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We are an IRS Tax Representation Practice - Enrolled Agents or EA's. Enrolled Agents don’t just prepare tax returns. We are licensed by the Federal Government to represent taxpayers before the IRS (and State agencies) for audits, collections and appeals. Nothing strikes fear in the hearts of people more than receiving an IRS Audit letter in the mail. Audits take significant time away from your business and family, requiring you to gather mounds of records substantiating each and every item reported on your tax return and develop a comprehensive understanding of tax law.The IRS leaves no stone unturned in its mission to determine the accuracy of your tax return. If you don't comply with the Auditors' wishes, the IRS will recalculate your tax and send you home with a hefty tax bill as your parting gift.Many taxpayers decide to handle a tax audit themselves, and discover they may have been "penny wise," avoiding a representative's fee, but "pound foolish," because they received a substantial bill for a significant tax deficiency. You see, IRS Auditors are trained to extract more information from you than you have a legal obligation to provide. IRS Auditors know that most people fear them and are ignorant of their rights. As a result, they know they can use that fear and ignorance to their advantage.Rarely do our clients even have to talk with the IRS. We handle it all for you so that you need not take time off of your business or job to handle the bureaucracy and paperwork of the IRS. No lost wages or business. You simply forward notification of an audit to us and we handle it from A to Z.If you've received an audit notice from the IRS, please fill out the form on the bottom of this page to receive a Free Consultation with our tax specialist. Non-Filed Tax Returns Back Taxes Owed Payroll Tax Problems IRS Liens IRS Levies IRS Wage Garnishment IRS Seizures Offer In Compromise IRS Payment Plan Bankruptcy Innocent Spouse Relief Get Your IRS File TAX LEVIES BANK ACCOUNTS: A tax levy is the enforced action taken by the IRS or state to collect taxes. For example, the IRS or state can issue a bank levy to obtain your cash in savings and checking accounts. Or, the IRS or state can levy your wages or accounts receivable. The person, company, or institution that is served the levy must comply or face their own IRS or state problems. The additional paperwork this person, company or institution is faced with to comply with the levy usually causes the taxpayer's relationship with the person being levied to suffer. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS or state. WAGES: An IRS or state wage levy is different. Wage levies are filed with your employer and remain in effect until the IRS notifies the employer that the wage levy has been released. Most wage levies take so much money from the taxpayer's paycheck that the taxpayer doesn't have enough money to live on. State tax levies actually take the person's whole paycheck. AUDITS: The IRS or state can audit you by mail, in their office, or in your home or office. The location of your audit is a good indication of the severity of the audit. Typically, correspondence audits are for missing documents in your tax return that IRS or state computers have attempted to find. These usually include W-2s and 1099 income items or interest expense items. This type of audit can be handled through the mail with the correct documentation. The IRS or state office audit is usually with a Tax Examiner who will request numerous documents and explanations of various deductions. This type of audit may also require you to produce all bank records for a period of time so that the IRS can check for unreported income. The IRS or state audit scheduled for your home or office should be taken more seriously due to the fact that the IRS or State Auditor is a Revenue Agent. Revenue Agents receive more training in auditing techniques than a typical Tax Examiner. All IRS or state audits should be taken seriously because they often lead to other tax years and other tax deductions not originally stated in the audit letter. SEIZURE OF ASSETS: The IRS and state have extensive powers when it comes to seizure of assets. These powers allow them to seize personal and business assets to pay off outstanding tax liabilities. This occurs when taxpayers have been avoiding the IRS or State Tax Commission. The IRS or state attempts to collect amounts owed with a seizure as the ultimate act of their collection efforts. WAGE GARNISHMENT: The IRS wage garnishment is a very powerful tool used to collect taxes owed through your employer. Once a wage garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The paycheck that would have normally been paid to the employee will now be paid to the IRS. The wage garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment. UNFILED TAX RETURNS: Taxpayers fail to file required tax returns for many reasons. The taxpayer must be aware that failure to file tax returns may be construed as a criminal act by the IRS or State. This type of criminal act is punishable by one year in jail for each year a tax return was not filed. Needless to say, it's one thing to owe the IRS or state money, but its another to potentially lose your freedom for failure to file a tax return. The IRS or state may file "SFR" (Substitute For Return) tax returns for you. This is the IRS or state version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you'll see are standard deductions and one personal exemption. You will not get credit for deductions which you may be entitled to, such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc. Regardless of what you have heard, you usually have the right to file your original tax return no matter how late it's filed. PENALTIES: The IRS and states penalize millions of taxpayers each year. They have so many penalties that it's hard to understand which penalty they are hitting you with. The most common penalties are: Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS or state in a very short period of time. To make matters worse, the IRS and state charge you interest on penalties. Taxpayers often find out about IRS problems many years after they have occurred. This causes the amount owed to the IRS or state to be substantially greater due to penalties and interest. Some IRS or state penalties can be as high as 75%-100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed. However, the extra penalties make it impossible to pay off the entire balance.The original goal of the IRS or state imposing penalties was to punish taxpayers in order to keep them in line. Unfortunately they have turned into additional sources of income for the IRS and states. The IRS and states do abate penalties. Therefore before you pay the IRS any penalty amounts, you may want to consider having a tax professional request the IRS or state to abate your penalties. STOP COLLECTION BY THE IRS AND STATE Many of the techniques mentioned here, if applied correctly, will stop the IRS or state from continuing with collection efforts against you. Levies may be lifted, liens prevented and garnishments stopped if the requirements are met. OFFERS IN COMPROMISE SETTLE FOR LESS: The IRS is making deals with taxpayers that owe them money. Never before in the history of the IRS have they been so willing to deal on tax liabilities. You have to be in the right place at the right time to take advantage of the great deals in life! Well, the time is now. Owing the IRS money is the first requirement of qualifying for these special IRS deals. Not being able to pay the IRS is the second requirement. Chances are that if you are reading this, you meet these two requirements. Now what? These great IRS deals will not be around forever and the time to act is now. The climate in the IRS is changing with the change in Administration. You need to take advantage of your current financial situation and obtain the best deal possible from the IRS before your financial conditions improve. States also have programs where you may pay substantially less than you owe for your tax liability. You may be able to pay the IRS or state a small fraction of what you owe them. You need legal help now if you owe the IRS money. Call Ed Forker, Enrolled Agent, at Forker & Associates LLC / TaxSolvers at (856) 988-7055 and request a free consultation for your IRS and/or state tax problems. INSTALLMENT AGREEMENTS For many taxpayers, they just need enough relief from the IRS or state's collection procedures so they can pay the tax. When there are levies or garnishments in place, the IRS or state decides how much you will pay to them. Under an installment agreement, coupled with a request for penalty abatement, you are more in control. INNOCENT SPOUSE DEFENSE Often the IRS seeks to recover taxes from a spouse who had nothing to do with the tax debt. This may include a spouse who had nothing to do with a business, or someone who is divorced and being held liable for a former spouse's debt. The injured or innocent spouse may be able to obtain relief from the IRS debt. PENALTY ABATEMENT: Penalties are imposed by the IRS and state which are significant. A little-known procedure which can significantly reduce tax liability is to request a penalty abatement. There must be good cause shown for the penalty abatement, but a skilled professional knows what it takes to show good cause and can advise you whether or not you qualify. BANKRUPTCY: The rules of bankruptcy are very complex as they relate to taxes. Generally, taxes that are over three years old are dischargeable in bankruptcy. If they have been subject to an IRS or state lien, then the value of the assets securing the lien must be dealt with. This fact is little known to the average taxpayer. Much can be accomplished by filing a Chapter 7, Chapter 11, or Chapter 13 bankruptcy on behalf of a taxpayer with tax liabilities. PENALTY ABATEMENT Taxpayers have the right to request the abatement of some or all of the penalties, including late filing penalties, late payment penalties and failure to deposit or failure to make estimated payment penalties, based on "reasonable cause." Reasonable cause is a broad, but vague term that could mean anything, though usually it requires a showing that the late filing, late payment, or failure to make tax deposits or estimated payments was attributable to circumstances beyond the taxpayer's control, such as illness or death of the taxpayer's accountant, destruction of records by a fire or flood, illness of the taxpayer or other significant events such as divorce, accident, dissolution of a business, etc. IRS has quite a bit of discretion and latitude to determine what is reasonable cause and any adverse decision may be appealed to its Appellate Division. It's usually advisable to attach relevant documentation to any petition, such as third party records, affidavits, etc. Taxpayers have the right to request the abatement of some or all of the penalties, including late filing penalties, late payment penalties and failure to deposit or failure to make estimated payment penalties, based on "reasonable cause." Reasonable cause is a broad, but vague term that could mean anything, though usually it requires a showing that the late filing, late payment, or failure to make tax deposits or estimated payments was attributable to circumstances beyond the taxpayer’s control, such as illness or death of the taxpayer’s accountant, destruction of records by a fire or flood, illness of the taxpayer or other significant events such as divorce, accident, dissolution of a business, etc. IRS has quite a bit of discretion and latitude to determine what is reasonable cause and any adverse decision may be appealed to its Appellate Division. It’s usually advisable to attach relevant documentation to any petition, such as third party records, affidavits, etc. BANKRUPTCY Among the options to consider in dealing with the IRS is whether bankruptcy might be a viable alternative. Sometimes it is the only option. Typical situations in which bankruptcy should be considered include the following: • Creditors have become very aggressive in collecting debts. IRS may be threatening, or has already executed, a seizure of assets, levy on bank accounts, or other enforcement action. • The amount of debt is out of proportion to the individual's or business' ability to pay. • The business has been losing money for some years and the prospects for profitability are uncertain. Some taxes, such as income taxes, may be dischargeable in bankruptcy. If a satisfactory arrangement cannot be reached with the IRS, either through a Payment Agreement or an Offer in Compromise, bankruptcy may become a viable option, especially if there are other debts. In some cases bankruptcy should be considered as an option even if the taxes are not dischargeable. A common example would be non-dischargeable payroll taxes. If the business is struggling financially and runs up several quarters of payroll tax liabilities, the IRS may threaten to seize the business’ assets or even shut it down completely. In that situation a Chapter 11 bankruptcy may be the only viable alternative to keeping the business in operation. A plan of reorganization in a Chapter 11 bankruptcy may give the business an opportunity to repay the tax liability (and other debts) over a period of five or six years, which is often more than the IRS will allow administratively to "pyramiding" taxpayers. In some situations a Chapter 13 bankruptcy may be appropriate. One common example would be a taxpayer who has equity in a home and does not want to lose it in liquidation bankruptcy or in a foreclosure proceeding by the lender and/or mortgagee. Chapter 13 gives the debtor up to five years to pay off any non-dischargeable debt while keeping possession and ownership of his property. A small, unincorporated business may also use the Chapter 13 to continue to operate while it pays off the creditors through a plan. A Chapter 13 is less expensive than a Chapter 11 bankruptcy and is well suited to small businesses in the right circumstances. EXPIRATION OF COLLECTION STATUTE IRS has ten years from the date of assessment to collect the unpaid tax liability, unless some action of the taxpayer extends it beyond the 10 years. Common examples are filing of bankruptcy, leaving the country to reside elsewhere, signing a voluntary waiver in relation to an offer in compromise or a payment agreement, etc. IRS may also extend it indefinitely by filing suit in the U.S. District Court and reducing the liability to a judgment. With some rare exceptions, once the collection statute expires the IRS can no longer pursue collection of the tax liability. It must then abate the tax and release any liens filed against the taxpayer's property. TAX LIENS What do you do when a client wants to sell his house and you discover there is a federal tax lien of record against him at the county recorder's office? Tax Paid: The first thing is to verify with your client and, more importantly, with the Internal Revenue Service, is whether the tax is still owed. If the tax has been paid in full, or is no longer due by virtue of abatement or expiration of the collection statute, then you ask IRS to issue a Certificate of Release. The request for a certificate of release can be made to an employee of the IRS who is actively working the case or directly to the lien section of the Special Procedures Staff. The procedure is spelled out in several sections of the Internal Revenue Manual, including §535(12), et seq, and, more specifically, in §5717.31. Also Publication 1450, Request for Release of Federal Tax Lien, describes the condition under which a Certificate of Release may be issued and the required contents of the request. The Certificate of Release may be mailed either directly to the recorder's office, or to you, if you have a power of attorney from the taxpayer. If you're in a hurry, you can arrange to pick it up personally and hand-carry it to the recorder's office. The Internal Revenue Service has 30 days to issue the Certificate of Release following your written request. Section 6240 of Taxpayer Bill of Rights (now incorporated into IRC §7432), provides for jurisdiction to sue the Federal Government if the IRS knowingly or negligently fails to release a lien.Tax Due - Sufficient Equity: If the tax has not been paid, however, then you need to determine if there is sufficient equity in the property to pay off the IRS in full. To make that determination you must compute the balances due on all encumbrances that are ahead of the Federal tax lien and add on the expenses of the sale. If there is sufficient equity left in the property after all prior encumbrances and sale expenses have been taken into account, arrangements can be made with the Internal Revenue Service for release of its tax lien(s) as discussed above. For immediate release, it is important to remember that the Internal Revenue Service must be paid by a certified or cashier's check. If a revenue officer is actively working the case, sometimes arrangements can be made for the revenue officer to come to the closing with the releases. It should also be noted that one certificate of release should be issued for every recorded lien. Tax Due - Insufficient Equity If there is insufficient equity in the property to pay off the Internal Revenue Service in full, all is not lost, however. Clear title to the property can be conveyed to the buyer nonetheless. That can be accomplished by applying for a Certificate of Discharge against the property being sold. A Certificate of Discharge will not release the general lien against the taxpayer, but it will release the lien as to the specific property being sold. As IRM §535(12) explains, (1) It is important to distinguish between the "release" of a Federal tax lien and the "discharge" of property from the effect of a tax lien. The release of a tax lien operates to completely extinguish the lien, while a discharge operates only to discharge specific property from the lien. The statutory authority for issuing a Certificate of Discharge is IRC §6325(b). Section 6325(b)(1) deals with a sale of part of the property; section 6325(b)(2) deals with the sale of the entire property. Procedures for the petition of a Certificate of Discharge are detailed in IRM §5718.2 et seq., as well as Internal Revenue Service Publication 783 and Treasury Regulation §401.6825-1(8) (Rev. Proc. 68-9). The key factor again is determining the equity in the property. For purposes of applying for a discharge of a federal tax lien, equity is determined by establishing the balances due (till the day of closing) on all encumbrances recorded ahead of the Internal Revenue Service's lien(s). Frequently this will include the first and possibly the second mortgage, unpaid real estate taxes, (regardless of whether or not there has been a tax sale) and any judgment liens. In addition, closing costs should be taken into account, such as loan origination fees, points, realtor's commissions, attorney's fees, fees for recordation of releases, etc. The sale price, less the payoffs for prior encumbrances and closing costs, determines the amount the Internal Revenue Service will demand in exchange for a Certificate of Discharge. Sometimes a disagreement will arise as to what constitutes a prior encumbrance or, more likely, the amount of the closing costs. For example, while the Internal Revenue Service will frequently allow 6 to 7% realtor's commissions, it will not allow more than $750.00 in attorneys fees - regardless of the complexity of the transaction or the amount of work done by the attorney. (The Internal Revenue Service's procedures are not well documented on this specific issue and there are no relevant court decisions.) At any rate, after the Internal Revenue Service reviews the petition, it will issue a letter of commitment, either Pattern Letter P-402 or P-403. P-402 will be issued under IRC §6325(b)(2)(B) when it is determined that there is no equity in the property (ie: Internal Revenue Service's interest in the property is valueless); P-403 will be issued under IRC §6325(b)(2)(A) when it is determined that the Internal Revenue Service's interest in the property is some specific dollar amount. In the first case, the Internal Revenue Service promises to issue a Certificate of Discharge upon proof that the taxpayer has been divested of interest in the property; in the second case, the Internal Revenue Service promises to issue a Certificate of Release upon proof of divestiture of the taxpayer's interest as well as the receipt of the specified amount (by certified or cashier's check). In many cases this letter of commitment is sufficient to close, though many title companies remain nervous about waiving the Internal Revenue Service's lien on the basis of the letter of commitment. Some feel that the "Internal Revenue Service is unpredictable". Closing Comments A number of interesting variations and/or permutations can develop from this basic scenario. For example it may be that the husband alone has a federal tax lien filed against him while the property is held jointly by husband and wife. In that case the Internal Revenue Service's equity, if any, is cut in half. Other interesting variations can include foreclosure proceedings, bankruptcy and tax sales. In some cases, subordination of a tax lien or a certificate of non-attachment may be in order. All of those, however, are the stuff of which future articles are made of. Incidentally, the procedures outlined here apply equally to real and personal property, such as machinery and equipment, as well as individuals and businesses. In the case of a sale of a manufacturer's machinery and equipment, Article 6 of the UCC (bulk sale provision) may apply as well. CRIMINAL INVESTIGATION There are a number of statutes in the Internal Revenue Code that authorize the federal government to prosecute individuals, including those dealing with tax evasion, fraud and false statements, failure to file returns, failure to pay tax, etc. Some, like the tax evasion statute, are worded in particularly broad terms and may ensnare the unwary or careless taxpayers. IRS Criminal Investigation Division ("CID") may become involved in a number of ways. Usually it may open up an investigation in the higher profile cases, ones involving drug dealings, political figures, alleged mobsters, etc. Some of these are the result of coordination with the FBI, DEA, INS and other agencies and could be part of special programs being targeted by the federal or state governments. However, average citizens should not assume that they are immune from investigation by the CID. They may be targets of special programs, such as those involving tax protester groups, bankruptcy fraud, or bank deposits or currency exchange transactions involving cash of $10,000.00 or more, for example. In addition, they may be referred to CID by Revenue Agents of the Examination Division or Revenue Officers of the Collection Division who have reason to believe that there may be fraud or tax evasion involved in the cases they are working. Finally, CID may open an investigation simply as a result of a telephone call to their "squeal" line if it feels that the call warrants further investigation. A criminal case is the most serious kind of case that IRS can have against a taxpayer. Nothing even comes close to the impact of an investigation by the Criminal Investigation Division. If it results in a referral to the U.S. Justice Department and subsequent prosecution, the consequences may be devastating, including damage to the taxpayer's personal and business reputation, financial ruin, break up of his or her family unit, and, worst of all, incarceration. If you are contacted by Special Agents and asked to be interviewed, decline the interview and contact a criminal attorney immediately. Do not say anything to them. Anything you say may be held against you - even statements you may consider to be innocuous. For example, many criminal statutes require an element that is known as "willfulness." Willfulness is a state of mind that cannot be demonstrated through direct evidence. The government must resort to circumstantial evidence to prove a state of mind, such as statements by the taxpayer. Therefore, even statements about the weather, depending on the context in which they are made, may be relevant to prove "willfulness." An unwary taxpayer, encouraged by seemingly friendly and low-key Special Agents, may disclose information that is damaging to his or her case. How do you know you have been contacted by Special Agents? They almost always travel in pairs, show their gold badges, and, as a matter of policy, usually read your "Miranda" rights on initial contact. The need to retain counsel cannot be overemphasized. The criminal "game" is played by special rules and you need a representative who knows them. Tax Evasion This is a particularly broad, catch-all statute that subjects the taxpayer to fines of up to $100,000.00 ($500,000.00 for corporations) and imprisonment of up to 5 years for the willful attempt in any manner to evade or defeat any tax under the Internal Revenue Code. While used sparingly by the U.S. Justice Department, it nevertheless remains a potential trap for even the most innocuous and benign transgressions of the IRC. Fraud and False Statements Any person who makes a false or fraudulent statement, or assists another person to make a false or fraudulent statement in connection with documents submitted to the IRS, such as Form 433A or B, or an offer in compromise or a closing agreement, may be prosecuted under this statute and, if convicted, subjected to a fine of up to $100,000.00 ($500,000.00 in the case of a corporation) and imprisoned up to three years. Concealment of property from the IRS, or withholding, falsifying or destroying records, also subjects the person to prosecution under this statute. Failure to File Returns, Supply Information, or Pay Tax This is another broad statute that can be used to criminally convict a taxpayer for failing to file a tax return, filing an incomplete one, or not paying the tax that is due. The taxpayer may be fined $25,000.00 ($100,000.00 in the case of a corporation), plus costs of prosecution, and incarcerated up to one year in a federal prison.
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