Fixing Your Tax Problems

In-Business Trust Fund Installment Agreements

It’s been a while since I’ve done one of these In-Business Trust Fund Installment Agreements (IBTF) – Express Agreement. This installment agreement is for businesses that fit all of the following criteria:

Owe $25,000 or less in Trust Fund taxes
Currently, have employees
Be compliant with all filing and payment requirements
You must be able to pay off the amount owed within 24 months (or prior to the Collection Statute Expiration Date – CSED)

If your business owes more than $25,000, you should pay down the amount owed so it is below $25,000, if possible.

One of the best reasons to apply for this agreement is that (generally) a financial statement or financial verification is not required.

Please remember this agreement is only for the portion of the trust funds that are owed by the business. This agreement does not cover any personal liability for trust funds.

To apply for this agreement, you can apply online or by calling 800-829-4933.

If you need help with setting up this type of plan or if you have any questions, please feel to reach out to us by clicking on the ‘Contact Us’ link at the top of the page.

Why the IRS rejected the Offer In Compromise from Wesley Snipes.

Wesley Snipes’ issues with the IRS have been widely documented – from his failure to pay taxes to jail time. Mr. Snipes recently was given a tax bill of $23.5 million (up from $17.5 million assessed about 2015).

Previously, Mr. Snipes filed for an Offer In Compromise (OIC) where he claimed he couldn’t pay the IRS and offered a lower amount. The OIC was for $842,061, or about 4 percent of the taxes owed.

The IRS reviewed his OIC and rejected it due to various reasons, as explained in an article from Accounting Today (published 12-13-2018). The primary issue was ‘dissipated assets’ (assets sold or transferred by Mr. Snipes or his advisors) that should have been included in the asset listing of Mr. Snipes.

Anyone who is thinking of submitting an OIC needs to include all assets that the taxpayer owns. Homes, cars, artwork, collectibles, business interests, and real property must be included in the OIC. The IRS reviews the assets listed and will investigate if other assets belonging to the taxpayer are not listed.

One time, I had an OIC reviewer call and asked why a taxpayer didn’t include a boat trailer on the asset lists. The IRS reviewed vehicle registration records and found the boat trailer under my client’s name. Turned out that my client had sold the trailer many years before and well before his tax issues arose so this was a non-issue in this particular case.

Do you have questions on Dissipated Assets, an Offer In Compromise or need to file one? Please send me a message in the form below.

Cheers!

Thomas C. Hodge

Founder, Hodge Group LLC

Did you know the IRS and some states share tax information?

A client comes in to finish his 2017 tax return (an extension was timely filed) and he has a stack of papers from the Illinois Dept. of Revenue. I ask about it and he suggests finishing 2017 taxes first and we do so.

Turning to his paperwork, he explains that he has been getting letters “for a while” and they claim he owes money for his 2012 state tax return, done by H&R. He went back to H&R and it seems they did his Federal return, but not his state (or at least there was nothing in the folder given to him by H&R).

Looking over the IL documents (beginning in late April of this year), Illinois showed the correct revenue and tax calculation but none of his withholding or any credits for his property taxes. This is very common with Illinois and there was a copy of his W2 in the paperwork as well as property taxes paid.

This is a simple Unfiled Tax Return case (presuming H&R didn’t file the return) and it pays to look over the paperwork carefully to make sure all payments and credits were calculated by the taxing agency.

My client will still owe something but significantly less than what Illinois proposed.

So, how did Illinois find out that my client had filed a tax return for 2012? The answer – the IRS and some states share tax information. Illinois reached out to the IRS and requested a copy of his 2012 tax return, then took the numbers off the IRS paperwork and came up with a Substitute Return. Internal Revenue Code section 6102(d) specifically states the IRS will comply with data requests from states (although not all states an in their program, YET!).

Illinois would also comply with a request from the IRS and send any information they have on a specific taxpayer.

This cooperation between the IRS and State agencies almost assuredly will result in more errors being discovered and more notices from the IRS and State Agencies.

Please feel free to leave your comments and questions below.

Need Tax Relief? Here’s what to look for.

{This is a blog post originally published August 17, 2014, on the Tom Hodge CPA blog page. The information is still relevant today!}

Reading the business news recently, I came across an article about how the Federal Trade Commission (FTC) was returning $16 BILLION to the customers of a tax relief company that they (FTC) had previously put out of business. American Tax Relief (ATR) was found guilty of falsely claiming it could reduce tax debts. Unfortunately for all the people who signed up, they are only getting back an estimated 16% of the monies given to ATR.

This makes at least 4 cases where tax relief (or tax problem resolution) companies have been put out of business – ‘Tax Lady’ Roni Deutch in 2011, as well as JK Harris and TaxMasters in 2012. On one site (www.accountingtoday.com), a person, claiming to be a retired IRS Appeals agent said (in part) that those companies would:

“…prepare a very simple Appeals protest, or Offer in Compromise application, or Innocent Spouse Relief Request form, etc. and then disappear. I would contact the named POA (power of attorney) to discuss the case and they would say they were no longer representing the taxpayer, their engagement only included the preparation of the application, etc.!!! The taxpayers would tell me they paid from $3,000 – $5,000 for this minimal service.”

Things like this upset me as I’ve been working with tax relief clients for many years, and I keep hearing all the radio ads that say you can ‘pay pennies on thousands of dollars owed if you qualify’. The key words are ‘if you qualify’ as every situation is different.

Tax Agencies will review your financial situation (both current and projected) to see if there is a reasonable chance you’ll be able to pay the debt either immediately or over time. In addition, the Tax Agencies will look at your assets to see if anything can be used to pay down the tax debt immediately (401k or retirement accounts, home equity, major assets, etc.). Health issues, job loss, economic downturns and other factors will be taken into account. Even when you enter into an agreement (payment plan, offer in compromise, etc.) penalties and interest will continue to accrue. Also, all of your tax returns must be on file with the Tax Agency – they won’t do any negotiation with open tax returns.

If you’re not comfortable with working with the Tax Agencies on your own and decide to seek help, be careful, do your homework and make sure you ask any and all questions that come to mind – here are a few I’d recommend:

What happens if the Taxing Agency turns down your first proposal – what will you do next? How many times are you willing to send in a proposal?
How long has your firm been providing these services?
How much of your fee will be paid upfront or as a retainer? (always a bad sign when the firm wants the whole fee upfront)
Who will be working on my case – someone local or in your home office? (some firms out-source their services to practitioners in each state especially if there are state & local taxes involved)
Is the person who will work on my case accredited to practice before the IRS (or other Taxing Agencies)?
Does your fee cover both state/local & federal taxes?
Will your firm file late tax returns and how much will that cost?
Are you accredited by the Better Business Bureau (BBB)?
Can you give me at least 3 references with similar tax problems who you’ve helped?

Again, each case is unique – you may have additional questions for potential tax relief companies so be sure to add them to your list. Make sure you feel comfortable with whoever does handle your case as that person will have to know almost everything about your finances, assets, health, family, etc.

If you’d like more information or have a tax relief question, please feel free to send me an inquiry below:

Cheers!

Thomas C. Hodge, CPA
Founder

Hodge Group, LLC

773.237.6369