How much do I pay IRS for late filing, paying, interest and penalties

by steve | Jun 17, 2010 | IRS Tax Advice, Tax News

IRS Collection Procedural Questions on Late filing Penalties and Interest
Question: What kind of interest and penalties will I be charged for filing and paying my taxes late?
Answer: Interest is compounded daily and charged on any unpaid tax from the due date of the return until the date of payment.
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The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months.
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For current interest rates, go to News Releases and Fact Sheets and find the most recent Internal Revenue release entitled Quarterly Interest Rates.
In addition, if you filed on time but didn’t pay on time, you’ll generally have to pay a late payment penalty.
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The late payment penalty is one-half of one percent of the tax (0.5%) owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent.
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You will not have to pay the penalty if you can show reasonable cause for the failure.
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The one-half of one percent rate increases to one percent if the tax remains unpaid after several bills have been sent to you and the IRS issues a notice of intent to levy.
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Currently, if you filed a timely return and are paying your tax via an installment agreement, the penalty is one-quarter of one percent for each month, or part of a month, that the installment agreement is in effect.
If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause.
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The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to 25%.
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The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return.
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After five months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid.
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The total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed. What a rip off!!!!!!!!!!!!!!!!!!
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If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 ($135 for returns required to be filled after December 31, 2008) or 100% of the tax required to be shown on the return.
If you have any questions, call Fresh Start Tax today.    1-866-700-1040

Enforcement of the IRS Summons

by steve | Jun 8, 2010 | IRS Tax Advice, Tax News

The General Enforcement of The IRS Summons, Civil Enforcement, Criminal Contempt, Criminal Enforcement
General Enforcement Procedures used by the Internal Revenue Service
1.
A summoned party who fails to comply with a summons may be subject to:
1.
criminal proceedings under IRC 7210.
2.
civil proceedings under IRC 7604 to enforce compliance.
2.
IRS will consider recommending civil enforcement action or criminal action when the person summoned neglects or refuses to comply. Do not refer a summons for enforcement in the following situations that might involve an abuse of process, or in other similar situations, as follows:
1.
The summoned party or their representative has contacted the Service and indicated a willingness to comply with the summons but has requested a reasonable extension of time within which to comply.
2.
The summoned party has appeared and denied under oath the possession or control of the documents called for in the summons, unless there is a good reason to believe the contrary.
3.
The Service has had possession of the documents for a sufficient period of time in which to examine and copy them.
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Records of financial transactions are demanded before the summoned party could reasonably be expected to produce them.
5.
More than one examination of the same records for the same purpose is sought under circumstances that might suggest harassment.
6.
The summons has not been issued by a proper, delegated official.
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The summons has not been properly served under.
8.
The summons does not comply with the time requirements for production of documents.
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The summons to a third party does not comply with the notice requirements.
Civil Enforcement of the Federal Summons by the Internal Revenue Service
1.
IRC 7604 provides for the civil enforcement of a summons.
2.
Under IRC 7604(b), enforcement action may be initiated by applying for an attachment for an arrest against a person who has failed to obey a summons to a district judge or magistrate judge. When the person is brought before him or her, the district judge or magistrate judge will issue whatever order deemed proper to enforce compliance with the summons and to punish such person for default or disobedience. When a petition for attachment is filed, the court may choose to proceed by issuing an order to show cause why the summons should not be obeyed. It may also modify the summons if compliance would be unreasonable or oppressive.
3.
Enforcement proceedings are usually commenced by filing a petition for a court order directing compliance with the summons. The summons (or a copy) should be attached to the petition or offered in evidence; otherwise, the court may not enforce it. Based upon the allegations, the court may issue either an order to show cause, or an ex parte (only one party represented) order directing compliance with the summons. The use of procedures other than attachment is authorized by IRC 7604(a), which grants district courts jurisdiction to enforce compliance by appropriate process.
Civil and Criminal Contempt Regarding the IRS Summons
1.
A person refusing to obey a court order to comply with a summons (civil enforcement) may be held in contempt of court. The contempt proceedings may be civil or criminal, or both. A defendant may be purged of civil contempt by complying with the court order, but punishment for criminal contempt is usually not conditional. Use of civil or criminal contempt, as with civil or criminal enforcement, depends on whether the purpose is to compel compliance with the summons or to punish disobedience and protect the authority of the court.
2.
A civil contempt proceeding may be commenced by a motion requesting that the person summoned be adjudged in contempt and punished. The recalcitrant party may then be committed to jail until he or she complies with the court order.
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A criminal contempt proceeding can be undertaken only on notice given by the judge in open court in the presence of the defendant, by an order to show cause, or by an order of arrest, unless the contempt was committed in the presence of the court. The notice must state essential facts, which constitute criminal contempt and describe the criminal contempt as such.
4.
For criminal contempt, the government must prove beyond a reasonable doubt that the defendant willfully failed to comply with a lawful court order and show that summoned records are presently within the defendant?s power and control. Presumption of continued possession and existence is not enough to shift the burden of proof to the defendant unless the time span is short and there is no outside motivation for destruction of the particular records.
Use of Declarations in Federal Summons Proceedings of the Internal Revenue Service
1.
To support applications for court orders directing compliance with a summons, prepare a declaration (Exhibit 25.5.10?3 contains a sample) detailing the nature and purposes of the examination, the testimony and records desired, and their relevancy. Enforcement proceedings are usually held solely upon declarations and oral argument. The declaration must show the person summoned has possession, care, or custody of the desired records and the records are material and relevant to the tax liability of the person being investigated. If the summons pertains to a year previously examined, attach a copy of the Area Director?s reopening letter. Some courts may require an affidavit under oath with the same basic information.
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If the declarations sharply dispute whether the records are subject to the control of the summoned person, the court will usually resolve the issue in the summons enforcement proceeding. When a petition for enforcement is filed, the court may choose to proceed by issuing an order to show cause why the summons should not be obeyed. It may also modify the summons if compliance would be unreasonable or oppressive.
Criminal Enforcement of Summons of the Internal Revenue Service
1.
A person who neglects to appear or to produce records pursuant to a summons may be criminally prosecuted under IRC 7210. The government must be able to prove that:
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The defendant was duly summoned to appear to testify or to appear and produce certain records.
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The defendant did not appear or produce such records.
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At least some of the records called for by summons were in existence and in the defendant?s control.
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The defendant willfully and knowingly neglected to appear and produce them.
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It has been held that neglect as used in this Code section means more than mere inadvertence. To make a criminal offense of neglect in this situation would imply that the person summoned must have:
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willfully failed to comply with the summons; and
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knowledge that he or she was failing to do what the summons required him or her to do.
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Refusal to obey a summons could lead to a prosecution under IRC 7203 for willful failure to supply information required by the law. Proof that the refusal was intentional and without legal justification is not sufficient. The government must establish that the refusal was prompted by bad faith or evil intent; i.e., that the defendant did not believe in good faith that refusal was legally justified.
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Requests for criminal action for failure to obey summonses issued by the area civil functions will be referred by the appropriate Field Territory Manager to CI for evaluation. If CI does not initiate an investigation, CI will notify the Field Territory Manager of the referring function, and thereafter the referring function may then make a referral to CT Counsel for civil enforcement action. No attempt should be made to enforce obedience with the summons while criminal action is being considered.
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If CI determines that criminal action for failure to obey a CI-issued summons will be undertaken (rather than enforced obedience) the matter will be assigned for criminal investigation. No attempt should be made to enforce obedience with the summons while considering criminal action.
6. There are several other factors that go into the decision and are up to the judgment of the Revenue Officer or compliance official.
This information comes from code Section 7603 and has been modified . Should you have any questions, call Fresh Start Tax 1-866-700-1040.

IRS Federal Summons, Delivery

by steve | Jun 7, 2010 | IRS Tax Advice, Tax News

The IRS Summons
The Service of the IRS Summons
1.
IRS will serve an attested copy of a summons in accordance with IRC 7603. The face of the summons given to the summoned person should bear a signed attestation statement. The federal summons should be:
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handed to the person to whom it is directed, or
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left at his or her last and usual place of abode by leaving it with a person who is of suitable age and discretion, with instructions that the summons be given to the summoned individual, or by affixing the summons to the front door of the last and usual place of abode by a means that will not mar the finish.
2.
The Service of a Summons issued to a third-party record keeper by registered or certified mail, or personally deliver it to the person to whom it is directed. However, service by registered or certified mail is the preferred method of service for third-party recordkeepers. IRS will mail the summons to the last known address of the recordkeeper and document the case file by recording the method of service.
3.
After completing the certificate of service, place Form 2039 in the administrative file in the office of the issuing division for use in enforcement litigation, if necessary.
4.
If a witness requests that he or she be served with a summons as evidence of his or her legal duty to produce records, testify, or provide handwriting analysis, and indicates he or she will voluntarily comply, issue the summons for that purpose. This is commonly referred to as a “friendly summons.”
5.
If information requested by a summons is later determined to be unnecessary, compliance with the summons may be waived by the issuing official, provided the summons is not the subject of litigation.
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Witness fees and payments for mileage may be made to all summoned witnesses, whether a third-party witness, the taxpayer, or the taxpayers representative.
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Under IRC 7610(b)(2), if the summoned party is the taxpayer or the taxpayers officer, employee, agent, accountant, or attorney who was acting in that capacity when the summons was served, then that person is not entitled to the reimbursement of costs incurred in searching for, reproducing, or transporting summoned records. Under IRC 7610(b)(1), only certain summoned third-party witnesses are eligible for reimbursement of those costs. Excluded from eligibility are third parties summoned to produce records in which the taxpayer has a proprietary interest.
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If the summons is served on a third party and the taxpayer is entitled to notice of its issuance, provide Part C of Form 2039 to the noticees along with Part D of Form 2039, which explains the right to contest the administrative summons. If more than one person is entitled to notice of the summons, Parts C and D may be reproduced to provide such notification. This would occur, for example, in a situation where a bank account is listed in two names even if the two persons reside at the same address.
The copy of the summons provided to the noticees, Form 2039 Part C, is not required to bear an original signature. However, the copy served on the summoned party, Form 2039 Part A, must bear an original signature of the official serving the summons.
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These summonses are considered third-party summonses to which the notice requirement of section 7609(a) applies. If only one spouse is summoned, the other spouse is entitled to notice under section 7609(a) as a person identified in the summons. Even when both spouses are summoned (by issuing and serving separate summonses), each spouse is entitled to notice of the other spouse’s summons. This procedure preserves each spouse’s opportunity to move to quash the summons served on his or her spouse. See IRM 25.5.6.3.1.2
10.
A summons may be issued to a corporation for the production of corporate records. If the summons is directed to the custodian of records, it must be served personally on the custodian. If the summons is directed solely to the corporation, it must be personally served on a corporate officer or a person authorized to accept service of the summons on behalf of the corporation. Although IRC 7603 provides that a summons may be served by leaving it at the summoned person’s “last and usual place of abode,” this rule does not apply when a corporation is the summoned person because a corporation has no abode. Consequently, do not serve a summons on a corporation by leaving it at the custodian?s or the authorized person’s place of abode.
11.
If the summoned party fails to comply with the requirements of the summons, see IRM 25.5.10, Enforcement of Summons, for enforcement procedures.
Time and Place of Examination Set by Summons
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Generally, the following guidelines apply:
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The time and place of examination must be reasonable.
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The date for appearance should not be on a Saturday, Sunday, or a legal holiday.
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If a prospective witness is cooperative, the summons should be made returnable, if feasible, at the place that suits the witness? convenience.
4.
If the witness is uncooperative or attempts to hamper the investigation, it may be best to have him or her appear and produce his or her records at the agent?s office.
5.
In computing the time period for appearance or production of records, do not include the date of service or the date of appearance within the 10 or 23 day waiting periods.
2.
If the summons is directed to a third party and is subject to the notice and waiting period requirements of IRC 7609:
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Set the date for appearance at least 24 days after the date notice of the summons is given.
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Do not accept records from the summoned third party prior to the date of appearance because noticees have the right during this time period to initiate proceedings to quash the summons.
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If a proceeding to quash has properly been instituted, do not examine records unless the court so orders, unless the noticees who has instituted the proceeding consents.
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If the summons is not subject to IRC 7609 requirements, the date for appearance must be not less than 10 full days after the date of service, but the summoned person may voluntarily comply at an earlier time.
4.
A third-party witness may request service of a summons as evidence of a legal duty to testify or produce records. If the summons is not subject to IRC 7609 notice and waiting period requirements, the date for appearance is 10 or more days after service of the summons even if the person expects to respond on an earlier date. (See IRC 7609(c)(2) and IRM 25.5.6 for a discussion of third-party summonses not subject to the 23 day waiting period of IRC 7609.)
Do not use this procedure when the taxpayer or other person is entitled to a notice. Do not use this procedure for a John Doe summons, which may only be served after approval by a federal district court judge.
5.
If a summoned witness for a valid reason (such as illness) cannot appear on the date fixed in the summons, the date may be continued by mutual agreement. To formally extend the compliance date of the summons:
If you have received a Federal summons from the IRS and have questions, please feel free to call your professional team at Fresh Start Tax 1-866-700-1040

Secrets of the IRS Collection Division

by steve | Jun 7, 2010 | IRS Tax Advice, Tax News

The IRS Collection Division, an arm of the Internal Revenue Service, has little known practices they use to collect tax money for the US government. The actual collection process has hidden secrets, as do any organization’s procedures. These so-called secrets provide people who know the system to work better within the system, “Knowing is Power”. Here are some of those little known secrets.
5 tips that are valuable when dealing with the IRS:
Tip #1
Should the IRS place your case in “currently noncollectable” status, how and when will they send your case back to the field?
There are two triggering mechanisms that place your case back into the system. Knowing these are strategic because it allows you to plan for the IRS starting up a new investigation. The first is a mandatory follow up that the working Revenue Officer or Agent places on the case. The working agent gets a feel for when they think the case is ready for review. They will literally put in a mandatory follow up. It may happen because of an event, i.e., new job. Something in the case investigation leads them to believe there will be a better time down the road to work this case. Many times the agent will place that in the file history, so the next agent who has your case will have that information.
The second type of follow up is based on your current Adjusted Gross Income (AGI). When your adjusted gross income reaches a certain level set by the agent that worded your case, the case will come back out to the field. So how can you prolong the AGI follow-up? One way is if you’re filing married, file separate tax returns if you qualify. The IRS will pick one income up rather than two. The downside to this strategy is that you may end paying higher taxes by filing separate.
Tip#2:
When you have an outstanding case with Internal Revenue Service be mindful of what tools they will use for their investigation. One of the sources they use is Accurint.com. It is a search engine that reveals detailed financial information that collection and credit agencies have been gathering for years. It would be wise to pull up your own Accurint report to see the avenues they will pursue.
Tip #3:
Have you been involved in a court case where you gave a deposition in the last few years? Through the courthouse record search, the IRS will find out about the suit. If it was a divorce or a case involving financial matters they will summons for a record of the deposition. The IRS will read the deposition to try to find out about any assets they don’t know about already.
Tip#4
Credit reports – On each case that is brought to the field, the IRS will pull a credit report. They will match up the credit report with the financial statements you provided. Here is the TIP. The IRS will summons any loan applications you submitted to see what assets you have put on your application. So make sure that you do not excluded those same assets off of the financial statement you gave to the IRS. This is one situation that can cause a problem since most loan applications are prepared to show the lender higher values.
Tip #5
The IRS will check DMV records for vehicles you may own. In addition, they will review other documents and accounts you have. A little item that the IRS is careful to examine is what you put on the information sheets stating “possible benefit of a trust or estate”. The IRS is mindful of the age of the taxpayer’s family, especially their parents. Since most people receive a little something from their parents when they decease, they will look to see if there is money to collect through the inheritance.

How to get your IRS Tax Levy or Garnishment Released

by steve | Jun 3, 2010 | IRS Tax Advice, Tax News

Fresh Start Tax, Solutions to get your IRS TAX LEVY RELEASED on Wages and/or bank accounts.    1-866-700-1040
The IRS TAX LEVY ON WAGES, 668(W) or the levy on BANK ACCOUNTS 668(A) is the ultimate collection tool of the IRS. This is the IRS’s enforced collection mechanism where IRS will seize your wages and/or your assets for unpaid back taxes. Below are 10 ways you can legally release a tax levy with the IRS.
Fresh Start Tax will evaluate your case, get a 433F, contact IRS and get a settlement document for you. We offer free assessments.
What Fresh Start Tax can do for you:

• immediately send a power of attorney to IRS so you will never have to speak to IRS
• make sure you are taken off the IRS enforcement action computer system immediately
• adjust the tax liability to make sure you are paying the lowest amount possible
• file any tax returns that need to be filed
• settle the tax liability for the lower possible amount
• make sure IRS never takes your tax refund

These are the ways IRS will close your case:
1. Pay the tax amount in full – If you can afford it, this is the easiest way of settling back taxes and getting a levy released. If you pay the tax amount owed in full, the IRS will immediately stop all collection actions against you or your company and the levy will be released or removed.
2. Let the Statute of Limitations Expire – The IRS has 10 years to collect taxes from the initial date of assessment. Once the 10 year period is up, the IRS can no longer collect these taxes from you. Keep in mind that the IRS will try to extend this the statute of limitations, so be aware of any papers they want you to sign. Also be aware that certain actions extend the statue of limitations, such as bankruptcy or the filing of an offer. If you have not paid the amount owed in 9 years, it is unlikely they will be able to collect from you in the last year. Certain factors influence when cases are sent back to the field. You should read our blogs to find out those factors.
3. Set up an installment agreement – An installment agreement is a payment plan with the IRS. This plan will allow you to pay off the IRS tax amounts owed over time. It usually is a 5 year period of time. It is important to make timely payments once the installment agreement is in place or the IRS can reissue the tax levy or levies.
4. Set up a partial payment agreementt – This is similar to the installment agreement, but if you can show you can legitimately not make the payments required for an installment agreement, the IRS will allow for smaller payments that may equal less than the original amount of tax owed. These are usually hardship type cases.
5. File an Offer in Compromise – If you meet the strict requirements for this type of relief, the IRS will release the levy. This is one of the hardest types of relief to receive from the IRS because it allows you to settle for far less than you owe.
6. Prove you have no equity in assets – If the assets the IRS is trying to levy have no equity in them, you must prove to the them that there would be no point for them to levy those assets. IRS will gain nothing from levying them and it will not pay anything towards your back taxes owed.
7. Prove you have a Financial Hardshipp – If you can prove to the IRS that the levy creates economic hardship. some examples of a hardship could be that you are being evicted or have a medical problem that take most of your wages or assets. If you qualify for as a hardship it is likely the IRS will release or remove the federal tax levy.
8. Post a Surety Bond – If you post a surety bond, the levy will no longer be in effect. If a levy is in place, and you cannot pay your taxes, it is highly unlikely you will qualify for a bond. If you do qualify for a bond, you may be better off paying the tax amount owed in full. Also your federal tax lien gets released as well.
9. Appeal the Levy – You can appeal an IRS levy and you will have a review if the Internal Revenue Service did not follow correct procedures.
10. File a bankruptcy – Bankruptcy settlement can release a tax levy by court order and return seized assets to you. This should be considered as a last resort. Your taxes must be 3 years or older, assessed for 240 days, and the returns must be filed for a two year period of time.