by steve | May 21, 2019 | Tax Help, Uncategorized
You will find the definition spelled out in IRS IRM – 5.16.1.2.9 (04-29-2011)
IRS Hardship
The IRS procedures in IRM 5.15.1, Financial Analysis Handbook, are used to determine the correct resolution of the case based on the taxpayer’s assets and equity, income and expenses. IRS only looks at Income and Assets to make their determination.
A Internal Revenue Service hardship exists if a taxpayer(s) is unable to pay reasonable basic living expenses
Disclaimer: IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes. These Standards are effective on March 1, 2011 for purposes of federal tax administration only. Expense information for use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.
National Standards have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.
The standards are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES) and defined as follows:
The basis for a hardship determination is from information about the taxpayer’s financial condition provided on Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection Information Statement for Businesses.
Generally, these cases involve no income or assets, no equity in assets or insufficient income to make any payment without causing hardship.
An account should not be reported as CNC if the taxpayer has income or equity in assets, and enforced collection of the income or assets would not cause hardship.
Hardship accounts are closed using cc 24 through 32. See Exhibit 5.16.1-2.
Reminder:
Hardship closing codes can only be used for individual or joint IMF assessments, sole proprietorships, general partnerships, and LLCs, where an individual owner is identified as the liable taxpayer. See IRM 5.16.1.2.4 for decedent cases.
Verification of a CIS is not required if the aggregate unpaid balance of assessments is less than ? ? ? ? ? and the information on the CIS appears reasonable.
Under certain conditions, a CIS is not required before reporting an account CNC. The aggregate unpaid balance of assessments, including any prior CNC’s, must be less than ? ? ? ? ? ? ? ? and at least one of the following conditions must exist:
The taxpayer has a terminal illness or excessive medical bills.
The taxpayer is incarcerated.
The taxpayer’s only source of income is social security, welfare, or unemployment.
The taxpayer is unemployed with no source of income. Consider a mandatory follow-up or Manually Monitored Installment Agreement (MMIA) for seasonal workers.
Note:
Employees are required to secure documentation from the taxpayer prior to declaring the account uncollectible if internal documents such as IRPTR and RTVUE do not confirm the taxpayers’ circumstance.
The following verification is required for accounts when the aggregate unpaid balance of assessments is between ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? :
IRPTR or SUPOL
RTVUE/TRDBV
Note:
RTVUE/TRDBV is required only if the last filed return was for one of the immediate two preceding years. If RTVUE reveals new income or asset information secure a copy of the return(s) for the purpose of identifying income or assets.
For accounts where the aggregate unpaid balance of assessments is above ? ? ? ? ? the following additional verification is required:
Full credit report on IMF and sole proprietor taxpayers and LLCs (where an individual owner is identified as the liable taxpayer)
Motor vehicle records
Real and personal property courthouse records, see IRM 5.1.18.4, Real Property Records
On-line locator services, such as Accurint, follow security guidelines when using public internet search engines
CC AMDIS. If there is open Examination activity, contact the revenue agent to determine any additional sources of collection or the need to limit the scope of the examination based upon collectibility.
Audit File or Special Agents Report if the assessment originated in Examination or Criminal Investigation (CI). The file can be secured by requesting the DLN of the TC 29X/30X.
Note:
If unable to obtain any information from the special agent, consider consulting with Advisory. If there is a TC 910 on the module, the taxpayer may have filed a financial statement with the probation office.
Note:
Credit reports are optional for accounts with an aggregate balance below ? ? ? ? ? ? .
IMF accounts and BMF accounts of sole proprietorships, partnership and LLCs, (where an individual owner is identified as the liable taxpayer) that cannot be collected due to bankruptcy, will be closed using hardship closing codes.
IRC 6343(e) requires the immediate release of a levy on salary or wages due a taxpayer upon agreement with the taxpayer that the tax is not collectible. See IRM 5.11.2, Serving Levies, Releasing Levies and Returning Property. Case histories must be reviewed to ensure that wage levies are released prior to declaring an account uncollectible under hardship closing codes. The case history must be documented.
Reminder:
If TC 670 with designated payment code (DPC) 05 (levy) is present on any module or a regular series of payments is noted, ensure that the disposition of the levy is known.
A compliance check will be made and the results documented in the case history for all hardship determinations per IRM 5.16.1.1(5). All open filing requirements or Del Ret modules must generally be resolved and closed appropriately when reporting an account CNC.
Open Del Ret modules may be resolved by closing as little or no tax due, or income below filing requirement (P-5-133), if warranted by the facts of the case. See IRM 5.1.11, Delinquent Return Accounts, for options to resolve delinquent return accounts. If the taxpayer is required to file and refuses a referral or summons may be appropriate. See IRC IRM 25.5, Summons Handbook for summons procedures.
by steve | May 21, 2019 | Tax Help, Uncategorized
Joint and Several Liability and Federal Tax Debt
A tax debt liability from the filing of a joint tax return, including interest and penalties, is considered to be a joint and several. Joint and several liability means that two or more individuals are each responsible for full payment of the same tax debt. In the case of a federal tax liability, a joint and several liability usually arises when a married couple files a joint tax return.
This means each spouse is individually responsible for the entire tax debt even if only one spouse earned all of the income.
The Internal Revenue Service (IRS) can collect the entire amount of the joint tax debt from one or both spouses. For example, if Mr. and Mrs. Taxpayer owe $5,000.00 jointly to the IRS, the IRS can collect the full $5,000 from either Mr. Taxpayer, Mrs. Taxpayer, or both Mr. and Mrs. Taxpayer.
The IRS can collect from either Mr. or Mrs. Taxpayer even if a divorce decree states one of them is solely responsible for the tax debt. The good news is that the IRS cannot collect more than is actually owed.
Joint and several liability is an important concept because it allows the IRS to collect a joint tax debt from more than one source. After a divorce occurs, one spouse may enter into an Installment Agreement, be placed into Currently Not Collectible status, reach a tax settlement by filing an Offer in Compromise, or be relieved of all or part of a joint liability through Innocent Spouse Relief, while the other spouse has no formal arrangement with the IRS.
The IRS can and usually does continue to pursue collection of a joint tax debt from the spouse that has no formal arrangement.
The IRS will use all available tools including Wage Garnishments, Bank Levies, Federal Tax Liens, and – sometimes – Asset Seizures to collect a tax debt.
If a taxpayer and a former spouse jointly owe the IRS, it is important that each have a formal arrangement with the IRS, whether it is achieved by filing an Offer in Compromise, establishing an Installment Agreement, or requesting Currently Not Collectible status.
by steve | Mar 4, 2012 | Income Tax Preparation, IRS Tax Problem
There is no hotter topic this tax season. The mortgage debt forgiveness issue is the bulk of our calls and tax questions this tax season. There is a lot on the line. With that said here are the top tax tips regarding mortgage debt forgiveness.
Internal Revenue Service and the Mortgage Debt Forgiveness
Canceled debt is normally taxable to you, but there are exceptions to the rules.
One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.
1. Normally, debt forgiveness results in taxable income.
However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit for mortgage forgiveness is $1 million for a married person filing a separate return.
3. You can also exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. For a taxpayers to qualify the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes for example, to pay off credit card debt do not qualify for the exclusion. Check the list to make sure your debt qualifies or call us today.
7. If you can qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision.
In some cases, however, other tax relief provisions such as insolvency may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully.
Notify the lender immediately if any of the information shown is incorrect.
You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.
To make sure your debt qualifies for this tax relief, call us today.
by steve | Mar 3, 2012 | Tax News, Uncategorized
IRS offers different tax credits for all kinds of programs. This tax blog will center around the tax credit and retirement savings.
Tax Credits for Retirement Savings
Eligible Contributions
If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you can be eligible for a tax credit, depending on your age and income.
The Savers Credit:
1. Income limits.
The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and 2011 income of:
a. Single, married filing separately, or qualifying widow(er), with income up to $28,250
b. Head of Household with income up to $42,375
c. Married Filing Jointly, with incomes up to $56,500
2. Eligibility requirements for Savers Credit.
To be eligible for the credit you must be at least 18 years of age and you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return. IRS will cross check tax returns for possible audits, so be careful.
3. Credit amount for the Savers Credit.
If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 ($2,000 if filing jointly). The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
4. Distributions.
When figuring this credit, you must subtract distributions you received from your retirement plans from the contributions you made.
This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date including extensions for filing the return for the credit year.
5. Other tax benefits.
The Retirement Savings Contributions Credit is in addition to other tax benefits you may receive for retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
6. Forms.
To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.
For questions, call us today.
by steve | Mar 2, 2012 | IRS Penalties, IRS Tax Problem
IRS Penalties – Get Rid of them – Receive Bad Advice – IRS will remove Penalties – Former IRS – Tax Experts
The following deals with the abatement of IRS penalties and interest due to receiving bad advice.
There are several methods of getting rid of IRS penalties, call us today to find out more.
If you have been a victim of bad advice, this will help you rid yourself of IRS penalties
From the IRS IRM 20.1.1.3.3.4 (12-11-2009)
Bad Tax Advice
This section discusses the three basic types of advice that may qualify for statutory, regulatory, or administrative penalty relief from the Internal Revenue Service:
1. Written advice provided by IRS,
2. Oral advice provided by IRS,
3. Advice provided by a tax professional,
Information the IRS will consider when evaluating your request for abatement or non-assertion of a penalty due to reliance on advice includes, but is not limited for the following reasons:
1. Was the advice in response to a specific request and was the advice received related to the facts contained in that request? Can that be proved?
2. Did the taxpayer reasonably rely on the advice?
3. Did you pay for that advice?
4. Was the person a professional tax preparer?
5. Is this a one time event?
In the following instances address some situations where penalty relief may not be appropriate even though the taxpayer relied on written advice from the IRS regarding an item on a filed return:
1. The taxpayer did not reasonably rely on the advice regarding an item included on a return if the advice was received after the date the return was filed,
2. A taxpayer may be considered to have reasonably relied on advice received after the return was filed if they then filed an amended return that conformed with such written advice.
3. A taxpayer may not be considered to have reasonably relied on written advice unrelated to an item included on a return, such as advice on the payment of estimated taxes, if the advice is received after the estimated tax payment was due.
4. Did the taxpayer, or their authorized representative, provide the IRS or the tax professional with adequate and accurate information? The taxpayer is entitled to penalty relief for the period during which they relied on the advice.
The period continues until the taxpayer is placed on notice that the advice is no longer correct or no longer represents the Service’s position.
5. The taxpayer is placed on notice as the result of any of the following events that present a contrary position and occur after the issuance of the written advice:
6. Written correspondence from the IRS that its advice is no longer correct or no longer represents the IRS’s position,
7. Enactment of tax legislation or ratification of a tax treaty,
8. A U.S. Supreme Court decision,
9. The issuance of temporary or final regulations,
10. The publication of a IRS revenue ruling, IRS revenue procedure, or other statement in the Internal Revenue Bulletin.
Tax Form 843, Claim for Refund and Request for Abatement, is required to be filed to request penalty abatement based on erroneous written advice by the IRS.
However, if Form 843 is not filed and the information provided demonstrates that abatement of the penalty is warranted, the penalty should be abated, whether or not a Form 843 is provided.
The information required to be provided includes:
1. The taxpayer’s written request for advice,
2. The erroneous written advice furnished by the Service to the taxpayer and relied on by the taxpayer, and
3. The report (if any) of tax adjustments that identifies the penalty or addition to tax and the item relating to the erroneous written advice.
Getting penalties and interest abated is a specialty. As Former IRS agents we know the exact requirements to give these cases there very best shot.
These cases require documentation and a great deal of expertise.
