by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
IRS can file a tax return for a tax payers.
IRS will file what is called a Substitute for Return or a SFR.
IRS prepares thousands and thousands of tax returns for taxpayers that do not file.
They are called “substitute for return” or “SFR”. Since you did not prepare a return, the IRS has the right to prepare a tax return under code section 6020b of the Internal Revenue Code.
This IRS problem will not go away unless you take action to stop the next steps which are as follows:
* tax levy;
* IRS garnishment on wages;
* IRS bank levy;
* IRS federal tax lien;
IRS prepares these substitute for returns for taxpayers who fail to prepare there own tax returns.
IRS has probably made an attempt to contact you and those attempts have failed. Many times you may have moved and never received the mail. Whether you received a letter or not, if you fail to respond to the IRS, they will prepare your federal income tax return for you.
You will need professional tax help to resolve this tax problem.
The non-filer program within the Internal Revenue Service on these back tax issues have been stepped up in recent years. Also, beware that IRS is probably preparing other back years and the back taxes due.
If you do not reply to them, they will plan to take enforced collect action to get the takes paid.
HOW DOES IRS PREPARE YOUR TAX RETURN
IRS has a collective data base of all income you have received from all companies over the past 7 years on the IRS data base system.
Anyone who has provided income information to them from a W-2 source or a 1099 source, IRS keeps and records all this information on there master files.
Every year social security matches are made against those W-2’s and 1099, if there is no match found, IRS sends out a series of letters asking for your tax return. If a federal tax return is not filed, IRS will prepare a substitute for return, (SFR) based on the information they have in the IRS system.
They will give all taxpayers the standard deduction, regardless of your itemized deductions. Then IRS adds in all the penalties and interest. The tax bill will be overwhelming and this will cause a huge tax problem.
HOW TO CORRECT THIS TAX PROBLEM
First, you want to find out whether this IRS tax problem or IRS tax situation is correct. Many times the income is correct, however the IRS will only give you the standard deduction. Once you get the notice from IRS you will want to respond to them.
It is in your best interest to contact IRS before they take the next steps of tax levies, tax garnishments or bank levies.
You then want to go to a professional tax preparer and file the original return with the Internal Revenue Service.
IRS will not allow anything but the standard deductions, so dig out the receipts and records, this could significantly lower your tax bill. In some cases you may have to file an administrative claim or an offer in compromise, doubt as to liability so IRS will process your correct and original tax return.
Our staff at Fresh Start Tax has been dealing with these Internal Revenue Code Section 6020b tax problems for over 60 years. We deal in all tax problems and stop all future problems that go with this situation from happening. Call us today for a free consultation.
Email us any questions you may have today.
by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
What is the IRS process to collect tax
Once IRS has a valid tax return in hand IRS take that tax return and inputs into the” CADE” system of Internal Revenue Service and creates a valid notice of assessment. That creates the ” date of assessment. That assessment is known as the TC 150 date.
IRS then sends out a series of Notices and Letters that start from a first tax notice or bill, CP14, until the final notice of intent to levy, CP 504. This process takes about 4 months. The following is a list of most common notices or letters you may receive from the Internal Revenue Service regarding the tax process.
Notices and Letters you may receive from the IRS
* CP 14 Your balance due to IRS.
* CP22A Data processing adjustment and the balance is more than $5.
* CP90/CP297 Final Notice Notice of Intent to Levy and Notice of your right to a hearing.
* CP297A Notice of Levy and your right to a hearing.
* CP91/CP298 Final notice before levy on social security benefit.
* CP501 Reminder Notice, balance due IRS.
* CP503 Second IRS notice on balance due.
* CP504 Final Notice balance due.
* CP521 Installment Agreement reminder notice.
* CP523 Default of installment agreement
After these letters and notices have been sent, if these notices have not been responded to, IRS will always send the CP 504 notice. It will come by certified mail.Within 6 weeks from the date on that notice of intent to levy letter, federal tax levies, bank garnishments and federal tax liens will but sent out. IRS must always make a final notice and demand and make sure you had an appeals right on all cases within their system.
So what happens when the cases do out to the local field office
After processing thousands of cases as a former IRS agent I am asked, “just what happens to a case when it comes into the local office“. After cases leave the ACS unit and run there normal course in the “automated” system, IRS realizes the computer can do nothing to stir up the environment enough to make the taxpayer contact the IRS regional office, pay the tax, or work out some sort of deal. So the next steps must be taken.
A process of grading takes place on the” collection potential” of each case. Some of the factors are the dollar amounts that are due, the number of tax periods that tax is owed, the type of tax, whether the case qualifies for high dollar, and is this a “repeat” tax offender
.
IRS wants to make sure from a dollar amount the case is worth pursuing. On some cases, it is simply not worth the effort because of IRS thresholds. These are simply left in the collection system and automatic freeze codes are input on these cases. These cases will probably not be worked for some time.
The number of tax periods owed is an important issue because IRS does not want repeat offenders especially those who willfully neglect the process. These are called multiple delinquent accounts.
Payroll tax cases get the” highest priority” because those are the so called trust-fund cases. This was money held in TRUST for the United States government. These cases are the highest priority at the Internal Revenue Service. The repeat offender is a big determining factor if the case is issued to the field. IRS simply adds the score of these major factors and determines whether or not the case is field worthy.
Once a case becomes field worthy is only half of the factor. At that point the case must be evaluated for a particular field office. Because most of the field offices are over loaded with cases, a determination must be made whether the case is ready to be worked or not. The local office agents who work these cases are called, Revenue Officers. They have a case load that is controlled by management and believe it or not the National Treasury Employees Union. The Union makes sure management is fair and does not overload the employees with high inventories. The system works very well and keeps a great check and balance system.
After a Revenue Officer closes a case, the “que” determines what case should be worked next based on the highest score. The group manager then puts that case into the revenues officers inventory and monitors the case until the case is closed. Periodic checks are made to ensure the case is being worked in the manner and format that has been predetermined by the Internal Revenue Manual (IRM). Now that a Revenue Officer has the case, the next stop is to do a full compliance check on the file, that is to make sure all tax return filings and all current payments are up to date. This full compliance check ensures the case will be worked and closed without other outstanding being owed or unfiled.
Many times the Revenue Officer may ask or pull an ACCURIANT REPORT. This report comes from a search engine that can go back ten years and check on all relative information such as, real property, DMV and such. Also it can search for credit card information and see whether you turned in a loan application when applying for credit. They can easily do an asset search based on the financial statement given to the third party lending or credit card agent.
The next step in the process is to make contact with the taxpayer. They can do this in different ways. The Revenue Officer can call the telephone number that is usually found in the file, send out a letter, or go by and make a field call to the home or the place of business. Depending on the way each Revenue Officer works will determine how the follow up is made. The field call to the home or place of business is usually the best way to handle a new case because it gives the revenue officer a sense of the environment the taxpayer lives or works in. The field call is a wake up call to the taxpayer that IRS is on their case. If the IRS does make a visit to your place of employment or home do not to worry, they are simply wanting to make contact and get financial information necessary to close your case. The same revenue officer will be with you through the duration of the case. Also be advised that if you are not home, they may leave a card or contact a neighbor just to make there point known.
Fresh Start tip, be as friendly as possibly and let them know you will have your representative contact them in the next couple of days and thank them for reminding you of your tax obligation.
by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
IRS Audit Techniques , Tax Audit Help- Former IRS Agents
We are comprised of tax attorneys, CPAs, and former IRS audit managers, instructors, and appeals agents.
We have over 60 years of direct working knowledge of the Internal Revenue Service and can help you with any IRS tax audit situation that you may have.
You can contact us today for free tax consultation and speak directly to former IRS auditors and tax audit managers. Also on staff as a former IRS appeals agent of 35 years.
Below we will discuss IRS audit techniques that the revenue agent or office auditor will use in the review of your tax return
The IRS and their “audit techniques”. What you should expect !!!!
Most taxpayers walk into an IRS audit having no clue about what to expect or the hornet’s nest they are getting themselves into.
Being a former IRS agent, I would love the taxpayer who has no clue about what was going on because you can have your way with them. Today, it would not be wise to walk into an IRS audit situation unless you are absolutely sure there are no problems with your return. If you know that to be a fact, you can boldly walk into the IRS office fearing nothing and you do not need a professional whatsoever.
However, if you think there is a problem, pay the money because it is your saving in the end. A smart professional can avoid penalties and interest and having the IRS pick up others years. Think through your situation.
As the IRS process starts….
The first thing the IRS agent will do is an analytical test. It is a review of the tax return, balance sheets and canceled checks. The agent takes a common sense approach into all available evidence.
Secondly, the IRS agent will look at all documentation to help determine and substantiate items claimed on the tax return.
The Agent will next interview the taxpayer or third parties that may be able to shed more light on the subject audit. The IRS agent will physically inspect the taxpayers assets, inventory or securities. The agent will observe the business by taking a tour and the owner’s reaction to statements and claims throughout the whole process. Lastly, the IRS agent starts the testing process of all books and records to make sure the tax return is true and correct.
Interviews: Authority and Purpose
1. Internal Revenue Code Section 7602 authorizes the Secretary or a delegate to examine books and records and to take testimony under oath.
2. Oral testimony is a significant factor in resolving tax cases.
Oral testimony
Oral testimony can be taken at the discretion of the IRS agent.
1. provide information not otherwise available from physical documentation
2.corroborate return information
3. provide relevant information not reflected on the return
4. establish the taxpayers intent
Who does the Interview?
1. Internal Revenue Code Section 7521(c) states that an examiner cannot require a taxpayer to accompany an authorized representative to an examination interview in the absence of an administrative summons.
However, the taxpayers voluntary presence at the interview can be requested through the representative as a means to expedite the examination process.
2. If the IRS agent can get the taxpayer by themselves the agent will have a field day. Representatives are a key to shielding off problems.
The Power of Attorney and the possible bypass of the “power”
1. When a taxpayer obtains representation, a valid power of attorney, the examiner will ensure that the authorization, Form 2848, Power of Attorney , or Form 8821, Tax Information Authorization , or a similar privately designed form, is properly executed. Service personnel are prohibited from disclosing tax information of a confidential nature to any unauthorized person.
2.Practice before the Service is restricted to persons recognized or qualified under provisions of Circular No. 230.
The IRS will not let anyone not authorized to appear on behalf of the taxpayer. If the taxpayer’s representative impedes or delays the examination by failing to promptly submit the taxpayer’s records or information requested by the examiner, failing to keep scheduled appointments, or failing to return telephone calls and written correspondence, the examiner may initiate procedures to bypass the representative and deal directly with the taxpayer or the business owner.
Where to Conduct Interviews
1. The time and place of interviews will be set by the IRS agent as long as they are reasonably scheduled.
2. Office examinations will be conducted at the Internal Revenue Service office closest to the location of the taxpayer.
3. Field examinations are conducted at the taxpayers residence or place of business, or where the taxpayers books and records are kept. It also can be held a the representative’s office.
Requests to Tape Record Interviews
1. Internal Revenue Code addresses audio recording of interviews.
2. Taxpayers may request to tape record an interview proceeding as long as “10 calendar days” advance notice of intent to record is provided to the Service. The taxpayer must supply his own recording equipment.
The Service has the right to simultaneously produce its own recording and has the right to reschedule the interview if the Service does not or will not have equipment in place. This is rare, but happens many times on taxpayer protesters.
3. All participants, both IRS and the taxpayer must consent to the recording of the interview.
4. All recorded interviews will contain the following information:
a.. The date, time, and place of the interview,
b.. The taxpayers name and social security number or business ID number
c.. Identification of all participants on the recording, along with a statement of each participants respective role in the proceedings
d. The purpose of the proceeding
e.. The tax year or years under examination or audit
f.. A clear description of written documentation provided in support of the issues
g. At the conclusion, a statement indicating the total recording time for the interview and that the interview has been completed and the recording is ended.
Types of Interviews
1.Initial Interviews. The initial interview is to be held as soon as possible after the IRS agent opens a case.
2. Subsequent Interviews. Subsequent interviews with the taxpayer should be held if and only if:
a.. The taxpayer does not provide all the information that the IRS requested;
b.. More detailed explanations are needed;
c.. A review of the IRS agent’s examination progress is needed.
The review should address information provided to date as well as outstanding information needed to complete the audit.
3. Closing Interviews. Closing interviews should be held to go over any proposed adjustments, and a signed agreement should be obtained.
Interview Techniques used by the Internal Revenue Service Audit Agent
1.Interviews provide information about the taxpayer’s financial history, business operations, and books and records that are not available from other sources.
Interviews should be used to obtain information needed to make informed judgments about the scope and depth of the examination and correctly resolve issues or look into other possible issues. Interviews are used to obtain leads, develop information, establish evidence and to find out the credibility of the information that the taxpayer is providing.
2. It is important to create an environment where the taxpayer feels comfortable. Examiners should maintain a friendly and professional demeanor. Suggestions for establishing rapport include:
a.. The IRS Agent should introduce themselves and give the taxpayer or representative their ID or badge number;
b. The IRS Agent should always explain what will happen during the examination or audit;
c.. The IRS Agent should be prepared to explain return selection procedures, rights to representation, and appeal rights. Very rarely does the IRS Agent explain the return selection process.
The IRS Agent should recognize that an IRS audit is often a once-in-a lifetime experience for the taxpayer and therefore the taxpayer may be tense or nervous. This is never the case. The taxpayer is always worried to death.
4. The IRS Agent should exhibit openness, honesty and be calm and objective as possible. This is not a time of emotion.
5. The IRS Agent should always be prompt and courteous.
Authority to Conduct Tours of Business Sites
1. ” Regulation 301.7605?1(d)(3)(iii)” states: where an examination takes place, the Service may visit the taxpayers place of business or residence to establish facts that can only be established by direct visit, such as inventory or asset verification.
The Service generally will visit for these purposes on a normal workday of the Service during the Service normal tour of duty hours.”
The IRS may do an inspection of a Taxpayers Residence, but their use is very limited.
The IRS Agent may consider inspecting the taxpayers residence. Due to privacy issues and the intrusiveness of such inspections, their use should be limited.
The purpose of inspecting the taxpayers residence includes (but is not limited to):
1. Determining the validity of deductions for an office or business located in the residence.
2. Determining the taxpayers financial status.
3. I would always have your professional representative there, review the walk through before the IRA agent arrives, make it a short, sweet and fast walk through. This rarely happens though.
Tours of Business Sites
1. The physical observation of the taxpayers operation, or tour of business site, is an integral part of the examination process. In viewing the taxpayers facilities and observing business activities is an opportunity to:
a.. Acquire an overview of the business operation;
b.. Get a feel for the business and the ownership;
c..Observe and test internal and external controls;
d. Clarify information obtained through interviews.
Cash Businesses
1. Many small businesses that deal almost exclusively in cash are likely to have few internal controls. Practically all income is received in cash. No independent third parties review the operation. Many expenses are paid in cash and documentation for transactions is often lacking. The IRS can and will pull industry standards and similar business records from research in the past.
2. The IRS has audited millions of cash businesses in the past. The IRS is trained to look for fraud and deceit. Caution should be used by all business owners in this situation and you should always have a trained professional representation.
Should you have any question regarding IRS TAX MATTERS, call us at FRESH START TAX 866-700-1040. We have tax attorneys, CPA’S, former IRS Agents ready to serve your professional needs
by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
IRS Employment, Payroll Tax Audit – Former IRS Agents – Fresh Start Tax LLC – Get Results 1-866-700-1040
We are comprised of attorneys, CPAs, and former IRS agents. We have over 206 years of professional tax experience in over 60 years of working directly for the Internal Revenue Service. Also on staff is a former IRS appeals agent of 25 years.
Hire Former IRS agents to represent you before the IRS for a Employment or Payroll Tax Audit.
Being Former IRS Agents, Managers and Instructors gives us a unique advantage over everybody else for employment or payroll tax audit.
We know all the techniques, tax policies and settlement procedures to get you the results you need.
We have represented thousands of taxpayers since 1982 with glowing successes.
Hire a tax firm that gets results. 1-866-700-1040
Employment Tax or Payroll Tax Audits
The IRS will start its campaign to begin the Employment Tax or Payroll Tax Research Study. Business practices regarding these issues has changed significantly since its last study in the 1980’s.
The IRS feels there is a huge need for its Employment Tax Campaign. The IRS will collect the data that will help allow them to understand the compliance characteristics of employment tax filers.
Once this study is complete and the data is analyzed, the IRS will probably roll out a National Tax Employment Tax Campaign that will spill over to thousands of taxpayers. These smaller campaigns help the IRS know exactly where to target and are templates for The huge National Programs in Payroll Tax audits.
The two main goals for the ET NRP is to secure valid information for computing the employment Tax Gap and to determine compliance characteristics so the IRS can focus on non compliant employment tax areas.
IRS Random Audits
The IRS will randomly select 6000 poor souls for each of the next three years. The examination will be very extensive in scope. The taxpayers will receive the NRP soon in the mail.
It is of utmost importance that no person, entity or corporation go into these employment tax or payroll tax audit without professional representation. The IRS will have their way with the average Joe. Also, the IRS can spin off full audits of the business and personal returns as well.
A good professional company can limit the scope of this investigation and assure you the best results.
Find a professional company like Fresh Start Tax who has a professional staff of tax attorneys, former IRS agents and CPA’S. This is not a matter to fool around with. Trying to save money and do-it-yourself is impending doom. Be wise, smart and prudent.
How the IRS process works
The Internal Revenue Service has a process called the common-law test.
These common factors determine what side of the fence the person falls on, that of an employer or that of an employee. The IRS Agent will look at the where the ponderousness of evidence falls before making their determination on each case. No two audits or cases are ever the same.
There are different nuisances with each and every case. Below is some of the information and factors that are used by the IRS for their determinations on these Payroll Tax Audits or Employment Tax Audits.
The Internal Revenue Service Factors for Evaluation for Employee or Employer Test
There are two general tests the IRS uses for this determination for the Employment Tax Audits or Payroll Tax Audits
1. Common Law Test
2. Reasonable Basis Test
Call us for more details and get a free case analysis. 1-866-700-1040
IRS Employment, Payroll Tax Audit – Former IRS Agents – Fresh Start Tax LLC – Get Results
by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
What you need to know about the Installment Agreements to the IRS
Here are the “10 Golden Tips”
1. Four million taxpayers are currently using Installment Agreements to pay their IRS taxes. It is the most common way to close your current IRS issue or case.
2. IRS will want a completed Form 433A or 433F, collection information financial statement, with supporting documentation. They will use this to determine if you are eligible for an Installment Agreement and how much your payments will be.
3. An Installment Agreement stops all enforced collection action immediately. It suspends the open case in the IRS enforced collection system.
4. The Installment Agreement allows you to make reasonable and affordable payments to the Internal Revenue Service.
5. The IRS will release any tax levies they may have filed if an Installment Agreement has been reached.
6. The IRS has two types of Installment Agreements, streamline and long term. The amount owed determines which agreement you are eligible for. Under $25,000 qualifies for the streamline which can be handled over the telephone.
7. An Installment Agreement still allows you to file an Offer in Compromise. Make sure your situation will qualify you for an Offer in Compromise.
8. With an Installment Agreement, penalties and interest continue to accrue on the total amount due to IRS.
9. Federal Tax Liens are not released because of Installment Agreements.
10. The Installment Agreement is only a temporary solution. At the end of the day the tax must be paid in full, have the statute expire or have the IRS accept an Offer in Compromise to fully close the case off the IRS system.
At the end of the day, there should be a clear exit strategy on how your case will be settled. Call Fresh Start Tax to help with your strategy. 1.866.700.1040
by steve | Jun 3, 2010 | IRS Tax Advice, Tax News
One of the questions Fresh Start Tax ( 866-700-1040 ) is asked the most is:
“How and why the IRS Selects Tax Returns for Audits?” Here is what the Internal Revenue Service reveals
FACTS: Did you know that:
* 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 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 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 audit
Staffing is based on the examination priorities that differ 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.
Front loaded programs
Front Loaded programs are those audits that 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 – 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.
The IRS makes sure there is balanced coverage.
The National Office makes sure there is a balance 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:
1.
Individual returns less than $100,000.
2.
Individual returns greater than $100,000 but less than $200,000.
3.
Individual returns greater than $ 200,000.
4.
Small Business Corporations.
5.
Small Business Flow-Through Entities – S Corporations, Fiduciaries and Partnerships.
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 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.
A ratable ordering tool and guide are also available on the Exam Planning and Delivery Web site, .http://sbse.web.irs.gov/epd/
DIF Cutoff Score This is BIG STUFF
1.
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.
Where your case is worked
1.
Examination inventory is assigned to IRS offices based on ZIP codes, using the Look up Tables at Martinsburg Computing Center.
High Assault Risk Areas
1.
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 the case with an eyeball look.
1.
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.
2.
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.
3.
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.
Should you have any IRS needs, please call our professional staff made up of former IRS agents, to help solve your case.
1-866-700-1040
