Category Archives: IRS Tax Debts

Posted by September 13, 2018 Individual Tax, International Tax, IRS Tax Debts, Uncategorized No Comments

IRS tax penalty

IRS Tax Penalty

The Internal Revenue Service IRS imposes an IRS tax penalty for different reasons. Some of the most common irs tax penalties are:

Notably, the IRS imposes interest by law. The IRS is powerless to remove interest unless calculated incorrectly. Conversely, the IRS will pay interest to you if they owe you money.

Can penalties be removed?

Importantly, the IRS removes penalties upon the taxpayer can demonstrating reasonable cause. Otherwise, the taxpayer may request a first time penalty abatement, if they have had a good history for the past three years.

If you receive an IRS notice, you should request that the IRS remove the penalties for reasonable cause and for first time penalty abatement. We usually do this while paying the undisputed amount of income tax and interest.

Penalties during an audit

I would not agree to penalties during an audit, especially if the taxpayer had a good history. Do not agree to an audit report that includes penalties. If you have already agreed to penalties, you could re-open the audit.

If you have any questions, please contact us.

Posted by November 8, 2017 Business Tax, Individual Tax, IRS Tax Debts No Comments

10 Legal Tax Savings Secrets: Learn How to Save…

10 Legal Tax Savings Secrets: Learn How to Save…

Client Talking Points

Do you want to add some value? Here are some points that can add value to you and your clients right now…

  1. Legal Tax Savings Secret: Holding Real Estate in the corporate solution (C-Corp or S-Corp). Is your client holding assets that appreciate in value using the corporate solution? Corporations do not get the benefit of long-term capital gains rates. The corporate rate is presently 35% and corporation dividends to shareholders are not deductible to the corp., and are thus, double-taxed. Holding assets that depreciate (go down) in value in a corporate solution makes sense. However, if the value of the asset increases, liquidating that asset has inefficient tax consequences for the small business owner. This applies to S-Corporations as well. Nevertheless, if President Trump, Senator Ted Cruz, and Congress achieve their goal of reducing corporate tax rates to 15%-20%, then this would be a future opportunity to liquidate corporate holdings at reduced corporate tax rates. TALKING POINT: Ask your client to monitor this proposed legislation, anticipated for 2018.
  2. Legal Tax Savings Secret: 1031 Like-Kind Exchange. Is you client aware of 1031 Exchanges? 1031 exchanges allow clients to sell business property including real estate or business personal property and exchange it for similar items. Taxes from the exchange are deferred and the client’s basis carries to the new property. Corporations can use this as well. TALKING POINT: Ask your client whether he or she is planning to liquidate business property (especially real estate, or rental real estate) to take advantage of an opportunity. If the client doesn’t need the cash and would prefer to re-invest, mention the 1031 exchange.
  3. Legal Tax Savings Secret: IC-DISC. Does your client export products that have US-made components? The IC-DISC is an export incentive permitted by the tax code. Essentially, a manufacturer, exporter, or supplier can reduce its tax rate to 20% by paying sales commissions to an IC-DISC that it owns and controls. The IC-DISC is a corporation that makes an election to be treated as an IC-DISC. Instead of paying 35%, it pays 20%, and can defer income as well. TALKING POINT: Ask your client if they export goods produced or remanufactured in the US, or whether the client knows if its goods or services are ultimately exported downstream. If Harley Davidson’s motorcycles are exported by unrelated suppliers, Harley would be eligible.
  4. Legal Tax Savings Secret: Cost Segregation. Is your client aware of cost segregation studies? Normally commercial buildings are depreciated over 39.5 years. This means the price paid for the building is recovered at 2.5% annually. Cost segregations allow buildings to be depreciated in part as personal property, allowing significant depreciation in early years. TALKING POINT: Speak to your client about newly acquired or recently renovated buildings. Good candidates are buildings recently remodeled or perhaps less than 15 years old.
  5. Legal Tax Savings Secret: IRS Penalties. Has your client recently been penalized by the IRS? IRS penalties can be issued for a variety of reasons. However, the IRS can be surprisingly gracious with removing penalties from accounts under the right circumstances. If a client has been given significant penalties, simply asking to remove them may do the trick.
  6. Legal Tax Savings Secret: Asset Protection. Corporate entities and LLCs often can provide significant asset protection. The entity acts as a shield between the creditor and its shareholders. However, the entity’s assets themselves may be subject to creditor’s claims. On the other hand, operating a thinly-capitalized company could render the corporate shield weak, and subject to piercing (attacking personal assets). TALKING POINT: Ask clients with significant assets in their corporate accounts if they have an asset protection strategy, or have considered whether their assets could be subject to attack from creditors.
  7. Legal Tax Savings Secret: Non-US-Residents and Non US Domiciliaries owning real estate in the US. US citizens and US residents get generous estate and gift tax exemptions currently in excess of $5.5 million filing single, and $11 million for married persons. By contrast, foreign owners of real property receive a $60,000 exemption. TALKING POINT: Why give all that hard-earned money to the IRS, needlessly? Utilize a foreign corporation to block the tax, as shares of foreign corporations are not subject to the estate tax. Be aware, as discussed above, that capital gains tax rates become corporate rates. But see President Trump’s proposal, above, regarding reducing corporate rates. Therefore, some planning is involved. Also, you may consider life insurance to pay for the potential tax consequences.
  8. Legal Tax Savings Secret: Compliant on Estimated Taxes. What is better: to pay down back taxes or make estimated tax payments? A big issue we encounter is people fall behind on past tax debts. This causes them to miss estimated tax payments because they are devoting resources to paying back taxes. The best strategy is to make sure estimated taxes (future taxes) are paid before back taxes. How you accomplish this warrants a discussion with a professional and an analysis of your client’s situation.
  9. Legal Tax Savings Secret: Filing Tax Returns. Has your client filed all tax returns? This is important for many reasons. Firstly, it is criminal to willfully fail to file returns. Also, the penalty for failing to file a return is greater than failing to pay. Finally, for those people who are W-2 wage earners, failing to file a return is a compliance risk for your employer. Yes. One of the first things the IRS requests in a corporate audit is copies of the C-Suite’s personal tax returns. Other responsible parties may be requested as well.
  10. Legal Tax Savings Secret: Estate Planning. When is the last time your client considered his or her estate plan. Believing you’ll live a long time is wishful thinking. You’ll never know what tomorrow brings. Make sure your family is protected.
Posted by November 8, 2017 IRS Tax Debts No Comments

IRS Letter: What to Do…If You Get a Letter from the IRS…

IRS Letter: What to Do…If You Get a Letter from the IRS…

What You Need to Know if You Get a Letter in the Mail from the IRS

Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive one:

1. Be alert for tax scams. The IRS sends letters and notices by United States Postal Service First Class Mail (Trademark) and USPS Certified Mail (Trademark), in many cases in duplicate. An IRS agent doesn’t contact people by email or social media to ask for personal or financial information. An IRS agent could call you on your telephone, but will never ask for payment over the phone, nor do they demand you make payment immediately, nor do they demand a specific type of payment such as debit or credit card. If you owe tax, you have several payment options and you should ask for an extension of time, such as a month, to evaluate your options and talk to your advisors.

2. Don’t panic. You can usually deal with a notice simply by responding to it. Each notice has specific instructions, so read the notice carefully because it will tell you what you need to do.

3. If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return. If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree, and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub.

4. For most notices, you may call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call. If you ever have a verbal communication with the IRS, be sure to use our IRS Contact form to allow you to record the information you need to document the call and record the agent’s ID number. Note: the call may be recorded and the IRS will make notes in their CRM system.

5. Always keep copies of any notices you receive with your tax records.

Call a tax attorney to help you…

 

Posted by November 8, 2017 Individual Tax, IRS Tax Debts No Comments

IRS Fraud: The Whopping $21 Billion Fraud on the IRS

IRS Fraud: The Whopping $21 Billion Fraud on the IRS

In 2014, the IRS was subject of a $6.5 Billion fraud. Some reports say it was bigger. What is this IRS fraud? It’s called tax refund fraud and it’s quite simple really. Fraudsters obtain large lists of taxpayers’ names and social security numbers (from where, who knows? the dark web?). Then they electronically file false tax returns with the IRS claiming tax refunds. The problem has become so big for the IRS, and lucrative for criminals, that the fraud is expected to reach a whopping $21 Billion in 2016.

I can tell you from personal experience as a tax attorney that the fraud is very difficult to detect and prove. Aside from a list of identities, a criminal needs little more than a laptop and internet connection to perpetrate the fraud. In more than one case I’ve recently been involved with, the fraudsters have even stolen a legitimate preparer’s identity to process fake refunds.

Perhaps you’re thinking, can’t they track the tax refund checks? Well, yes and no. Imagine that a stolen identity (i.e. someone’s real identity) is used to establish a bank account. Additionally, fraudsters use third party refund companies that offer “refund advances.” Refund advance companies have the ability to issue rapid refunds in the form of pre-paid debit cards.

The IRS has recently issued a statement advising that hackers had stolen more than 700,000 identities from an online tool known as “Get IRS Transcript,” which allowed taxpayers to log in and obtain a copy of their IRS records. Nevertheless, this transcript contained enough information for thieves to file fraudulent returns. Just yesterday (3/26/2016), the IRS announced that it now believes more than 1 Million accounts may have been stolen.

The IRS has taken a significant number of measures to protect the public. Its wage and income division reported it prevented $63 Billion of false refunds from being paid. While admirable, this number demonstrates how pervasive the problem is.

The IRS offers a person who has been subject to identity theft the ability to file an identity theft affidavit, and the IRS will “place a marker on your account to assist with future protection.” The IRS had offered an Identity Theft Protection Pin as a limited pilot program in 2015 and 2016 for residents of Florida, Georgia, and Washington, D.C., whose residents had the highest per capita tax related identity theft. Residents of those states could apply for a unique PIN number issued anually to prevent unauthorized returns from being filed. However, as of March 7, 2016, the IRS suspended the IP PIN online tool because it “is looking at further strengthening the security features on the tool.”

As of January 1, 2012, tax return preparers were required to use IRS e-file, eliminating paper tax returns. Henceforth, the problem has amplified into a hacker’s dream and a $21 Billion IRS problem. As of the writing of this post, the IRS reported a 400% surge in phishing and malware incidents so far this tax season. Finally, threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer.

In conclusion, the three biggest problems facing the IRS and taxpayers are (1) identity theft (false tax refunds) (2) email phishing/malware and (3) threatening phone calls, all fraud. I can report from my own experience, at times it seems more than 50% of my clients’ IRS accounts are compromised without them knowing it. Furthermore, I have received several calls from very worried clients and prospective clients who believe the IRS is on the other line claiming they’ve committed tax fraud–and it can be remedied through a quick credit card payment.

If you need so,e assistance in this area, please feel free to call me (786) 464-0403 or visit www.irs.gov/identitytheft for more information.

Miami Tax Attorney
Posted by July 17, 2016 IRS Tax Debts No Comments

Get an IRS Notice?

Get an IRS Notice?

First, the IRS normally sends correspondence in the mail. Second, it sends millions of letters to taxpayers every year. As a result, keep these important points in mind if you get a letter or notice:

  • Don’t Ignore It.  You can respond to most IRS notices quickly and easily.
  • Follow Instructions.  Read the notice carefully. It will tell you if you need to take any action. In addition, be sure to follow the instructions. The letter will also have contact information if you have questions.
  • Focus on the Issue.  IRS notices often deal with a specific issue about your tax return or tax account. Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue.
  • Correction Notice. If the IRS corrected your tax return, you should review the information provided and compare it to your tax return.

If you agree, you don’t need to reply unless a payment is due.

If you don’t agree, it’s important that you respond. Follow the instructions on the notice for the best way to respond. You may be able to call us to resolve the issue. Have a copy of your tax return and the notice with you when you call. Alternatively, if you choose to write, be sure to include information and any documents you want considered. Also, write your taxpayer identification number (Social Security number, employer identification number or individual taxpayer identification number) on each page of the letter you send. Mail your reply to the address shown on the notice. Allow at least 45 -60 days for a response.

If you don’t get the result you’re looking for, you may need professional assistance.

  • Respond to Requests about the Premium Tax Credit.  The IRS may send you a letter asking you to clarify or verify your premium tax credit information. You should follow the instructions on the letter. For more information about these letters, see the Understanding Your Letter 0012C page on IRS.gov/aca.
  • You Don’t Need to Visit the IRS.  You can handle most notices without visiting the IRS. If you have questions, call the phone number in the upper right corner of the notice. Have a copy of your tax return and the notice when you call.
  • Keep the Notice.  Keep a copy of the IRS notice with your tax records.
  • Watch Out for Scams.  Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS will contact you about unpaid taxes by mail first – not by phone.  Be aware that the IRS does not initiate contact with taxpayers by email, text or social media.

Additional IRS Resources:

IRS YouTube Videos:

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