Common Mistakes Made by Taxpayers

I have found that one of the biggest mistakes made by taxpayers who are behind with the IRS is not addressing the issue.  It is easy to get paralysis when faced with a tax debt. There are a few simple steps to follow that will make your life easier when dealing with the IRS.

  1. Always file your tax returns on time, even if you can’t pay. The IRS will penalize you for failing to file your return timely.
  2. Try to make some payment to the IRS with your return. The IRS will penalize you for failing to make a timely deposit. It is better to send a portion of the tax due instead of nothing!
  3. Contact the IRS and try to set up a re-payment plan that is reasonable for you. Don’t over commit!  It is easy to commit to an amount when you feel pressure by the IRS, so make sure you only commit to what you can afford.
  4. If you are unable to set up a reasonable plan, contact a professional to help navigate the IRS collections department.

I quite often get asked, “How much are you going to save me?” This might seem like a logical question to ask, however, every situation is different and I can’t tell you how much we can save you right off the bat.  Anyone who is claiming to save you a percentage of the tax is just guessing and not being completely honest with you.

Hiring a tax professional can save you a lot of time, energy, and stress when dealing with the IRS.  Does it cost money?  Yes, but learning this skill set on your own does not come easy and certainly not cheaply. Not to mention the time it takes away from where you should be spending your time….on your business, family, and yourself.

So if you find yourself faced with a back tax debt follow these simple steps and your life will be less stressful.

 

Jack Larson, EA

Larson Financial, Inc

IRS Fraud Scams – Larson Financial Scam Prevention Tips

WATCH OUT FOR PHONE CALLS FROM SCAM ARTISTS.

Individuals all over the country are being called by scam artists posing as IRS agents demanding payments for supposed back taxes owed to the government.

DON’T FALL FOR IT!

  • The IRS will never call you about back taxes owed without first sending you repeated notices of money owed via the mail first.
  • The IRS will never demand payment over the phone by asking for your credit or debit card numbers over the phone.
  • The IRS will never threaten to have you arrested if immediate payment is not made over the phone.

Whether you owe taxes or not, do not give out any personal information to anyone over the phone.

Should you get a call like this HANG UP IMMEDIATELY and report the incident to the U S Treasury Inspector General For Tax Administration, (TIGTA).

The TIGTA has received reports of about 736000 scam contacts since October of 2013.  Nearly 4550 victims have collectively paid over $23 million as a result of this scam!

DON’T BECOME ONE OF THEM!

You can read more here on Larson Financial scam prevention tips.

Divorce and Federal Tax Liability Jurisdiction

It is common for divorcing spouses, their attorneys, and the presiding State Court Judge  to delegate responsibility for outstanding Federal tax liabilities as a part of the divorce decree and final divorce settlement. However, this can cause problems because the divorce court does not always consider that the Internal Revenue Service and Federal Tax Courts have exclusive jurisdiction over federal tax matters. The result is often that the party who was delegated responsibility for the back taxes is stuck between the terms of a State Court Order and the Internal Revenue Service’s insistence that they do not have to honor the terms of that court order. This can result in the other spouse experiencing enforced collection action such as wage garnishments because the Internal Revenue Service does not stop its collection action against that spouse even though the State has ordered the Internal Revenue Service to do so. In turn, the spouse who was ordered to address the tax issues can be found in contempt of court simply because the State Court unsuccessfully tried to assert its authority on a Federal Tax Matter for which it has no jurisdiction. Therefore, when preparing for a divorce where there is joint Federal tax liability, it is very important for the parties to consider this problem and consider this jurisdiction limitation of the State when negotiating the terms of a divorce decree.

Why you don’t qualify for an offer in compromise (OIC) with the IRS and why they might want you to “apply,” for one.

If you owe back taxes, you have become more popular than you would have ever thought imaginable!  The mailbox is full of promises to settle your tax obligations at “pennies on the dollar,” the phone rings constantly; it seems that everywhere you turn, someone is offering to help you and asking you to pay them for it – ironic, I know.  With the current “Fresh Start,” initiative from the IRS there is more buzz about wiping the slate clean and settling your taxes.  Unfortunately, the buzz and sizzle fall short of what you most likely will end up with.

 

For an individual or business that has fallen behind on their tax obligations, the offer to pay less than what is owed sounds more than appealing.  Collection agents from the IRS will encourage you to complete the paperwork for an OIC; they will even state that you have a right to try it.  What they will not tell you is what the criteria is, how your ability to repay is measured and what the overall consequences are to filing for this specific hardship program when you do not qualify.

 

You can review the OIC (form 656) booklet and form here.  You will find an eight page form to “apply,” for the OIC is included in this 32 page handbook.  As you review the form, it seems simple enough; your personal info, how you earn a living, how much you make, what you own, etc.  It would seem reasonable that the government would ask these questions in order to review your chances for settlement.  Let’s look a little deeper at what they are really asking for.  Providing your employment/earnings information seems simple enough – the IRS probably has it from a previous filing or from someone that has reported income paid to you.  What if you are not in compliance (filings not submitted)?  What if you tell the IRS you cannot afford to pay an installment agreement?  The IRS will now have a direct path on where to collect the funds from you via enforced collections.  Since you will provide your employer’s info, they can easily submit a wage garnishment which ensures that they will be able to collect faster than before.  Additionally, when you provide your bank account info, they now have the correct account to seize.  In short, you are providing exactly what is needed to make collecting from you simple.

 

What about the list of assets you own?  If there is available equity in your home; even your primary home, that is reviewed as a means to collect from you.  Retirement accounts, investments, joint accounts, etc; everything about you financially is required to be disclosed in consideration of an OIC.  As a comparison, take a look at the form 433-A (collection information statement) here.  Oddly enough, the information requested from the Revenue Officer (collection agent – RO) is all required for the OIC.  If the RO is asking you to complete the OIC paperwork and offering an opportunity to settle your tax debt for less than is owed, are you more likely to comply with their request for financials, or is the 433 an easier request?  The new “Fresh Start,” initiative is geared toward exactly that; getting the info necessary to ensure that you pay your “fair,” share!  This might have been one of the cleverest marketing ideas from the IRS in history!

 

Do you think that after reviewing your financials that you cannot possibly pay the tax debts?  What if you stopped paying your credit cards and other unsecured debts?  How about the cost of your living situation?  Is it higher than the average costs for your market place?  The money you are obligated to pay to your creditors, your landlord, the mortgage company; if any of that is higher than what the “norm” is in your area, this would be an available amount to pay the IRS in their eyes!  In summary, even though you do not have the ability to pay the IRS in your opinion, the IRS will require that you change your financial obligations and pay the tax debts, regardless of what that does to your creditworthiness or lifestyle!  Not only will the tax debt inhibit your ability to pay your bills, a lien will most likely be filed against you to encumber your assets and damage your credit further.  As if that is not enough, the OIC program will also extend the amount of time the IRS can collect from you – 10 years from the date of assessment PLUS the time the OIC has been submitted, waiting for review AND the eventual appeal of their denial.  This could increase/expose your situation by another 2 years!

 

As you can see, filing for an OIC when you do not qualify can really hurt you.  The good news is that there are other methods to resolving your tax problems that can save money, preserve your creditworthiness, not disclose all of your assets and once and for all, allow you to close this chapter out and move on with your life.  A true “Fresh Start,” can be had and the experts at Larson can help.  Call or email us today to discuss what other programs are available and how we can help.

 

888-589-0955

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Tax Deadline Missed?

The deadline for 2015’s Form 1040 – US Individual Income Tax Return has passed, and most taxpayers have filed and paid their returns.  However, some people will not to choose to file their tax return if they do not have the money to pay the tax owed.  This may be because they are scared and unsure on how to proceed, if it’s obvious that tax will be due.  It is always wisest to file all tax returns as they come due, even if there isn’t money directly available to pay the tax owed.  That way, Failure to File Penalties can be easily avoided and also you avoid prolonging a tax bill for months/years beyond what it should ordinarily be. There are also some options for requesting online short-term extensions requesting additional time to pay an individual income tax bill.  If you find yourself in a personal or business tax dilemma that you need some advice or help with, please do not hesitate to contact Larson Financial at 888-589-0955 or learn more at www.larson-financial.com.