by steve | Jun 15, 2010 | IRS Tax Advice
A determination must be made by the IRS on how to monitor the taxpayer that owes monies to the IRS on back taxes during the time the offer in compromise is given to the IRS. The following is the treatment of those cases:
Summary
1.
During the time an accepted offer is monitored, a determination must be made to terminate or rescind an existing offer in compromise agreement. A determination by the IRS agent as to whether to compromise an existing accepted offer may also be considered. This chapter addresses the situations which lead to the need for such decisions to be made and the procedures to follow. The IRS agent usually has complete control of what the next steps will be. You should ask the agent, ” where does this case go from here?”
Rescission’s of Accepted Offers in Compromise
1.
An offer in compromise is an agreement which is binding on both the government and the taxpayer, or corporation, and precludes further inquiry into the matters to which it relates, unless fraud or a mutual mistake of fact is identified.
2.
An offer in compromise may be rescinded or set aside when there was a mutual mistake as it relates to a material fact or a false representation that was made by one party. That party is usually the taxpayer.
3.
A “mutual mistake of fact” is defined as an erroneous belief held by both parties about the facts as they existed at the time the contract was entered into.
4.
The mere fact that both parties, the IRS and the individual were mistaken with respect to the same basic belief about an existing fact does not, of itself, provide reason for the affected party to void the contract. Rescission is only appropriate where a mistake of both parties has such a material affect on the agreed exchange of performance that it upsets the very basis of the offer in compromise.
5.
To constitute fraud or false representation, the following must be present:
1.
The representations related to material facts were false.
2.
The maker knew the facts to be false.
3.
The facts were made for the purpose of inducing, and did induce the other party to make the contract, and that the latter had the right to rely on them, and did rely on them, thereby sustaining injury.
4. It should be be known that these instances are rare and in-between.
5. The possibility of a referral to CID or Criminal Investigation could transpire.
Potential Default Case based on the inability of the taxpayer to preform
1.
An offer in compromise can reach a potential default status in one of these ways:
1.
The taxpayer failed to make timely payment of the amount due based on the terms of the offer or a related collateral agreement that is failed to make a monthly tax payment or did not remain current in the tax year the taxpayer is in.
2.
The taxpayer has not adhered to the compliance provisions of the offer
3.
The Taxpayer failed to return an erroneously issued refund.
4. The taxpayer did not answer documentation set by the IRS
5.
Compromise of the original Offer in Compromise
1.
The compromise of an original “Offer in Compromise” should be rare ( but do happen ) in light of the IRS’ current investigation completed in connection with the original offer in compromise. However, in cases where the taxpayer or entity is unable to pay the balance of an accepted offer in compromise or the balance of the liability under the terms of a collateral agreement and the Internal Revenue Service investigation reveals that “extreme hardship” or special circumstances exist, which would justify that a default is not in the best interest of the government. (See our other writing on website under “current hardships”) IRS has the option to:
1.
Adjust the payment terms of the offer in compromise, doubt as to collect ability
2.
Formally compromise the existing offer in compromise
How the process works : The consideration of Process
1.
The consideration of such a proposal of the Offer in Compromise doubt as to collect-ability will be made by the office of jurisdiction that originally accepted the offer. Most of the cases are worked out of the New York office. Some local office are staffed with Offer personnel as of the writing of this document. Acceptance will depend on various factors such as:
1.
Is this in the best interest of the United States Government?
2.
Understand that all Offers in compromise are open for public inspection. Does this offer serve the mission of the IRS and Federal Government as a whole?
2.
The information required to support the proposal should fit the case. Examples are the following:
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Copy of the taxpayer’s most recent income tax return
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Estimate of the remaining liability under the terms of the future income collateral agreement
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Reasons why the request is being made to compromise the existing agreement. A full written explanation along with documentation is usually required. The IRS will not just accept a verbal explanation.
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Full compliance check of all current estimated payments or current tax deposits or even a pay stub reflecting withholding sufficient to pay the tax in full for the current tax year.
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Statement of current financial condition. IRS may require a new financial statement or 433A
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Description of future prospects and any other information which might have a bearing upon the acceptability of the offer. IRS will explore all future avenues
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Estimated and projected amount of future income over the period covered by the remaining terms of the original offer in compromise agreement.
3.
Compare the amount of the taxpayer’s offer and the amount which is anticipated to be recouped under the remaining terms of the original offer agreement.
What is the usual outcome
When the IRS is confronted with a well documented case and file, the IRS is usually very reasonable and will try to make the situation work to the best interests of all involved. With the condition of the current economy we are finding this trend of changing the original offer to be a current trend. It is very wise to have a good solid tax professional as your guide and counsel through this process.
How long does this process
While each case is different, a number of factors needs to be considered:
* Has the case been completely documented
* Who is the IRS Agent working the case
* Is the case being worked out of the local office
* Is this all done by mail correspondence
* Is this case being worked during the holidays are possible summer seasons
On average, Offers in Compromises take between 3-5 months
Fresh Start Tax is available for all your tax needs. Call us today at 866-700-1040.
by steve | Jun 14, 2010 | IRS Tax Advice
Ten things you need to know about IRS Tax Levies.
- IRS has a list of levy information for all taxpayers on their master computer, the information goes back seven years.
- IRS gets the levy information from your 1040 tax return and attached documents, the W-2’s, 1099’s and and various other sources such as interest or dividend income information.
- IRS has a record of all bank checks you have sent them and they keep this bank information on file.
- IRS will send a federal levy 668(a) or 668(W) out 6 weeks after you have received your CP-504, Notice of Intent to Levy. The 6 week period starts from the date on the IRS letter or notice.
- Whether you sign for the certified notice letter that IRS sends out or not, the 6 weeks still runs from the date on the letter.
- IRS must give you a right to a hearing before the tax levy may be sent. This is a 30 day period of time for a tax hearing
- IRS can and will send out multiple levies to bank accounts, Form 668(a) and on wages, Form 668(w).
- An IRS bank levies, 668(a), is a 21 day freeze on funds in the account the day the levy hits the bank, this gives you 21 days to resolve the case.
- A wage garnishment, 668(w), or levy on wages is continuous and will not be removed or released until the case is closed.
- IRS will not release any levy until all tax returns are current.
What is the next step in the process after you have received a tax levy or Notice of Intent to Levy
- Contact Fresh Start Tax at 1.866.700.1040 and we will handle IRS for you;
- Make sure all tax returns are filed and you are current on all filings;
- Prepare and document an IRS financial statement, Form 433F.
The IRS Financial Statements, Form 433F
The IRS Financial Statements are the single biggest problem for taxpayers when trying to close their IRS case. It is this document “alone” and the corresponding documentation that determines the outcome of your case. The biggest cause of concern and problems comes from lack of knowledge in packaging the 433F. The lack of knowledge can significantly change the outcome of your case. Paying too much to the IRS can cause financial hardship. Be very aware that your lack of knowledge is IRS’s success.
Here are some tips for success for dealing with the IRS financial Statements
The 433 F “Financial Statement”
Form 433F is a financial Statement that is primarily used by the Automated Collection System of the Internal Revenue Service, also call the ASC Unit. The ACS Unit has offices set up in regions across the United States, but it works through an 1-800 telephone system. All calls to ACS are routed into one national telephone system. Those calls are routed to regions whose telephones lines are available to pick up. It is possible calls from Florida are worked in California. One benefit about this system is that it allows taxpayers on the East Coast to call up to 8:00 PM, Eastern Standard Time to handle their cases. The downside to this system is that it is almost impossible to close the case with one telephone call. Fresh Start Tax has the ability to make this happen.
What typically happens when you call the 1 800 telephone number is that the IRS agent asks you to complete the 433F with all supporting documentation. If you have all the 433F with the documentation you will fax it to the IRS agent directly. If you are missing one or more piece of information you must call back to submit the missing documents. You call the 1 800 telephone number again and talk to a different agent. You never get the first agent to work the case again. You have to go over the whole case again and at that time the second agent who reviews the 433F may ask for different documentation that the first agent never inquired about. This process can repeat itself over and over.
This is the most frustrating system in the world and IRS knows it. When you finally close your case with an agent it must be approved by a supervisor. In most cases the agent your working with will say “a supervisor will get back to you and let you know if it is approved”. Many times no supervisor calls. You must call them back, to find out if your case if closed. If you do not confirm that your case is closed, it is very possible the case will hit the enforced collection system of the IRS. If this happens a federal tax lien and/or federal tax levies on bank accounts and wage garnishment may take place. Always call back to confirm your case is closed. By the way, wait times on the phone can be up to 45 minutes. Mondays and after Holidays the wait time is big. You need to find the time and patience to call back.
The basic tips to close your case when calling the IRS using the 433F Financial Statement
- Complete every line on the 433F;
- Answer all questions. Write none or not applicable in boxes that do not apply to you;
- Have all documents ready to be faxed the IRS. Do not call them until all documents are ready to be faxed;
- Make sure you have bank statements, pay stubs and supporting documentation for expenses;
- When IRS tells you they need managerial approval to close your case, make sure you contact them back or your case will still be open in the system. Do not assume the case will close itself.
Other Key Tips:
- IRS will ask you for the last three months income statement or pay stubs. However this could have been your largest months of income. If this is the case, send them the entire year or past 6 months whichever lowers your average income. Use the lowest period of income to prove your case;
- If you are going through a time of financial hardship or other difficult times, the 433F does not ask for that, but send it to them as part of the package. Remember, IRS does not know your circumstances so by all means show it to them;
- Show past medical bills or other debt you are facing. Remember, paint the picture for them.
Fresh Start Tax are professional experts in this field. We can get you your very best result.
Call us today and end your problem NOW !!!
by steve | Jun 12, 2010 | IRS Tax Advice
The IRS is the most powerful collection agency in the world. They have many resources to find your money and your assets.
Locator Service Programs (IRS internal programs)
Locator Service Programs are automated services to assist the IRS in finding and locating taxpayer’s assets. The IRS maintains a system for these programs and utilizes the information received to help their agents in the field. These services are not for public use, however other government agencies tap into the wealth of information found on this system.
The Largest source for collecting information is the Internet
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The Internet is a powerful tool for gathering information about individuals and businesses. The information on the Internet can assist IRS employees in locating taxpayers and their assets. A great amount of information is available free of charge although many web sites charge a usage fee or provide information on a subscription basis. Effective use of the Internet can include the use of various websites to locate taxpayers and their assets. Taxpayers can use the same information that IRS uses on the Internet.
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The Internal Revenue Service has current corporate contracts for locator services such as credit bureau services, and tax law research services and others.
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SPDER provides IRS employees with Internet (internal tools) – Intranet access on an as needed basis. These are protected secured sites that usually government agencies have right to tap into.
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Internet/Intranet access provides IRS employees with access to a number of computer applications including:
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The National Asset Locator tool, Accurint. This tool is used by almost all revenue officers when working field collection cases. You can subscribe to this service as well;
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The Credit Bureau Web browser, Smart.Alx;
o
The tax research portal ? Lexis-Nexis this is used primarily for legal research.
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The IRS Intranet Home Page. These are restricted sites.
Asset Locator Research used by IRS agents
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IRS employees are required to research public records in person or online to locate taxpayers and/or their assets. This is required on ALL cases. The IRS has a current corporate contract for online asset locator research. This is used nationwide by all offices.
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The national asset locator tool provides easy access to public records such as real estate transactions, real property, corporate officers, vehicles, guns, boats, and aircraft, as well as information on people and businesses. There are vast resources available on the Internet which can also provide information on these topics and should be considered as a supplement to the national asset locator tools. The tips and leads available from the national asset locator tool help ensure quality case work and a high level of customer service whether searching one county or nationwide. These are easy and require little or no effort. They also can lead to the discovery of tax fraud.
Tax Law Research
The Service has current corporate contracts for tax and legal research services. These services are managed by Service-wide Policy, Directives, and Electronic Research.
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Although the IRS agents could perform tax and legal research using a search engine such as Google, MSN, Yahoo, or AOL, the IRS agent uses the commercial electronic research services provided by the IRS.
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Once again the IRS collection division uses this on a limited basis unless it is a large dollar case. Both CID and large dollar case group are more likely to use these tools.
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These electronic research services are fully linked to cited references which allow access to all tax law research material from one place.
Real Property Records
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IRS uses the real property records as a critical source for locating taxpayers and their major assets. Many real property records are available online. Although real property records have yet to become universally automated anyone with a computer can use these records.
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In some states, and especially in large metropolitan areas, the real property records are available electronically from the courthouse without going through a third-party vendor.
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Some collection areas have been able to arrange for direct data base access where courthouse records are automated, but such arrangements may be complicated by the varying systems encountered from one county or city.
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Real property records are currently available for all the States and the District of Columbia through the national asset locator tool.
Department of Motor Vehicles
All states and the District of Columbia have a Department or Office of Motor Vehicles DMV.
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Department of Motor Vehicles require state residents who own a motor vehicle to register their motor vehicle or vehicles, and require state residents who drive a motor vehicle to hold a valid driver license. In addition to driver licenses, motor vehicle departments issue identification cards to persons who require an ID card. The ID card looks like a driver license, but is used for identification purposes only. This is a great locator tool for individual that have not filed their tax returns.
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Information maintained by the various motor vehicle departments varies from state to state. Most states provide driver information, secured ownership information, lien holders, and vehicle information on cars, trucks, etc. ID card information is also provided. IRS will use this information to seize your car if it comes down to that.
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Information from twenty-five state motor vehicle departments at the writing and editing of this document, are now on the IRS system. Due to contractual and regulatory restrictions, some states are not available, and it is illegal to make this information public in some other states. Some collection areas have been able to arrange for direct data base access to motor vehicle records.
Summons Enforcement
Also keep in mind the IRS has summons and subpoena power to obtain third party records. Many times after pulling credit card records the IRS can summons for loan applications to find out what assets were listed on the credit application.
Uniform Commercial Code
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National Uniform Commercial Code filing records contain information from commercial lien filings. These records are usually found in the city where the State Capital is located. These records can help find assets used by businesses to secure commercial loans or to learn about financial relationships between businesses and individuals. The results include:
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Debtor name and address;
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Date and state of filing;
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Document number;
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Legal type;
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Secured parties name and address;
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Number of secured parties;
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Number of debtor parties;
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Number of filings; and
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List of collateral.
Uniform Commercial Code information is currently available for all the states and the District of Columbia.
Corporate Information ? Secretary of State
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Corporate information refers to each state’s Secretary of State, State Corporation Commission, or equivalent. These organizations provide information regarding the Date of Incorporation and the officers of the corporation.
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All states and the District of Columbia require that corporations register at the time of their incorporation, and the registration information is usually maintained in each State’s capital. Secretary of State information is one of the most effective sources available for corporate accounts. It provides third party information, corporate officers, and registered agents, and is also fairly effective for verifying the existence of assets. However, the effectiveness of Secretary of State information varies from one state to another based on the method used to access the information.
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Secretary of State information is currently available for all the States and the District of Columbia.
State Employment Commission Program ?Tape Exchange Agreements
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The State Employment Commission Program involves tape exchange agreements between areas and the states. Every two weeks, a tape containing a file of all individual taxpayers in fourth notice status, CP 504, Final notice status is mailed to participating states by the responsible service center campuses. The controlling location code of the taxpayer determines to which state the taxpayer’s record is sent.
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This tape contains records for both primary and secondary Social Security Numbers. The state matches the social security number on the tape with those on its employment commission data base. For each social security number on the tape, the state will return at least one record, in many instances, multiple records may be returned, depending on how many quarters of information the state’s database contains. This is a great way to pick up levy source information.
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If a record does exist for the social security number, a matched record will be returned including the names and addresses of the taxpayer’s employers. For each matched record returned, a levy source record is created on the IRS computer system. If IRS system shows that this levy source, as identified by the Employer’s Identification Number or state identification number, duplicates one previously sent, it will be dropped. The levy source record will identify whether the levy source belongs to the primary or secondary social security number.
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When a balance due account or final notice is passed to automated collection systems, all levy source records on IRS computer are forwarded automatically.
Other Tools
The IRS has a tool that is rarely incorrect and that is the tool of observation. If your case is generated to the field office, there is a real good chance the revenue agent is going to make a field call or visit to your physical location, meaning your house or your business. From there the IRS Agent gets a good idea of the scope of the case.
* this information is found on the IRS.GOV site with modifications and comments by Fresh Start Tax. should you have any questions call, email or SKYPE us today.
1-866-700-1040
by steve | Jun 11, 2010 | IRS Tax Advice
Trust Fund Recovery Penalty Statute of Limitations
The general rule is that an assessment of tax must be made within three years from the date a return is filed or the due date of the return, which ever is later.
Most people have no idea there is a Statute of Limitations on these Trust Fund Penalties. Make sure the IRS does not set up your penalty if the Statue of Limitation has expired. Do not let them get away with that.If you have any question regarding these issues or you believe the IRS set up an erroneous penalty, call our Fresh Start Team today. 1-866-700-1040.
by steve | Jun 10, 2010 | IRS Tax Advice
Definition of a Responsible Person as defined by the Internal Revenue Service
1.
A “responsible person” is one who has the duty to perform or the power to direct the act of collecting, accounting for, or paying over trust fund taxes. When evaluating responsibility, consider the Supreme Court decision in Slodov v. United States, 436 U.S. 238, 78-1, USTC 9447 (1978).
2.
Most trust fund recovery penalty cases involve officers of corporations. However, a responsible person may be one or more of the following:
1.
an officer or employee of a corporation
2.
a member or employee of a partnership
3.
a corporate director or shareholder
4.
a related controlling corporation
5.
a lender, a surety, or any other person with sufficient control over funds to direct disbursement of the funds, or
6.
in some cases, a person assuming control after accrual of the liability.
3.
In each situation, determine who had a duty to see that taxes were withheld, collected, or paid over to the government at the specific time the failure occurred. There can be more than one responsible person.
Definition of Willfulness by the Internal Revenue Service
1.
The trust fund recovery penalty is a civil penalty; so the degree of willfulness in failing to collect or pay over any tax leading to liability for this penalty is not as great as that necessary for criminal proceedings. “Willful” is defined as intentional, deliberate, voluntary, and knowing, as distinguished from accidental. “Willfulness” is the attitude of a responsible person who with free will or choice either intentionally disregards the law or is plainly indifferent to its requirements.
2.
Internal Revenue Service Appeals employees must determine if the actions of a responsible person who permits funds withheld as tax to be used to pay operating expenses of the business are willful. Were the person’s explicit or implicit directions willful to a degree sufficient to make the person liable for the trust fund recovery penalty. There is no need to show that a responsible person had any evil intent or desire to defraud the Government of the withheld taxes. When determining willfulness, Appeals officers must research the large body of Court decisions on this topic.
3. All facts and interviews of third parties are taken into consideration.
Mediation and Arbitration of the Internal Revenue Service
1.
Post-Appeals Mediation takes place while the Trust fund Recovery Penalty is under the IRS Appeals’ jurisdiction, which means the written request for mediation must be made before the case is closed by Appeals.. Arbitration procedures are found in Rev. Proc. 2006-44. Appeals is presently addressing both post-Appeals mediation and arbitration requests on a case-by case basis.
2.
Trust fund Recovery Penalty cases are eligible for Fast Track Mediation . Fast Track Mediation takes place while the Trust fund Recovery Penalty is still under the Internal Revenue Service Collection’s jurisdiction. This program is designed to expedite case resolution. Collection Division provides the taxpayer with Publication 3605, Fast Track Mediation, a Process for Prompt Resolution of Issues. FTM mediation has no impact on the statue, , Fast Track Mediation does not extend the statue. Both the Collection Division and the taxpayer must agree to mediate the case. If Collection and the taxpayer agree to mediate, the Revenue Officer will complete Form 13369 an “Agreement to Mediate” and a “Summary of Issues” . The Revenue Officer will send the forms to Appeals within 3 days of securing the signed Agreement from the taxpayer. Mediators (Appeals employees) will conduct the session, however, they will not have settlement authority. Both parties (Collection Division agent and the taxpayer) must agree in order to reach a resolution.
3.
Jurisdiction and statute of limitation responsibility remains with Collection Division, therefore, the case file is not forwarded to Appeals Division. Local Appeals and Internal Revenue Service Collection Offices will work their own procedures for prompt transmittal of cases to the local Appeals office. Collection will send a copy of the Agreement to Mediate to the taxpayer and/or representative.
1.
The mediator will attempt to schedule the mediation session with the taxpayer and/or taxpayer’s representative and collection within 5 business days after the case is assigned to Appeals
2.
The mediation begins with an initial joint discussion where all parties are present
3.
Both the taxpayer and Collection will be given time to present their position
4.
After the initial joint discussions, the mediator may hold individual discussions with the party
5.
At any time, either party may withdraw from the process prior to reaching a resolution by notifying the other party and the mediator in writing.
4.
The entire process should take 30 – 45 days to complete. If the mediation cannot be held within a reasonable amount of time, the mediator may return the case. The mediator will attempt to bring the parties to a mutual resolution of the issues during the mediation session. If, after a reasonable time, it is apparent that the parties will not reach resolution, the mediator will terminate the mediation session and return the case to Collection Division.
5.
Tax Professional should be consulted for these procedures.
Call Fresh Start Tax today for Professional Representation 1-866-700-1040
by steve | Jun 9, 2010 | IRS Tax Advice
How to effectively deal with the IRS over the telephone.
Here are the “10 Golden Tips”
1. It is helpful to know the process of your case and its movement within the IRS system. There are flow charts available to follow your case through the system. You can review the process at the IRS website, IRS.gov.
2. Have your transcript from the IRS available so you are looking at the same records that the IRS employee has in the IRS computer system. Order a free transcript by calling 1-800-829-1040.
3. Upon first contact with the IRS, make sure you know the name and ID number of each IRS employee you spoke with including the date and time of each call. They will provide their name and ID when answering the call.
4. If you call the IRS back on the same matter you will usually speak to a different IRS representative. This is normal and do not be concerned. The IRS routes their calls all over the United States. The IRS is available for calls up to 8:00 pm EST.
5. The IRS usually will not call you back. They will tell you they can only take an incoming call and they will not give out their direct telephone numbers. This can be very frustrating when dealing with the IRS.
6. The IRS employees handling the case over the telephone, in most cases, are not able to get their supervisor on the line. They will tell you the supervisor will call you back within 2 to 3 days. Unfortunately, the call back from a supervisor does not always come.
7. Have all records in front of you when you call the IRS so you will not have to call back a second time.
8. Know the agent you are talking with. Each agent has their own style and is going through life stresses. You will sense this by the first hello. Sometimes it is better to say you will call back.
9. Make sure you call back when the IRS Employee give you a date. If you do not, the IRS computer will move your case into enforcement.
10. You can always contact Taxpayer’s Advocate if you do not get the results you are looking for.
Talking to the IRS can be very stressful. Fresh Start Tax can help you negotiate the best deal with IRS.
Call us at 1.866.700.1040.
