of Deficiency?
Within 90 days after a Notice of Deficiency is mailed (or within 150 days after mailing if the notice is addressed to a person outside the United States) the taxpayer must pay the assessed amount or file a petition with the Tax Court to contest the liability. Payment of the assessed amount after the deficiency notice is mailed does not deprive the Tax Court of jurisdiction over the deficiency. In addition, discussion of the case with the IRS during the 90 day period does not extend the time period during which a petition can be filed.

What are the consequences if a response is not submitted in a timely manner?
If the taxpayer does not file a Tax Court petition within the required time period, the appeal process is closed and IRS has the authority to collect the tax. Since the Tax Court is the only court that will hear the question of whether a tax liability is really owed, the taxpayer’s only option after the 90 day deadline has passed is to pay the assessed amount in full and then apply for a refund. If a response is not received within 90 days after the issuance of a Notice of Deficiency, the IRS is likely to issue a Notice to Levy. The Notice to Levy allows a 30 day response time, after which a taxpayer’s property may be seized to enforce collection if the assessed tax still has not been paid. The requirement to issue the Notice to Levy and wait 30 days does not apply if the IRS finds that the collection of tax is in jeopardy.

What are the advantages of obtaining the services of an experienced tax professional?
The IRS is authorized to collect taxes and issuing a Notice of Deficiency is the first step in the collection process. Receiving such a notice can be both intimidating and confusing and may make enlisting the help of a qualified tax professional a worthwhile investment. Collection of taxes by the IRS is permitted without proof of the debt so the burden rests with the taxpayer to determine whether the tax amount shown on the Notice of Deficiency is actually owed. Because of the complexities of tax law, accurately making this determination may require someone with both expert knowledge and experience. In addition, obtaining the help of a tax professional will ensure that the response to such a notice meets the IRS requirements and is submitted correctly, thus avoiding unpleasant consequences down the road.

If you have received a letter from the IRS such as a Notice of Deficiency or Notice to Levy or are threatened with a tax lien or wage garnishment, we can help stop the immediate collection action and help you work toward resolving your tax debt. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.

IRS Warning About Companies That Promise To Reduce Tax Debt – For a Large Fee

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The IRS Wants You to Check Carefully Before Applying for an Offer in Compromise

The Internal Revenue Service has issued a consumer alert advising taxpayers to beware of tax settlement agencies that claim they can settle an outstanding tax debt for a small fraction of the amount owed through the through filing an application for an offer in compromise. While it is true that the IRS has the authority to settle federal tax liabilities for less than the full amount of the tax debt, the offer in compromise serves an important purpose for only a very select group of taxpayers. Commissioner Mark W. Everson recently warned consumers that the IRS is “increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements.” He urged taxpayers with unresolved tax debt issues not to be fooled by high priced promises.

The bottom line is that if a tax settlement promise seems too easy and too good to be true, then it probably is. There are a few large marketing companies in the United States that are trying to take advantage of taxpayers who are faced with the very real, and very scary prospects of tax liens and wage garnishments. By preying upon those taxpayers in need through advertisements that promise enormous tax relief, they are not only misleading the public, but they end up costing those very vulnerable individuals time and money without ever really addressing the specifics of their tax debt. This is not to say that all tax settlement companies are unscrupulous, but the issue has become rampant enough that the IRS felt they needed to warn the public about this alarming practice.

The truth is that an offer in compromise will usually be considered only after other payment options have been exhausted. If a taxpayer is unable to pay their tax debt in full, there are other settlement options, such as monthly installment agreements, that must be explored before an offer in compromise can even be submitted. In actuality, tax settlements for very low proportions of tax debt are far more infrequent than the advertisements lead the consumer to believe and 100% tax relief is even less common.

Complete information on the tax collection process and various tax settlement and payment options is available on the IRS website (www.irs.gov). By reading through the agreement request qualifications provided on the site, the taxpayer may be able to determine if they qualify for a particular tax settlement option or payment plan. The website itself provides detailed instructions for submitting an offer in compromise and also includes all of the necessary financial forms. Of course, the many laws and regulations regarding the offer in compromise as well as other tax settlement options can be overwhelming so obtaining the help of a knowledgeable and qualified professional is often a worthwhile investment.

A qualified certified public accountant is probably the most desirable choice when seeking professional help with a tax debt issue. A CPA is the most likely professional to have a current knowledge of tax law and a thorough understanding of the policies and procedures of the IRS. An individual with this certification will also have the expertise and the experience to determine the true tax debt and to select the best method of tax relief for a specific set of circumstances. In order to locate a CPA in a specific geographical area, a taxpayer should contact the local or state tax professional association. Before actually hiring a CPA, it might also be a good idea to run a background check on the individual and also to verify their current licensure with the state certification agency and the Better Business Bureau. If references or referrals are available, it is a good idea to review these as well.

At Professional Tax Resolution, we welcome your inquiries and questions. We encourage you to read reviews from our clients as well as click our direct link to our rating with the BBB and the state licensure division. To learn more about how we can help you to remove tax liens, stop a wage garnishment, or find tax debt relief, call us today at (949) 596-4143 for your free no obligation consultation.

In these economic times being considered “Currently Not Collectible” is not complete freedom from tax debt, but it can provide some tax relief.

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It is no secret that Americans have been facing difficult times. At Professional Tax Resolution Inc., we have found that more taxpayers than ever are finding themselves with significant tax debts that are so large they are very difficult or even impossible to pay.

For some people a monthly tax settlement payment can create a hardship by leaving them unable to meet their necessary living expenses. In other words, tax settlement payment is just beyond their financial means. If this is the case, the IRS may classify the tax debt as “currently not collectible”. While more and more people find themselves living on less and less, getting the IRS to classify a taxpayer as “currently not collectible” is often difficult particularly without professional guidance. It should be noted that even if you obtain this classification, this status is that it is NOT a permanent designation and it may only temporarily provide to relief to the taxpayer. The fact is that a “currently not collectible” status continues to accrue penalties and interest on outstanding tax debt liabilities.

When tax debt continues to accumulate, the IRS can become more and more aggressive about collection attempts regardless of your ability to pay. At Professional Tax Resolution Inc., we are often contacted by taxpayers after they have received intent to file a tax levy from the IRS. Usually the tax debt that results in a tax Levy is accumulated from multiple years and includes a significant amount of penalties and interest.

One of the more common ways Tax debt results is from not filing returns. In these situations, the IRS may do a substitute return that only considers income and does not give credit for deductions for which the taxpayer is likely eligible. When the IRS substitutes your returns for you, it can result in an overstatement of the tax debt. How is this related to a tax levy or “currently not collectible” status? When the IRS moves to impose a tax levy, the unfilled returns can be a significant obstacle in halting the collection efforts. So, even if you can demonstrate you have a clear economic hardship caused by the tax levy, in most cases the IRS will not even consider a resolution alternatives until all returns are filed. If you have not filed your tax returns and a tax levy is imposed, you may be caught in a chicken and egg situation. It can be difficult to obtain expense and other records form past years leaving you unable to prepare outstanding tax returns in time to halt the filing of the tax levy.

A court case addressed this how these very issues interact. In Vinatieri v. Commissioner, a taxpayer faced both financial hardship and aggressive collection efforts by the IRS. In this case the Tax Court held that the IRS abused its discretion by proposing a tax levy upon a taxpayer with un-filed returns who had shown that they were in economic hardship. In other words, the taxpayer was in an economic situation that might have qualified them as “currently not collectible”, yet the IRS abused its discretion by imposing a tax levy without regard to their financial ability to pay at the time.

Unfortunately despite the ruling, IRS procedures for placing an account into “currently not collectible” status remain unclear. The net result is that a number of tax levies are being impressed upon people who are in such dire financial situations that they should be at least temporarily be ineligible from such collection actions.

There is some hope that the growing issue will finally be addressed. The national taxpayer advocate service has recently recommended that the IRS provide its employees with clear guidance that employees are able to classify an account as “currently not collectible” independent of any other criteria and even when the taxpayers has unfilled tax returns. The TAS has also recommended that the IRS provide its employees with additional training on how to manage accounts for taxpayers facing an economic hardship.

While the IRS may overtime become more accommodating to those in dire financial circumstance, the best advice for those with tax debt is to take action immediately. The effects of a tax levy, wage garnishment or other collection method can be devastating to a taxpayer that is already struggling financially. Don’t let years of interest and penalties continue to accumulate. Call us now and let us help you to evaluate your tax debt resolution options. яндекс