Have you seen the news lately?According to the Us Treasury, Business are creating a huge tax gap, and it has been going on for year's. This means they owe the taxes but they are just not voluntarily paying, and in most cases not reporting the tax. The same business are reporting great gains to their investment boards and share holders. They do this in order to keep investment money, and lines of credit flowing into the company.
"There are three key characteristics of the tax gap:
• Over 70 percent of the gross tax gap is attributable to the individual income tax,
which is the largest single source of Federal receipts.
• Over 80 percent of the gross tax gap is caused by under reporting of tax (i.e., by
under reporting income or overstating deductions and credits), with roughly half this
amount (including self-employment tax) attributable to under reporting of net business
income by individuals. Eighteen percent of the gross tax gap is attributable to
underpayments of taxes or failure to file tax returns.
• Noncompliance is highest among taxpayers whose income is not subject to third party
information reporting or withholding requirements.
These characteristics suggest a targeted response designed to address the most significant
areas of noncompliance. The following overview discusses these characteristics
As indicated above, the IRS estimates that over 70 percent of the gross tax gap is
attributable to the individual income tax. "
"Moreover, while it may be possible to develop a comprehensive strategy that reduces the
tax gap, it is not possible to implement a policy that would come close to eliminating the
tax gap without an unacceptable change in the fundamental nature of our tax compliance system"
Tax Gap Strategy Timeline for Fiscal Year 2007
January
• Taxpayer Advocate’s Annual Report to Congress
• Update of 2006-2007 Treasury Department/IRS Priority Guidance Plan
• Launch of Federal/State Electronic Federal Tax Payment System (EFTPS).
• Deliver Taxpayer Assistance Blueprint Phase II Report to Congress
February
• Administration’s fiscal year 2008 budget request, including anticipated legislative proposals for compliance initiatives, tax code simplification and IRS funding
March/April
• Detailed outline of IRS tax gap strategy reflecting provisions in Administration’s fiscal year 2008 budget request
o Outline steps to reduce opportunities for evasion
o Outline IRS research initiatives
o Outline IRS information technology initiatives
o Outline IRS compliance initiatives
o Outline IRS taxpayer service initiatives
o Outline steps to reform and simplify the tax law
May
• Stakeholder meetings to discuss Administration’s fiscal year2008 budget request
June
• Treasury Department review of practitioner compliance initiatives
July
• 2007-2008 Treasury Department/IRS Priority Guidance Plan.
The IRS and US TREASURY are committed to flushing out these companies. Revenue Officers are getting tougher on compliance and enforcement trying to make examples out of the business they are able to get now. My advice as a Tax Consultant in a prominent firm is to seek legal representation NOW
Showing posts with label collections. Show all posts
Showing posts with label collections. Show all posts
Wednesday, August 13, 2008
Friday, August 8, 2008
Haven't filed a tax return in awhile? You may owe the IRS!
If you haven't filed a tax return in a few years, you may still owe the IRS. You may have even been suprised when you received a Balance Due Notice in the mail from the IRS for years you haven't filed.
The reason for this is the SFR. An SFR stand for Substitute for Return. When you go more than 2 years without filing a return, the IRS might prepare a return for you. They will file you single with standard deductions. You will not get any other deductions that might be beneficial to you. Once they prepare a return for you and you owe tax, they will file that return and assess the tax against you. If they prepare a return for you and you are due a refund, they will not file that return. Thus, you will not get your refund. It is not in the best interest of the Treasury to hand out money on returns not filed by the tax payer.
Once your tax has been assessed, they will put you in the collections letter cycle.
Even though you have a SFR, you can still file a return on top of it with all of your deductions included and you correct filing status. This will file over the SFR and adjust your tax liability, but it will take months to process, so in the meantime, you need to be in a resolution with your supposed liability or the IRS will enforce collections (even if your return shows you don't owe). Doesn't seem fair but that's the way it is.
This is one of those areas where professional representation might be your best bet. It is very tricky when filing over SFRs and when filing old returns. If your returns don't match up to IRS records, you will be red-flagged for an audit for sure, delaying the whole process and even resulting in more penalties.
The reason for this is the SFR. An SFR stand for Substitute for Return. When you go more than 2 years without filing a return, the IRS might prepare a return for you. They will file you single with standard deductions. You will not get any other deductions that might be beneficial to you. Once they prepare a return for you and you owe tax, they will file that return and assess the tax against you. If they prepare a return for you and you are due a refund, they will not file that return. Thus, you will not get your refund. It is not in the best interest of the Treasury to hand out money on returns not filed by the tax payer.
Once your tax has been assessed, they will put you in the collections letter cycle.
Even though you have a SFR, you can still file a return on top of it with all of your deductions included and you correct filing status. This will file over the SFR and adjust your tax liability, but it will take months to process, so in the meantime, you need to be in a resolution with your supposed liability or the IRS will enforce collections (even if your return shows you don't owe). Doesn't seem fair but that's the way it is.
This is one of those areas where professional representation might be your best bet. It is very tricky when filing over SFRs and when filing old returns. If your returns don't match up to IRS records, you will be red-flagged for an audit for sure, delaying the whole process and even resulting in more penalties.
Thursday, August 7, 2008
Thats not your money!
The IRS takes the civil trust fund very seriously. If you own a business, you know exactly what the civil trust fund is. When you pay employees, the IRS "trusts" you to collect their withholding and FICA taxes. At that point, you have to give that money to the IRS and file a form 941 to reconcile what you have paid the IRS.
What happens a lot of times is a business will get into a cash crunch and not pay their civil trust fund deposits to pay other bills instead. They think they can catch up with it the next month and when that doesn't happen, the next. Slowly they realize that they are now behind 3 months and have not filed their form 941. The IRS sees this as stealing. This is not unpaid taxes of the business; instead, it is other people's money that was intended to pay their own taxes, medicare and social security retirement. It must be paid back and in full. The IRS does not negotiate on this type of liability.
This potentially places a business in great jeopardy. By not paying and/or filing for 3 months, they have earned themselves a Revenue Officer, the highest level of collections enforcement the IRS has. It is the Revenue Officer's job to collect the civil trust fund money. They will levy a business to collect the money. They can levy bank accounts and accounts receivables. They can even shut down a business to collect the civil trust fund.
It does not have to be the end of the road for your business. There are ways of handling this situation with the IRS. You need professional representation to help you navigate through these kinds of rough waters. There is help if you want it!
What happens a lot of times is a business will get into a cash crunch and not pay their civil trust fund deposits to pay other bills instead. They think they can catch up with it the next month and when that doesn't happen, the next. Slowly they realize that they are now behind 3 months and have not filed their form 941. The IRS sees this as stealing. This is not unpaid taxes of the business; instead, it is other people's money that was intended to pay their own taxes, medicare and social security retirement. It must be paid back and in full. The IRS does not negotiate on this type of liability.
This potentially places a business in great jeopardy. By not paying and/or filing for 3 months, they have earned themselves a Revenue Officer, the highest level of collections enforcement the IRS has. It is the Revenue Officer's job to collect the civil trust fund money. They will levy a business to collect the money. They can levy bank accounts and accounts receivables. They can even shut down a business to collect the civil trust fund.
It does not have to be the end of the road for your business. There are ways of handling this situation with the IRS. You need professional representation to help you navigate through these kinds of rough waters. There is help if you want it!
Wednesday, July 30, 2008
FREE SEVICES ?
If it's free it's for me! In a world where the cost of everything continues to go up I am all over anything I can get free. More and more service based companies are cutting back on the things they use to offer as incentive to do business with them. The tax industry is riding that wave also. There is good news though. If you call the right tax firm they have the ability to get information for you when you're not sure what’s going on. The fee for this service can range from 650- 900 dollars. A lazy tax consultant will just guess as to your actual liability amount and you get charged for what he "guesses" you owe. Many companies base their fees on what you owe so they guess high and hope you don't object. This service is called a practitioner call. They can provide you any information they need to handle your case. This is especially important if you have any tax returns from previous years. These older returns are very suspect to the IRS, therefore each one of these returns will be hand audited. A good tax company will use the information they get from the IRS to file your returns. Why? To get you through step one of the audit process. The first thing an auditor looks for is accuracy of the numbers. Down to the penny! This is just one benefit of the practitioner call. For more info on this potentially free service, call around and see who will offer it.
JUST DO IT !
The Nike philosophy is a universal truth that can save you money! As a senior tax consultant in a major tax resolution firm, I see cases all the time that could have been half the price for resolution. Every 4 years you don't handle a tax liability, it DOUBLES! I understand when folks tell me that they got scared. Fear and procrastination will cost them much more than they think. The common symptom most people have with tax problems is analysis paralysis. Action is what ignites every success. Action is what produces results. Knowledge is only potential power until it comes to someone who knows how to get himself to take effective action. If you want to reduce the amount you have to pay the IRS, then do your home work on some PROFESSIONAL TAX RESOLUTION FIRMS and JUST DO IT!
Tuesday, July 29, 2008
KISS OF DEATH !
Have you ever greeted someone with a hug or kiss and you could feel them knifing you in the back? If you have been around for more than a week I'm sure you have run into people who are nice to your face but really don't care a thing about you.
Unfortunately, the IRS has figured out that they can get much more information from tax payers by acting like they are there to help you. They will be down to earth and friendly. BEWARE… they have an agenda. They want you to tell them important information they need to do their job, COLLECTING YOUR MONEY! They need banking info, job info, anything they can use to ENFORCE COLLECTIONS! The IRS is a SUPER COLLECTIONS AGENCY. All their employees are trained to lull you into a false sense of security that they're going to HELP YOU. Make no mistake, they are there for one purpose and that is to collect. In 2007, over 4 million LEVIES and LIENS were issued. To do that, they need SOURCES (ie. banks, job etc.) A lot of times they get you to volunteer to write it all down and send them all the info they need to ENFORCE COLLECTIONS on you via a form called a 433 a, b or f. If you fill this out and send it to them, THEY HAVE YOU! Don't be unaware of their tactics. Get a PROFESSIONAL ORGANIZATION to help you.
Unfortunately, the IRS has figured out that they can get much more information from tax payers by acting like they are there to help you. They will be down to earth and friendly. BEWARE… they have an agenda. They want you to tell them important information they need to do their job, COLLECTING YOUR MONEY! They need banking info, job info, anything they can use to ENFORCE COLLECTIONS! The IRS is a SUPER COLLECTIONS AGENCY. All their employees are trained to lull you into a false sense of security that they're going to HELP YOU. Make no mistake, they are there for one purpose and that is to collect. In 2007, over 4 million LEVIES and LIENS were issued. To do that, they need SOURCES (ie. banks, job etc.) A lot of times they get you to volunteer to write it all down and send them all the info they need to ENFORCE COLLECTIONS on you via a form called a 433 a, b or f. If you fill this out and send it to them, THEY HAVE YOU! Don't be unaware of their tactics. Get a PROFESSIONAL ORGANIZATION to help you.
Thursday, July 24, 2008
Taking Care of Your IRS Problem
When you owe the IRS, or are behind in filing your tax returns; there are three things you can do.
The first is to do nothing and let the IRS enforce collections and take care of your problem for you. This is never a good idea. Although the IRS can prepare and file a return for you, known as a substitute for return or SFR, they will prepare it in the best interest of the treasury. Meaning, they will not take into account any deductions you may be able to take advantage of, and then they will assess a tax liability against you. This will put you into the collections process; mandating that you take action or have the full collection forces of the IRS come after you.
The second thing you can do is handle it yourself. This is also not a good idea. Unless you know how the IRS works and what options are available for you, you will never know if you have gotten the best deal that is available for you. It is not the IRS’s job to get you into your best possible result, it is their job to collect from you. AND it is never a good idea to prepare your own tax return. Always have a professional do it for you so that you can be sure to take advantage of all possible deductions you may have and to avoid costly mistakes and errors that can cause you many many headaches.
The Third and best way to handle your situation is to hire a reputable tax resolution firm. They will know how the IRS works, what options are available to you and get you the best result possible. You wouldn't go to court without a lawyer would you? So why would you want to face the largest bill collector on your own. A reputable firm will have your best interest in mind. Have great communication with clients, have great customer satisfaction scores and deliver what they promise.
You always want to be proactive with the IRS and deal with them on your own terms.
Coming soon: How to know your tax resolution firm is reputable.
The first is to do nothing and let the IRS enforce collections and take care of your problem for you. This is never a good idea. Although the IRS can prepare and file a return for you, known as a substitute for return or SFR, they will prepare it in the best interest of the treasury. Meaning, they will not take into account any deductions you may be able to take advantage of, and then they will assess a tax liability against you. This will put you into the collections process; mandating that you take action or have the full collection forces of the IRS come after you.
The second thing you can do is handle it yourself. This is also not a good idea. Unless you know how the IRS works and what options are available for you, you will never know if you have gotten the best deal that is available for you. It is not the IRS’s job to get you into your best possible result, it is their job to collect from you. AND it is never a good idea to prepare your own tax return. Always have a professional do it for you so that you can be sure to take advantage of all possible deductions you may have and to avoid costly mistakes and errors that can cause you many many headaches.
The Third and best way to handle your situation is to hire a reputable tax resolution firm. They will know how the IRS works, what options are available to you and get you the best result possible. You wouldn't go to court without a lawyer would you? So why would you want to face the largest bill collector on your own. A reputable firm will have your best interest in mind. Have great communication with clients, have great customer satisfaction scores and deliver what they promise.
You always want to be proactive with the IRS and deal with them on your own terms.
Coming soon: How to know your tax resolution firm is reputable.
Tuesday, July 15, 2008
The Collections Process and the IRS
The IRS is required by law to follow specific steps when notifying a tax payer of a tax liability. This is the Collections Due Process. The IRS has to follow these rules step for step. They only need to send notices to the last know address of the tax payer.
The process starts with a balance due notice, form CP14 or CP11. The balance due notice states how much is due and from which tax year.
After 10 days of sending the Balance Due Notice the IRS will send a second notice of demand for payment with form CP 501.
10 days after the CP501, a CP503 is sent with the same demand for payment.
When all the above notices are ignored, the IRS will send a CP504, Notice of Intent to Levy. This is always sent via certified mail.
In most cases a final notice of intent to levy is sent. This is letter L 1058. This step may be skipped by the IRS.
If the taxpayer ignores or fails to respond to all the notices, a Levy is placed against the taxpayer and a notice is then sent to the taxpayer informing them of the levy. The Levy Notice is form 668.
If you are in IRS collections, you may need help to handle the IRS. You want to act quickly when you start receiving these notices and not wait until you are levied which can leave you with no money that may be used to get help. It is always best to be proactive with the IRS. You want to deal with the IRS on your terms not theirs.
The process starts with a balance due notice, form CP14 or CP11. The balance due notice states how much is due and from which tax year.
After 10 days of sending the Balance Due Notice the IRS will send a second notice of demand for payment with form CP 501.
10 days after the CP501, a CP503 is sent with the same demand for payment.
When all the above notices are ignored, the IRS will send a CP504, Notice of Intent to Levy. This is always sent via certified mail.
In most cases a final notice of intent to levy is sent. This is letter L 1058. This step may be skipped by the IRS.
If the taxpayer ignores or fails to respond to all the notices, a Levy is placed against the taxpayer and a notice is then sent to the taxpayer informing them of the levy. The Levy Notice is form 668.
If you are in IRS collections, you may need help to handle the IRS. You want to act quickly when you start receiving these notices and not wait until you are levied which can leave you with no money that may be used to get help. It is always best to be proactive with the IRS. You want to deal with the IRS on your terms not theirs.
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