by steve | Jan 20, 2010 | Tax Help, Uncategorized
Telephone Service. The report designates the IRS’s declining ability to answer telephone calls as the most serious problem facing taxpayers. Olson notes that the IRS has set a target for FY 2010 of answering only 71 percent of calls from taxpayers seeking to speak with a customer service representative about account questions, down from 83 percent in FY 2007.
?In other words, the IRS is planning to be unable to answer about three of every 10 calls it receives,? Olson said, adding that the IRS expects those who get through will have to wait an average of 12 minutes. The report states that this projected level of service is barely above the level of 69 percent notched in 1998, when Congress passed the landmark IRS Restructuring and Reform Act due in large part to concerns about inadequate taxpayer service. This level of service is unacceptable,? Olson wrote.
Examination and Collection Issues. The report contains a detailed assessment of the Internal Revenue’s examination and collection practices, concluding that many practices have been developed piecemeal and that the IRS lacks an effective overarching strategy to maximize voluntary compliance. The report also concludes that IRS collection practices often harm taxpayers without producing revenue.
In particular, the report cites the IRS lien filing policies as the second most serious problem facing taxpayers. The IRS uses automated systems to file liens against taxpayers in a variety of situations, even when the taxpayer possesses minimal or no property and the lien will do little more than damage the taxpayers financial viability and access to credit. A study conducted by Olson?s office found no obvious causal relationship between the number of lien notices filed and the amount of overall revenue collected. Over the past decade, the IRS increased its lien filings by nearly 475 percent ? from about 168,000 in FY 1999 to nearly 966,000 in FY 2009, yet overall inflation-adjusted collection revenue declined by 7.4 percent during this period.
A second study found that IRS procedures for determining a taxpayers ability to pay outstanding tax liabilities may be driving some taxpayers into long-term noncompliance because the IRS fails to consider other debts such as credit card balances, school loans, and actual hospital or medical bills. Other tax systems, including Sweden’s, consider the taxpayers overall financial picture.
?Any taxpayer with these debts will tell you that these creditors don’t go away,? Olson said. Taxpayers are placed in the intolerable position of agreeing to pay the IRS more than they can actually afford (given their other debts) and then defaulting on the IRS payment arrangements when they channel payments to unsecured creditors in order to get some peace. Thus, the IRS itself fosters noncompliance by its failure to take a holistic approach to the taxpayers debt situation.?
http://www.irs.gov/newsroom/article/0,,id=217903,00.html
This report is taken directly from the National Taxpayer Advocate published at the IRS website. The question I ask, what will IRS do to fix the problems? I guess we will wait and see.
The above link is the report in full given to congress.
by steve | Jan 20, 2010 | Tax Help, Uncategorized
How to Obtain a Transcript of Your Past Tax Information.
ALL Taxpayers who need to get their past tax return information on business or personal can obtain it from the Internal Revenue Service. Here are some of the things to know if you need copies of your federal tax return information.
There are two very easy options for obtaining free copies of your federal tax return information or tax return transcripts. First of all, the IRS does not charge a fee for transcripts, which are available for the current year as well as the past six or seven tax years.
A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. It is the original tax record. In many cases, a tax return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans and other institution needing official tax records.
A tax account transcript shows any later adjustments either you, your representative or the Internal Revenue Service made after the original tax return was filed. The transcript shows basic information including marital status, type of return filed, adjusted gross income and taxable income.
To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message. You can also send a letter to the IRS asking for the above information. Be sure to include the years of the information you are seeking.
by steve | Jan 12, 2010 | Tax Help, Uncategorized
The following tips will help you choose a GOOD tax preparer who will offer the best service for your tax preparation and all your tax needs.
First of all, check on the person’s or company’s qualifications and find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics or conduct.
Check to see if the preparer has any questionable history. One of the ways to check is with with Better Business Bureau in your area, the State?s Board of Accountancy for CPAs or the State?s Bar Association for Attorneys. You can also use a search engine like google to see if there is any information on line about the preparer. You will find complaints on line many times. Find out about their service fees and especially avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers. Some of these tax preparers will wind up in jail and your tax return will wind up being audited.
Make sure the tax preparer is accessible. Be sure you will be able to contact the tax preparer after the return has been filed, even after April 15th, in case questions arise. Many have email addresses and a web presence.
Provide all records and receipts needed to the preparer to complete your tax return. Most reputable preparers will request to see your records and receipts. They will also ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
Never ever sign a blank return and avoid tax preparers that ask you to sign a blank tax form.
Review the entire return before signing it. Make sure you review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it. If it is a joint tax return make sure the spouse is present with this as well. Also, make sure the preparer signs the form. A paid preparer must sign the tax return as required by law. Although the tax preparer signs the return, you are still responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
At last, ask the tax preparer if they will defend the tax return should the IRS chose to audit the it. If a balance is due, make sure the checked is stapled to the tax return.
by steve | Jan 11, 2010 | Tax Help, Uncategorized
How the IRS determines responsibility for trust fund cases. Call Fresh Start Tax we can Help, 1.866.700.1040.
A trust fund recovery case begins with unpaid 941 payroll taxes from a corporation. After some period of time, the IRS computer catches up with the unpaid 941’s on corporate cases. These cases are always sent to the field for an examination of the Trust Fund Recovery Penalty.
After a series of notices are sent out to the corporation, the case eventually works its way out to the field where an IRS Revenue Officer is assigned to it. After the Revenue Officer goes through necessary office checks, a field call is usually set up to visit the taxpayer at their place of business. After the visit, the Revenue Officer will normally make demand for the tax to be paid in full or work out some sort of payment plan. In most of these cases payment cannot be made in full to pay the IRS tax liability. In these situations, the Revenue Officer normally makes a decision that the best way to secure the governments interest is to make sure that the corporate officers who are responsible for paying the tax are set up with an individual liability to pay these 941 taxes. This is called setting up the trust fund liability.
These assessment become linked with the individuals. The assessments are made as though you would owe personal income tax. The code section that deals with this administrative procedure is Section 6672. Multiple individuals may be set up as responsible parties.
The revenue officer goes through a number of items to determine who is responsible. After 10 years on the job, it does not take a long time for the IRS Agent to figure this out. It is obvious who the responsible parties usually are.
Below are some of the check lists used.
Step#1 – Find out who is responsible to follow the money. That is who signed checks and who benefited from profits. The Internal Revenue Service is looking for who controlled the money. The IRS can ask the company to cooperate by asking for checks to review signatures. Or, the IRS can directly summons the bank to see who is on the bank signature cards and who signed the majority of the business checks. This usually points them in the right direction.
Step #2 – Who signed the 941’s, who is responsible for the preparation and signing of the tax forms. Anyone in the chain of events that had knowledge or authority may be held liable by the IRS. The fear of the IRS agent asking a companies staff questions can be very unnerving and the IRS agents on these types of cases are trained to get to the truth.
Step #3 – Who is really in charge. At the end of the day, someone is the decision maker. Who really is that. Who really controlled the operations of the company.
Step#4 – Who has the right to hire and fire. Whoever had this responsibility had a lot of influence in the company.
Step #5. – Who had the right to determine financial policy. In other words, who talked with the bank. The bank knows the true officers of the said corporation.
Step #6. – Who has the right to authorize all bills and pay other creditors. When you get to this point it starts to get real obvious who the responsible officers are.
Step#7 – Who had the right to open and close the bank accounts. Only the true officers of the corporation had this authority.
Step#8 – Who guaranteed or co-signed loans. Only someone who had a true vested interest in the company would want to do this.
Step #9. – Who authorized payroll. Even though this can be delegated to anyone, usually the responsible person has an interest in this function.
Step #10 – Who could sign the corporation’s tax return. This is true evidence of responsibility.
If the IRS does not find out who is responsible after this process, they will ask the neighboring businesses or the landlord. Usually, they all come up with the same person. By the way, whoever signed the lease, is usually a good choice. Another thing the IRS agent uses are the corporate resolutions found at the bank. The IRS also uses a Form 4180 which is collection interview form that is several pages of questions. Upon completion, the agent can make the determination easily.
As a former agent, everyone wants to blame the other person, a real who done-it. It is always someone else’s fault. A key tip for persons that might be be reading this is that if you are in trouble or heading that way, contact a professional to represent you. We at Fresh Start Tax are experienced in these types of IRS Cases. Another tip is if you are making tax payments, write on each check to IRS, “monies to be applied to trust-fund only”. If you do that, each payment will be applied to the trust fund tax and not go to penalties and interest. A final tip, if you do not like the revenue officers findings, you can always take your case to appeals.
If you are Involved in a Trust Fund Recovery Case, Call Fresh Start Tax at 1.866.700.1040 and Get the Help you Deserve.
by steve | Jan 11, 2010 | Tax Help, Uncategorized
The Processing Of Part Pay Agreements For Business Accounts and Application Of The Trust Fund Recovery Penalty.
When a business has an inability to pay delinquent and accrued taxes to the IRS, the following actions are taken by the Internal Revenue Service:
If a businesses has a hard time paying operating expenses and current taxes, then deferring action on delinquent and accrued taxes may serve no useful purpose. Appropriate collection action such as levy, seizure, or a trust fund penalty, will be considered to protect the IRS and the federal government’s best interest. The taxpayers interests must also be considered and the financial statement will be reviewed with the taxpayer to determine if there is a way to reduce expenses in order to make payment on the taxes and avoid enforced collection action.
When it is determined the taxpayer can pay current taxes as well as operating expenses, they will be required to pay the delinquent taxes. The taxpayer can then request an installment agreement.
When taxpayers are in business, are currently pyramiding trust fund taxes and have been repeatedly assigned to the collection field function for outstanding liabilities, then they are considered “repeaters.” These taxpayers may not be granted installment agreements. If, however, after contact, taxpayers originally classified as repeaters do not continue to accrue liabilities and begin making Federal Tax Deposits and file all appropriate returns (so that they are in compliance with all filing requirements); then, they are no longer considered repeaters and may qualify for installment agreements.
In-Business Trust Fund Installment Agreements Requiring Financial Analysis and Determining Ability to Pay
When Notices of Federal Tax Lien were not previously filed, a federal tax lien determination will be made on the taxpayer and or the business.
The IRS will verify current compliance with filing and deposit requirements of all required taxes including your personal income tax.
The IRS has a special procedure that they will consider for special deposits and monthly filings. These are usually on repeat offenders.
IRS will determine the taxpayer’s (business) ability to pay.
The IRS will secure Form 433B, Collection Information Statement for businesses and, if appropriate, Form 433A, for individuals. The IRS wants to determine if these in-business taxpayers can fully pay liabilities from current assets and or income. If they do not qualify for installment agreements full payment will be requested. The IRS will collect the monies from personal funds if available.
If the case is worked by a field agent the case will go through a very thorough review of all financial statements.
Trust Fund Recovery Penalties and Installment Agreements
The trust fund program is a priority for the IRS.
The IRS must ensure consideration is given to securing waivers to extend the statutory period for assessment from each responsible individual or individuals when the delinquent taxes will not be fully paid prior to the original statue.
The IRS will ask for waivers from responsible individuals and notify them of their right to refuse to extend the period of limitations, or to limit such extension to particular issues, or to a particular period of time. The IRS will seek to extend the statute if possible. Taxpayers will be notified of their right of refusal each time they are requested to sign a waiver extending the period for assessment.
The IRS will fully explain to the taxpayers that signature on a waiver, extending the period for assessment, will allow the Service to collect the delinquent and accrued taxes through an installment agreement which extends beyond the original Assessment Statute Expiration Date. This is not what you want at all!
On trust fund recovery penalties, no interest is charged until assessments are made.
Payments on Trust Fund Accounts During Approved In-Business Trust Fund Installment Agreements
Under the Trust Fund Recovery Penalty (TFRP) more than one entity or individual may be liable, or become liable, for the trust fund portion of liabilities. This is the federal governments way to collect the trust fund taxes from responsible individuals. Therefore, when businesses enter into installment agreements with the IRS the entities or individuals liable for the TFRP may prefer (and request that) the business’s payments be applied to the trust fund portion of the balance due accounts. If this occurs, the business should be notified that:
Installment agreement payment application is governed by the IRS and the terms of the agreement.
As stated on the agreement form: “We will apply all payments on this agreement in the best interests of the United States.”
Taxpayers are not permitted to designate installment agreement payments.
Installment agreement payments will be applied in the best interests of the United States, regardless of the policy to apply payments to tax first and then to penalties and interest when dealing with trust fund tax. This will vary from agent to agent. Professional help is needed here.
Individuals who are potentially responsible for the trust fund tax will be asked to make payments from their own resources. These payments are not considered to be installment agreement payments.
The local agent working this case is responsible for all determinations. That person is called a Revenue Officer.The following are possible applications of the trust fund taxes.
Example One
(1) Diaper Corp has not made a request for an installment agreement. Mr. Clinton, officer of Diaper Inc., tells the IRS revenue officer that he will pay $500 per month toward the trust fund portion of a tax liability with personal funds. The trust fund penalty has not been assessed as yet and Mr. Clinton has not yet been determined to be responsible for a trust fund recovery penalty. The balance due period or periods from which the liability was derived have not been specifically identified. Since the liability has not been identified this is not a pending installment agreement. Also, Mr. Clinton must be informed that any payments will be considered “voluntary”, and may be applied according to his instructions. Information regarding the contact must be documented in the case history.
Example Two
The same above scenario exists as above. Mr. Clinton has signed Form 2751 agreeing to the trust fund recovery penalty of Diaper Inc. As long as Mr. Clinton provides a specific payment amount this is a pending installment agreement. Note that the installment agreement is pending for Mr. Clinton’s trust fund recovery penalty, not for Diaper Corporations balances due on the back taxes.
Example Three
Football Inc. enters into an installment agreement requiring payment of $500 per month. The corporation does not make payments from corporate funds. Instead, corporate officers Ben and Jerry take turns designating payments of $500 per month with their personal funds on behalf of Football Inc. Although they write on their checks that the payments should be applied to the trust fund portion of the liabilities, these payments may be applied in the best interest of the government.
Example Four
Same as Example 3, except Football Inc. makes its monthly payment of $500 from corporate funds. In addition to the installment agreement payments made by the corporation, the officers make payments as described above. These payments, made in addition to the payments made by the corporation under the agreement, may be applied according to the officers’ instructions.
