Jim Magary | Fresh Start Tax

IRS Tax Audits Help + Use Of Electronic Records FAQ

by Jim Magary | Mar 30, 2016 | Tax Help

Affordable IRS Tax Audit Help, Tax Audit Defense – Former IRS Agents

We have 205 years of direct tax experience, 65 years of working for the IRS in the local, district and regional offices.

We worked as Agents, Instructors and in IRS Management.

We know the settlement techniques and formulas to save your money.

Be worry free, call us today. 1-866-700-1040

We are one of the nations most experienced IRS Tax audit defense help firms.

It only makes sense to have Former IRS Agents and IRS Tax Audit Managers handle your IRS tax audit and give you the most experienced and successful IRS Tax Audit Help.

Call us today for a free initial tax consultation.

Use of Electronic Accounting Software Records; Frequently Asked Questions and Answers

Here are some frequently asked questions and answers for electronic accounting software records requests and submissions during Small Business/Self-Employed examinations.

Q1. Why is the IRS using electronic accounting records instead of continuing to use traditional paper books and records in examinations?

A: Electronic information management has become the standard in the private sector and is now being used to enhance the IRS examination process.

Obtaining accounting records in electronic format provides significant advantages:

1.Reduces burden because taxpayers and/or representatives don’t have to print records provided electronically.

2.Provides a complete set of the taxpayer’s accounting records, decreasing the number of items included in the initial document request and follow-up requests.

Increases efficiency of the examiner’s analysis and testing of the books and records.

Q2. How and when will the IRS request electronic accounting software records?

A: The IRS will request electronic accounting software backup files using Form 4564, Information Document Request (IDR), early in the examination.

IRS will also request the administrator’s username and password, as they are needed to read most data files.

The backup file should be provided on a CD, DVD, or a flash/jump drive.

E-mail must not be used to transmit electronic records to or from the IRS, a taxpayer, or their representative, to ensure security.

Q3. What is the IRS doing to address concerns about sharing the accounting software administrator’s username and password for the audit?

A: The taxpayer can preserve any favorite password by changing the administrator’s password to a temporary one, such as “IRS Audit.” Create the backup file for submission and then change the password back to the original “favorite” one within the main accounting software working file.

The temporary password must have administrator access to the backup file provided because the IRS needs to have the same access levels as the administrator.

If the examiner does not have the administrative password, he or she will not be able to read the data as needed for the examination.

Q4. What if a taxpayer uses an accounting software program that is not readable by the IRS?

A: At this time, IRS has the ability to accept and read data files from accounting software programs that are used by most business taxpayers.

Taxpayers should consult with the examiner before submitting any type of electronic files.

Whenever possible, the IRS will work with the taxpayer and their electronic accounting records to reduce the number of information document requests (IDR’s).

However if the examiner is unable to read the electronic accounting records, he or she will determine the best course of action to complete the audit in a timely, efficient manner.

Q5. Now that IRS has the ability to accept electronic information from accounting software programs, will backup files be requested in every examination where the taxpayer uses those programs to maintain their books and records?

A: Using electronic records to conduct examinations should make the audit more efficient for everyone.

Examiners will be requesting these files in the majority of cases where the taxpayer already uses electronic accounting software to maintain their books and records.

However, if the audit is limited in scope, such as auditing one specific expense item, the examiner may determine that requesting the electronic accounting software file may not be necessary.

In broader scope audits, such as when verifying gross income, the backup file will likely be requested by the examiner.

The professional judgment of the examiner and his or her manager will be used on a case by case basis to determine whether it is appropriate for a particular examination.

Q6. How will the electronic data be used?

A: Most accounting software programs can generate a large number of pre-set reports. Each report can be modified to fit the examiner’s needs.

When working with these reports, the examiner can “drill down” to the underlying data and documents to further investigate items, as appropriate.

The software also allows the examiner to test the integrity and veracity of the accounting records in making a determination as to the reliability of the records for examination purposes.

However, the examiner may still need to request other documents when such records are necessary to properly test a return item or issue.

Q7. What is the IRS’s legal authority for requesting electronic files and other relevant accounting records? How does Revenue Procedure 98-25 impact the IRS’ authority to request electronic records from small business taxpayers?

A: The legal authority for requesting accounting records in electronic format is based on IInternal Revenue Code section 7602(a), Internal Revenue Code section 6001, Regulation 1.6001-1(a) and -1(e) (PDF), Revenue Ruling 71-20 and Revenue Procedure 98-25.

Note that, although Revenue Procedure 98-25 exempts certain taxpayers from the requirements of the Revenue Procedure, this does not create an exemption for any taxpayer from having to produce electronic books and records if they otherwise exist when a business chooses to use an electronic accounting software program to maintain their books and records.

Q8. What if a taxpayer refuses to provide the IRS with an electronic accounting software backup file or any other type of electronic data file?

A: Our tax system is set up in such a way that taxpayers fill out their own tax returns and are responsible for maintaining their own books and records.

Under Internal Revenue Code section 6001 and Regulation 1.6001-1 (PDF), taxpayers are responsible for maintaining sufficient books and records to support the income and deductions claimed on their tax returns and for presenting this information to the IRS when requested to do so in an examination.

Further, sesection 7602(a)(1) grants the IRS the authority to examine any books, papers, records or other data that may be relevant or material to a tax examination. Section 7602(a)(2) grants the IRS the authority to summons the books and records.

If the taxpayer has concerns with providing a copy of their original accounting software backup file, they have the right to discuss the matter with the examiner’s manager.

If a taxpayer declines to submit the requested materials voluntarily, the IRS has the right to summons the information requested, use indirect methods to reconstruct income and/or disallow the items reported for lack of substantiation.

If the taxpayer or the taxpayer’s representative has concerns that the records contain sensitive or privileged information, please see Q&As #14 and #15 for guidance.

Q9. What if the taxpayer’s representative refuses to provide a copy of the taxpayer’s electronic accounting backup file?

A: If the taxpayer’s representative chooses to decline to voluntarily submit the requested materials, the IRS has the right to summons the information and the representative could be in violation of Treasury Department Circular No. 230 (PDF).

Subpart B, section 10.20(a)(1), of the Treasury Department Circular No. 230 (PDF) regulations states that “[a] practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.”

If the taxpayer or the taxpayer’s representative has concerns that the records contain sensitive or privileged information, please see Q&As #14 and #15 for guidance.

Q10. What if the taxpayer or representative agrees to provide a copy of the taxpayer’s company backup file; however, rather than providing an exact copy of the original file they create a new file for the IRS?

A: If the taxpayer or representative creates or reconstructs a new company file, for example, by re-inputting the transactions for only the year under examination, this new file does not satisfy the requirements or needs of the Internal Revenue Service.

The new or modified company file is not a copy of the books and records of original entry. The altered electronic file would not meet the requirements of the Information Document Request or a summons and the taxpayer’s representative could be in violation of Treasury Department Circular No. 230 (PDF).

If the taxpayer or representative wants to condense old or closed transactions for dates prior to the years under examination, see Q&A #13 for guidance.

Q11. Why should a taxpayer submit an accounting software backup file rather than simply export selected reports to Excel? What are the advantages to using the backup file over Excel?

A: The backup file is an exact copy of the original books of entry and allows the IRS to review and test the integrity of the original electronic records using the software program.

This testing cannot adequately be performed on records that have already been converted into Excel spreadsheets.

Examiners are required under IRM 4.10.3.4, Evaluating Taxpayer’s Internal Controls, and the related subsections, to acquire an understanding of the accounting system for all types of business returns.

An integral part of this process is an evaluation of the taxpayer’s internal controls.

Examiners use the information obtained during this process to determine the appropriate audit techniques to be used during the examination process.

Through tests and analysis of the electronic records in their original format examiners can properly evaluate the accounting system (including internal controls) to consider the reliability of the books and records.

This process is not unique to examinations where the electronic accounting records have been requested.

The control structure of an accounting system is often times dependent on the size and nature of the business. Frequently, smaller businesses are not able to establish sophisticated control and accounting processes. his is unlike larger entities where resources are more likely to be available for systems and processes.

An examiner will determine the appropriate method(s) for examination based on the accounting system and control structure of the business.

By reviewing an exact copy of the original backup file, the examiner can view transactions to see the date the transaction was originally created, dates of subsequent changes, what changes were made, and the username of the person who entered or changed the transaction.

This type of information is directly relevant to the evaluation of the taxpayer’s accounting system and internal controls.

If the various reports that are needed for the examination are only provided in spreadsheet format, there is a possibility that certain information, including metadata, could be lost or altered, leaving no reliable audit trail to identify these changes.

Q12. The accounting software backup file can contain transactional data for several years that are outside the scope of the audit.

What, if anything, will the IRS do with that information?

A: If IRS is given a backup file that includes data for years not under examination, IRS will not utilize that data during the examination of the current year.

If based on the results from the current year examination a decision is made to expand the scope of the examination to prior or subsequent years, the taxpayer will be notified.

The records may be utilized after that notification.

However, the examiner may review transactions that occurred in the month prior to and the month after the tax year or the tax periods before and after the ones under examination if the transactions in those timeframes are relevant to the examination.

Examiners may also review any transactional data created or changed during the tax year under examination.

For example, if a business under examination uses the accrual accounting basis, then it will be relevant for the IRS to examine transactions for the month prior to and the month after the tax years under examination to test the cut-off of reported income and expenses.

The same is true if a taxpayer creates a transaction to record sales during the year under examination, but the actual transaction is dated in a prior or subsequent year, then the examiner can inquire as to why the taxpayer determined the transaction would not properly be recorded in the year under examination.

As another example, if the IRS was exploring whether to reconstruct income by an indirect method (e.g., bank deposits or net worth method), then certain information for the tax periods immediately preceding and following the year under audit would clearly be relevant.

An inspection of the tax returns which are prior or subsequent to the tax years under audit does not constitute an examination of books and records.

Examiners are expected to inspect such tax returns in all examinations, and to compare them to the tax returns that are under examination.

Q13. May the IRS request electronic accounting records for periods not under examination?

A: IRS examiners may request the electronic accounting software data backup file to include the month prior to and the month after the tax year under examination, thus a fourteen (14) month period.

An examiner who makes this request is often looking for data for the month prior to and the month after the year under examination, in order to ensure a proper cut-off of reported income and expenses for the year under examination.

Sometimes the examiner may need to look at other categories of data pertaining to the month prior to and the month after the tax year under the examination, in order to conduct a proper examination of the tax year.

If the fourteen month period is insufficient to establish an accurate cut-off of revenue and expenses, or to verify other items, for the year under examination, the examiner may request a broader period.

The IRS must only show that the information requested is potentially relevant to the issues related to the year under examination in order to request the information.

However, if the taxpayer or representative has concerns the examiner’s request for records are not potentially relevant with respect to the tax year(s) and issues under examination, he or she may discuss the matter with the examiner or manager.

For additional guidance, please see Q&A #12 and IRS Chief Counsel Advice No. 201146017.

Q14. Can a taxpayer or representative condense or “clean up” the electronic accounting software data file before submission?

A: Many accounting software programs will condense old, closed transactions occurring prior to a manually selected date. For example, the closing of a prior year. Often this is done to reduce the size of the company data file.

The process essentially removes the details of those transactions from the data file and replaces them with summary journal entries, allowing monthly financial statements to be created for old years if needed.

The ongoing data file (working file) will no longer have the details of old, closed transactions which occurred prior to the manually selected date.

However, during the condensing process, the software creates a backup or archive copy of the company data file and this archive copy provides the original detailed records of each old transaction.

If you do not have a complete understanding of your software’s condensing feature, please contact your software provider for additional guidance before using it.

Condensed data is not acceptable for the tax year(s) under audit.

However, if you choose, the company data file can be condensed (through the clean up or purge feature) for dates prior to the year(s) under audit, as long as they do not include transactions created or changed for time periods under audit, or for transactions from prior years that have an effect on the years under audit.

If the scope of an audit is expanded, the IRS may request another backup file that was created prior to the date the company file was condensed or request a copy of the archive file created during the condensing process.

Q15. Accounting software backup files contain sensitive customer, vendor, or other information. Since it is possible that any release of this vital information would damage a business, what assurance does the IRS provide that this information is secure?

A: The security and privacy of information provided by taxpayers is taken very seriously by IRS. Internal Revenue Code section 6103 prohibits the unauthorized disclosure of information obtained during the course of a tax examination (including any sensitive business information).

IRS employees receive annual training on protecting taxpayer information from unauthorized disclosure and are reminded that they could face disciplinary action (up to and including removal) for such disclosures.

Also Internal Revenue Code section 7213 provides for criminal penalties for willful violations of section 6103.

In addition to the section 6103 restriction on disclosure, IRS has procedures in place for examiners on how to protect portable electronic media containing any taxpayer sensitive information.

Once the IRS no longer has a business need for the portable electronic media, examiners can return the data to the taxpayer or dispose of it following internal procedures for destruction of sensitive portable electronic media.

In addition, any copies made of the taxpayer’s electronic files on the examiner’s computer will be deleted once the case has been completely closed.

Q16. What if the accounting software backup file contains privileged information or information that is protected from disclosure by statute?

A: The issue of privileged communications is the same whether IRS is asking for electronic or paper records. IRM 25.5.5.4.3, Privileged Communications and Summons, provides guidance to examiners when a claim of privileged communication is made. Paragraph (2) of the IRM section states, “[p]privileged communications cannot be obtained by issuing a summons.”

The taxpayer is encouraged to discuss with the examiner if the electronic backup file contains privileged communications or information that is protected from disclosure by statute.

The examiner may ask an IRS Counsel attorney for assistance, if a taxpayer claims that records contain privileged communication or that a statute, such as the Health Insurance Portability and Accountability Act (HIPAA), prevents him from complying with a request for the records.

Generally, a customer list would not be privileged but there may be unusual circumstances in a particular case that could possibly make the information, when combined with other information, privileged.

Q17. Can IRS obtain health information from a taxpayer or third party when the information is protected from disclosure by regulations under the Health Insurance Portability and Accountability Act (HIPAA)?

A: Yes, IRS may obtain health information that is protected under HIPAA. Chief Counsel Notice 2004-034 (PDF) (dated Sept. 10, 2004), which provides guidance to IRS Chief Counsel employees, contains more information on the effect of HIPAA when IRS requests protected health information from a taxpayer or third party.

Tax Audits IRS + IRS Audit Tax Defense + ex-Agents

by Jim Magary | Mar 30, 2016 | Tax Help

Affordable IRS Tax Audit Help, Tax Audit Defense – Former IRS Agents

We have 205 years of direct tax experience, 65 years of working for the IRS in the local, district and regional offices.

We worked as Agents, Instructors and in IRS Management.

We know the settlement techniques and formulas to save your money.

Be worry free, call us today. 1-866-700-1040

We are one of the nations most experienced IRS Tax audit defense help firms.

It only makes sense to have Former IRS Agents and IRS Tax Audit Managers handle your IRS tax audit and give you the most experienced and successful IRS Tax Audit Help.

Call us today for a free initial tax consultation.

Facts about IRS Tax Audits:

The IRS audits a total of 1,391,581 tax returns a year.
The IRS field agents complete more than 310,000 audits by office or business visits a year.
The IRS completes over 1,081,152 correspondence audits a year.
IRS has installed new software tracking systems with the development of the CADE 2 computer to spot and recognize tax audits more proficiently
IRS collected over $10 billion dollars a year from IRS tax audits.
IRS employs over 13,000 IRS auditors.
$5.2 billion dollars are collected through the IRS document matching program.
For truly professional IRS Tax Audit help contact former IRS Agents and Managers.

IRS Policy Statement P-4-21. It states “The primary objective in selecting returns for examination is to promote the highest degree of voluntary compliance on the part of taxpayers.”

The IRS Tax Audit Examination Plan

The plan that is used by the IRS is based on long range coverage planning, and objectives on the resources requested in the Congressional Budget.

From this, there is an established plan where staff years are allocated to all area IRS offices using resource allocation and a prescribed methodology.

Each Area Manager of the IRS is responsible for preparing an area response following instructions from the National Headquarters.

Staffing for the IRS Tax Audit

Staffing is based on the examination priorities that differs from office to office and region to region, front loaded programs set up before hand, historic examination rates adjusted to yield sure ended results and audits that match experience of the personnel. Each region is excepted to produce tax audits and money from tax audits. IRS is funded thru results.

Why the IRS Audits Tax Returns

a. Front Loaded Programs

Front Loaded programs are those tax audits that IRS DC headquarters has determined are very important and a considerable amount of time must be spent on these programs and activities.

Each area has discussions within management as to what the programs should be for each region, district, and office.

Some of the programs are:

Special enforcement programs – An example of this may be compliance of all flee market vendors, a program I was involved with
High Income non-filers – The IRS would get their information from a match program of w-2’s and 1099’s and match up social security numbers against filed returns
Abusive Tax Avoidance – This could be in the area of offshore activities
Offshore credit card program
National Research programs – Those set forth by management after doing a trends project
FBAR filing – IRS is currently targeting those with overseas bank accounts
Non- filers – IRS is presently forming a task force to seek non-filers though aggressive means.

b. The IRS makes sure there is balanced coverage.

The National Office makes sure there is a balanced approach for audit return delivery and tax compliance. Resources and inventory and the size of personnel all go into this formula. The focus is blended into these areas:

Individual returns less than $100,000.
Individual returns greater than $100,000 but less than $200,000.
Individual returns greater than $ 200,000.
Small Business Corporations.
Small Business Flow-Through Entities – S Corporations, Fiduciaries and Partnerships.

c. Classification Plan

The IRS will prepare a plan, which is classified. A National DIF score indicator is placed on all Federal Income tax returns that are filed. Each tax return has certain factors that contribute to its score such as Gross Income, Adjusted Gross Income and line item expense.

There are several classified secrets that go into the DIF score.

Each tax return is processed through the IRS computer line item by line item.

A DIF score label is placed on every tax return with its DIF number. A tax examiner or Revenue Agent manually eyeballs each and every tax return with a high DIF score. The examiner then determine which return has the highest probability of tax audit success.

d. DIF Cutoff Score

The IRS will calculate the Area DIF cutoff score for each activity code, giving consideration to the selection rate.

This is the lowest DIF score necessary to secure the number of returns required for audit.

For example, if the return plan shows 225 returns for an activity code and the selection rate is 70%, the IRS will need to order 321 returns (225/70%).

The DIF Cut off Score is 500. The number of returns with DIF scores greater than 550 is 280, which is less than the number of returns required, so the lowest DIF score on an ordered return will be in the range of 500 to 550 and the DIF cutoff score is 500.

This is the IRS example as found in the IRS IRM section 4.

e. Where your case is worked

Examination inventory is assigned to IRS offices based on ZIP codes, using the Look up Tables at Martinsburg Computing Center.

f. High Assault Risk Areas

Certain ZIP code areas are identified as High Assault Risk Areas. There are special instructions the IRS has regarding these audits. These returns will be audited.

Survey of Examination Cases. The IRS can look over your case and close it with an eyeball look.

While cases should be selected and started in accordance with all guidelines, in a limited number of circumstances, there may be returns that appear in the “judgment of the examiner and manager” to warrant survey without taxpayer contact. That is to not even contact the taxpayer.
Cases delivered to the IRS area manager will generally fall into one of three categories: mandatory work, strategic (priority program) work, and non-strategic work.
1. Mandatory work includes nationally coordinated research projects such as NRP and employee audits (excludes “new” IRS employee audits)
2. Strategic work is identified annually in the Exam Program Letter which can be found at http://sbse.web.irs.gov/Exam/. The procedures to survey strategic work and referrals from other business units, “new” employee audits and cases with previous taxpayer contact require an explanation for the rationale for the survey.
3. Cases that are not mandatory work, strategic work, a referral from another business unit, and are not part of an employee examination or research study may be surveyed based upon the professional judgment of the examiner with concurrence of the immediate supervisor.
Here are some factors to consider when determining whether to survey strategic work:
1. Taxpayer is in bankruptcy
2. Taxpayer has suffered an extreme hardship or illness
3. Taxpayer is deceased, or
4. Examiner has additional information that was not available during classification
5. This is in the complete judgment of the IRS tax auditor

From year to year the IRS changes their programs to keep everyone honest. However, after years of experience, a trained eye can know what tax returns will be pulled for audit.

Why use former IRS agents for IRS tax audit help

Being former IRS agents we know all the protocols, all the theories, all the settlement formulas and all the tax procedures the IRS will use for a IRS tax audit.

While most tax professionals learn their IRS Audit skill during on-the-job training, former IRS agents and managers actually know the insider programs and insider secrets to successful tax audits.

The team of tax professionals we have at fresh start tax not only were former IRS agents and managers but were former instructors with the Internal Revenue Service not only taught a local office but also taught in the district and regional IRS offices as well.

We are one of the most experienced tax firms when it comes to IRS tax audit help.

If you’re got a hire a professional tax firm is wise to hire tax attorneys, certified public accountant or former IRS agents and managers who can provide you the very best IRS tax audit help.

There are many excellent tax firms to help you through this problem make sure you check on their experience and their Better Business Bureau rating.

Tax Audits IRS + IRS Audit Tax Defense + xAgents

Business IRS Payment Plan + OWE IRS Business Tax + Debt Settlements

by Jim Magary | Mar 30, 2016 | Tax Help

Michael Sullivan Fresh Start Tax Expert

Affordable Business Tax Debt Settlement Options + Former IRS Agents & Managers can settle your case, over 65 years of former IRS work experience. Since 1982.

Here the truth from Former IRS Agents who have worked thousands of cases. We can help settle and resolve business tax debt.

With over 65 years of direct working experience at the Internal Revenue Service we know every possible tax solution that can get you immediate and permanent tax relief for a payroll tax settlement or business tax problems. is important to know that IRS settles business tax debt in one of three ways.

We can file all back payroll tax returns and settle IRS payroll tax debt, and/or business tax debt, all at the same time.

Being a former IRS agent and teaching instructor you should understand that the Internal Revenue Service is tougher on payroll taxes than any other taxes.

The reason for this is very simple, this tax is money held in trust in not an actual tax.

The internal revenue actually sends out special FTD alerts the local offices letting them know of businesses in the area who own payroll tax debt. This programming phase in and out depending on inventories.

It is one of few taxes that the Internal Revenue Service not only go after the company it can in addition can go after the responsible persons or individuals.

This is a tax that you should not fool around with because it is number one on the IRS to hit list.

The Internal Revenue Service will individually engage those responsible under section 6672 of the Internal Revenue Code

We should be able to make sure we can reach a reasonable business tax settlement on your payroll tax liability and you can continue to operate your business without fear and worry from the Internal Revenue Service.

IRS does not want to seize your business for back taxes due on payroll taxes, however 941 payroll taxes are a big concern for the IRS.

The Process of Getting Business Tax Debt Settlement and IRS Tax Relief

The Internal Revenue Service will want to fully review your company or corporation before you can obtain in IRS payroll tax settlement.

You will need to provide IRS with the current financial statement along with proof that all payroll tax deposits and 941 tax forms have been filed.

When Internal Revenue Service reviews a business they also review individuals as well.

Therefore a personal or individual financial statements are required.

IRS will expect a 433B for the business & 433A for the individual.

IRS will expect complete documentation to support all the figures on the financial statements. The financial statement is one of the key documents IRS uses before a taxpayer will get a payroll debt settlement for tax relief.

After IRS reviews your current financial statement, Internal Revenue Service may determine that you are a:

1. hardship candidate, you can stay in the status for 2 to 3 years before the IRS will review your case once again. Interest and penalties continue to run and IRS expects to stay current filings and deposits.

2. monthly payment agreement candidate, this is simply based on your current verifiable income and expenses.

3. or an offer in compromise candidate and IRS payroll settlement, IRS will require extensive financial statements from both business and personal.

Who Can Be Responsible for the IRS TFRP

One of the unusual features about payroll tax debt is the fact that IRS can collect the trust fund tax debt from the individuals who are responsible for paying the back payroll taxes. This is true with both payroll and excise taxes.

The TFRP may be assessed against any person who:

a. Is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and

b. Willfully fails to collect or pay them.

A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes.

This person may be:

1. An officer or an employee of a corporation,

2.A member or employee of a partnership,

3.A corporate director or shareholder,

4.A member of a board of trustees of a nonprofit organization,

5. Another person with authority and control over funds to direct their disbursement,

6. Another corporation or third-party payer,

7. Payroll Service Providers (PSP) ore responsible parties within a PSP

8. Professional Employer Organizations (PEO) or responsible parties within a PEO, or

9. Responsible parties within the common law employer (client of PSP/PEO).

For wilfulness to exist for IRS to assess , the responsible person:

Must or should have been, or should have been, aware of the outstanding taxes and either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).

Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of wilfulness.

You will be asked to complete an interview in order to determine the full scope of your duties and responsibilities. Interviews will be conducted on form 4180

Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.

An employee is not a responsible person if the employee’s function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid.

It is not wise for taxpayers to represent themselves when IRS’s trying to assess the trust fund recovery penalty. As a former IRS agent I can tell you can say bunches of money by having a professional firm represent you during this process.

How does IRS Figure the Trust Fund Amount

The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:

The unpaid income taxes withheld, plus

The employee’s portion of the withheld FICA taxes. For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.

Assessing the TFRP. If the IRS determines that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you. You have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal our proposal.

The letter will explain your appeal rights. You must follow-up on this letter.

Refer to Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree (PDF), for a clear outline of the appeals process.

If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.

Once IRS asserts the penalty, the IRS can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.

Why have Fresh Start Tax LLC contact the IRS:

You never have to talk with the Internal Revenue Service on these tax matters;
Fresh Start Tax knows what the IRS is looking for;
Fresh Start Tax knows the exact packaging required;
Fresh Start Tax knows the next steps the IRS will take;
You know your case will be handled and resolved as fast as possible

Steps necessary to work out an affordable payment plan with the Internal Revenue Service:

Immediately stay current on all payroll tax deposits to show the IRS good faith,
Be prepared to give the IRS a current financial statement,
Make sure your personal tax liabilities are filed and paid,
Have all documentation on the financial statement prepared for the IRS.

If you do not pay your Payroll Taxes IRS can collect them from you individually
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP.( trust fund recovery penalty )

These payroll taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount.The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business.

The business does not have to have stopped operating in order for the TFRP to be assessed.

On many cases, as the Internal Revenue Service works on payroll cases they will assess the individual trust fund penalties against the responsible officers as the business continues to operate.

If you have business tax debt and wish to resolve your tax situation with a payment plan or offer a compromise, call us today for a free initial tax consultation.

Business IRS Payment Plan + IRS Business Tax Debt Settlements

File Back Payroll Tax Return = Settle IRS Payroll Taxes, 941 Tax Debt

by Jim Magary | Mar 30, 2016 | Tax Help

Affordable Payroll Tax Debt Settlement Options + Former IRS Agents & Managers can settle your case, over 60 years of former IRS work experience. Since 1982.

Here the truth from Former IRS Agents who have worked thousands of cases.

With over 60 years of direct working experience at the Internal Revenue Service we know every possible tax solution that can get you immediate and permanent tax relief for a payroll tax settlement.

We can file all back payroll tax returns and settle IRS payroll tax debt all at the same time.

Being a former IRS agent and teaching instructor you should understand that the Internal Revenue Service is tougher on payroll taxes than any other taxes.

The reason for this is very simple, this tax is money held in trust in not an actual tax. The internal revenue actually sends out special FTD alerts the local offices letting them know of businesses in the area who own payroll tax debt. This programming phase in and out depending on inventories.

It is one of few taxes that the Internal Revenue Service not only go after the company it can in addition can go after the responsible persons or individuals.

This is a tax that you should not fool around with because it is number one on the IRS to hit list.

The Internal Revenue Service will individually engage those responsible under section 6672 of the Internal Revenue Code

We should be able to make sure we can reach a reasonable settlement on your payroll tax liability and you can continue to operate your business without fear and worry from the Internal Revenue Service.

IRS does not want to seize your business for back taxes due on payroll taxes, however 941 payroll taxes are a big concern for the IRS.

The Process of Getting Payroll Tax Debt Settlement and IRS Tax Relief

The Internal Revenue Service will want to fully review your company or corporation before you can obtain in IRS payroll tax settlement.

You will need to provide IRS with the current financial statement along with proof that all payroll tax deposits and 941 tax forms have been filed.

When Internal Revenue Service reviews a business they also review individuals as well.

Therefore a personal or individual financial statements are required.

IRS will expect a 433B for the business & 433A for the individual.

After IRS reviews your current financial statement, Internal Revenue Service may determine that you are a:

2. monthly payment agreement candidate, this is simply based on your current verifiable income and expenses.

3. or an offer in compromise candidate and IRS payroll settlement IRS will require extensive financial statements from both business and personal.