by steve | Oct 6, 2009 | Tax Help, Uncategorized
How easy is it to get penalties and interest abated?
That is a question that I am asked on a daily basis and there is an easy answer. The answer is simply, ” if reasonable cause exists”. The next question that comes from that, ” what is a reasonable cause”?
There is no magic wand to wave regarding penalty abatement. The IRS is very tough on abatement because once assessed the penalty becomes taxes that are owed. The IRS makes it very difficult to abate penalties and interest and unless documented very well, most of these cases end up in appeal and then denied. Even though I am not aware of statistics available, I would say, one out of every hundred are accepted, if that. As a general rule, almost all penalties seem to get a reject letter the first time around because they are not filled out with the documentation that the IRS requires. There is an art to filling out the abatement requests. Firms that know how to do this are invaluable .
So what is reasonable cause?
While by no means should this be all encompassing, there will be a couple of basic thoughts and trend patterns to follow when considering abatement of almost 150 plus penalties that IRS can hit you with. Also, it should be known that reasonable cause exists on a case by case basis.
The first principle of reasonable cause is determined and based on whether or not the taxpayer used and exercised ordinary business care and prudence to make payments and accounted for the filing of all and any tax returns timely. This ordinary business care is just that, ordinary, nothing more or nothing less.
The second principle is as simply as this sounds. Does the event make sense? You find incredible fabricated stories that seem as though they come from a sci-fi movie that you talk about in the break room at the IRS. You want to make sure a third party would understand and believe the explanation.
The third principle is very important and it is where most people make their mistake. It is the time line. Does the explanation fit the time line of events? The time line of the explanation must fit the period of time.
The fourth principle is the case documentation. Do you have substantiation for the event? Do you have letters from third parties, accountants, witnesses, doctors in some cases or employees of the business. The IRS does not usually accept self serving letters written to excuse oneself. Having third party letters are a key to abatement. Sometimes having notarized statements adds to the credibility of the situation.
The fifth principle is the packaging of the case along with the IRS guideline that the reasonable cause follows.
While this is not a comprehensive list, it is a good start to penalty abatement.
by steve | Oct 6, 2009 | Tax Help, Uncategorized
Yes they can, if reasonable cause exists. The reasonable cause should be documented and signed under penalties of perjury. Please review the following:
Failure to timely file the information return, absent reasonable cause, can give rise to a penalty under section 6652 of the code. Whether or not an organization qualifies for the reasonable cause exception to the penalty will be determined on a case-by-case basis taking into account all relevant facts and circumstances.
The regulations provide that a request for abatement of penalties based on reasonable cause must be made in the form of a written statement, containing a declaration by the appropriate person that the statement is made under penalties of perjury, setting forth all the facts alleged as reasonable cause. This statement should be made as an attachment to the Form 990; please disregard the Schedule O instructions that ask for this statement to be included in Schedule O. When requesting abatement of penalties for reasonable cause, your statement should include supporting documentation and address the following items:
by steve | Oct 6, 2009 | Tax Help, Uncategorized
How do I get a release of Federal Tax Lien?
A complete release of a Federal Tax Lien comes in various fashions. The first and easiest way to get a Federal Tax Lien released is to pay the liability in full with a cashier’s check. Within days, you can have a release. Many times if you are selling your house, the IRS has a procedure for a simultaneous release of lien at closing. Check with us for these details.
Another way is to get an Offer in Compromise accepted and when it is paid in full, the IRS will issue a Release of the Federal Tax Lien. You want to make sure it gets filed at the court house closest to your residence. Another way is to post a surety bond for the full amount of the tax. This is done by filling out the necessary forms and paying the required dollar amount. These are very expensive and only used in very rare circumstances. Once your tax lien has been released, you want to make sure all three credit reporting agencies reflect the same data. Many times one credit report will not show the release of the tax lien. Jump on this!
by steve | Oct 6, 2009 | Tax Help, Uncategorized
You better believe it! It kills your credit. The IRS tax lien is a destroyer to all those who want to ever get a loan.
Caution!
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore, it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.
This is the case because IRS can seize an item you have just purchased. You want to stay away from this federal tax lien as much as possible. People can never make the aforementioned purchases once this lien is filed. You will need a release of the federal tax lien to resolve this problem.
by steve | Oct 6, 2009 | Tax Help, Uncategorized
This is a question we are often asked. Tax planning on your case becomes a key issue and knowing how long the lien is good for is critical.
How long is a Federal Tax Lien good for?
A Federal Tax Lien continues until the liability for the amount that is assessed against you is satisfied in full. The Federal Tax Lien could also become unenforceable because of a lapse in time. The collection period expires ten years from the original date of the assessment
Can the ten year period of time be extended by law?
Yes it can.
- How long is a Federal Tax Lien good for?
The statute of limitations was extended at the same time an installment agreement was entered into. In this case, collection action may be taken until the 89th day after expiration of the installment agreement. IRC § 6502(a)(2)(A). You want to make sure IRS does not extend the statue of limitations on your case
- Or if a release of a levy under IRC § 6343 is accompanied by an agreement to extend the statute of limitations to a specific date and that date has not yet passed. IRC § 6502(a)(2)(B); Treas. Reg. § 301.6343-1(b)(2)(ii)(D).
Other reasons that exist common to these cases is that the taxpayer has been outside the United States for a continuum of 6 months or a bankruptcy has been filed. These also extends the statue of limitations. There are a few other reason though rare.
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