Author: 20/20 Tax Resolution

Taxes 2016: Collection Cases, Unpaid Balances Increase

More people owe more money in unpaid taxes than at any other time in U.S. history, according to recently published figures from the Internal Revenue Service. According to the numbers for fiscal year 2015, unpaid tax balances increased by $7 billion and the number of active collection cases grew to 13.5 million.

All this data, coupled with the recent IRS announcement that the agency is planning to hire up to 700 enforcement agents to pursue collection efforts, points to an increasing need for tax resolution services, said David Miles, vice president of 20/20 Tax Resolution in Broomfield, Colo.

“With a growing emphasis on collection and the addition of 700 new enforcement hires, businesses and individuals facing unpaid tax burdens would be wise to take action first before the IRS takes it for them,” Miles said.

According to news reports, IRS hiring will first be focused on the department that monitors small businesses and self-employed individuals. This only increases the urgency for these audiences to address any lingering tax concerns, according to Miles.

“Most of our clients are an adaptable cross-section of American business,” he said. “They have a general sense of business, but the nuances of tax policy are not usually top of mind. Particularly with this new IRS development, our advice is always to err on the side ofover preparation.” 

Primarily, that means planning ahead for tax burdens, closely monitoring financial concerns throughout the year and keeping ahead of any potential IRS action.

“Undercapitalization seems to be the universal issue with companies facing tax problems.” Miles said. “Whether due to poor planning or unforeseen circumstances, undercapitalization often leads to a company’s collection problems. However, many companies compound the problem by ignoring the issue or just hoping it will go away. Being proactive before the IRS takes action is the best way to resolve tax challenges.”

Heed These Warning Signs When Seeking Tax Resolution

Nearly two-thirds of America’s small businesses say that the complexity and cost of federal tax preparation poses a significant problem for their business, according to the National Small Business Association. Consequently, small business owners can sometimes miss important nuances of the tax code, putting them at odds with the IRS and in need of tax resolution services.

“Businesses facing difficult tax problems can be very vulnerable,” said Brian Biffle, president of 20/20 Tax Resolution. “Owners feel they need to react quickly but they are often worried about facing IRS penalties and can be unsure of tax policy regulations. The rush to solve the problem, combined with a lack of knowledge, can make identifying a qualified tax resolution provider a challenging process.”

However, there are many reputable professionals providing tax resolution services, Biffle said. The key is to identify one that is knowledgeable, diligent and will actually help solve tax problems.

“Many tax resolution companies work very hard to provide honest and effective counsel to their clients,” said Biffle, whose company has successfully managed tax issues for more than 26,000 clients nationwide as of April 2016. “But there are distinct warning signs business owners should recognize when searching for a provider.”

  1. Overpromising – No tax consultant can guarantee results, whether those results include reducing tax liabilities or promising acceptance into the IRS Offer In Compromise program. If a company makes immediate guarantees with no information to back up its claims, it may be a sign to seek a different provider.
  2. Lack of transparency – Every tax resolution provider should be comfortable delivering background information on their company in an upfront and easily understood manner. The provider should be able to discuss company ownership, years in service and past client successes. When they aren’t able to do so (or are unwilling to do so), a business owner should move on.
  3. Demands for in-full payment upfront – As in any relationship with a professional services provider, trust is a key indicator of partnership. If a tax resolution provider wants to charge a fee just to speak with a consultant, you can end up paying an unlicensed salesperson to simply tell you what the company can do for you. Find a company that provides initial consultations completely free of charge.
  4. Lack of credentialed consultants – A competent tax resolution provider will not utilize unlicensed commission-based sales people to provide a diagnosis of your tax issue. Remember that only a CPA, an attorney or an Enrolled Agent can represent you before the IRS. If your tax resolution provider is not offering you assistance through a seasoned, credentialed consultant, it’s a good sign the provider will not be working in the best interests of the business.
  5. Unclear next steps – The provider should be able to discuss who will be managing the work, how often they’ll be in contact and what a business owner can expect with respect to ongoing reporting of progress. If these specifics are unclear, it’s a sign to walk away.

“These are the key indicators that should raise consumer concern,” Biffle said. “Of course, business owners should always use their best judgment, but as in so many aspects of business, if it feels too good to be true, it probably is.”

Experts: Plan Now To Improve Tax Outcomes Next Year

According to Internal Revenue Service data, nearly one third of all Americans wait until the last minute to file their federal income taxes. And that delay can come at a hefty price, say tax consultants at 20/20 Tax Resolution. Therefore, taking the time right now to plan for next year’s tax deadline is the surest way to ensure you and your business feel less pain and don’t run into trouble down the road.

“Business filers can take an average of 24 hours to prepare their annual tax returns,” said Brian Biffle, president of 20/20 Tax Resolution in Broomfield, Colo. “But for complex returns, that figure is typically much higher and poor planning comes with huge opportunity costs, including the risk of missing deductions, making errors and increasing stress due to the hurried rush to finish by the deadline.”

Instead of incurring these costs and risking another stressful tax season, Biffle and his consultants advise clients to take action immediately.

“Our clients come to us when their situation seems so dire they have no option but to seek professional assistance,” said Biffle, whose agents provide tax resolution services to clients facing action by the IRS or state taxing authorities. “But with a little proactive planning throughout the year, businesses and individuals can vastly decrease the pain of tax preparation and even save themselves the possibility of needing 20/20’s services in the future.”

Here are 20/20’s top tax planning tips for 2016:

  • Start maintaining better records: It seems like a no brainer, but maintaining organized, accurate records throughout the year is the quickest way to reduce tax headaches come next April. Rather than throwing receipts in a box and waiting till next year to review them, start documenting them now. You’d be surprised at how many businesses fall short in this area.
  • Get organized: If your accounting system is a hodgepodge of spreadsheets and documents in a folder called “Taxes” on your hard drive, now is the time to research and identify a manageable system for 2016. There are a lot of products available for nearly every need (no matter the size of your business) and using one of these will save immeasurable time and money next spring.
  • Get educated: You probably asked your accountant about a half dozen questions in the last week about your taxes (and they were the same six questions you asked last year). Take the time now to educate yourself on all things tax related, and give yourself an occasional refresher throughout the year. This education will make you a much more savvy taxpayer.
  • Plan for estimated taxes: If you were unprepared for your tax bill this year – just as you were last year and the year before that – start planning now for your quarterly and annual estimated taxes. Accurate planning takes the bite out of tax season. In addition, it helps you make smarter business decisions throughout the year.

“Obviously, we specialize in helping people resolve their tax issues when problems arise,” said Biffle. “But following these tips can help businesses start off on the right foot, and keep them from running into the problems that bring so many distressed taxpayers to our door.”

Glitch in IRS Direct Debit Installment Agreements

Direct debit installment agreements (DDIAs) allow taxpayers to make payments through a monthly direct debit from their bank or other shared draft account. From 2011 to 2015 the overall installment agreement default rate was often twice as high as the default rate of DDIAs. Yet, despite the apparent overall success of the DDIA program, we have found a recent pattern of issues with these agreements.

For years, our firm has been establishing resolutions for taxpayers around the country. We have found that monitoring the agreement after it has been established to ensure that both the IRS and the taxpayer abide by the terms set forth in agreement is crucial to the long-term success of these resolutions. Recently, in the course of our monthly monitoring of an agreement set up in May of 2015, we discovered that the plan was being defaulted. This was curious because the taxpayer had not missed any monthly payments or missed or made any other tax payments late.

In February, the IRS US Mailboxissued its formal default letter, Notice CP523 “Notice of Intent to Levy – Intent to Terminate your Installment Agreement” to the taxpayer. The notice stated that the taxpayer’s installment agreement payment was overdue and that the agreement would be terminated due to missed payments.  The explanation for the default raised even more questions because research illustrated that the IRS had not even attempted its most recent draft of the taxpayer account.

The events prompted extensive research with IRS Customer Service. Eventually, it was determined that due to an IRS error there was, in fact, no attempt made to debit many taxpayer accounts on DDIAs. The IRS then compounded its error by erroneously issuing default notices to the taxpayers whose payments were not drafted as though the taxpayers themselves had missed the payments.

In an ironic twist, at almost the exact same time that we discovered the IRS error in our case, the Treasury Inspector General for Tax Administration (TIGTA) released a report titled Direct Debit Installment Agreement Procedures Addressing Taxpayer Defaults Can Be Improved. In short, the report found that, “As a result, systemic DDIA defaults increased taxpayer burden because taxpayers incurred additional interest on their unpaid balances. In addition, revenue collection was suspended until the DDIAs were restructured, and some were not reestablished.” 

Thankfully, we learned through the IRS that letters outlining the erroneously issued default notices would be mailed to all taxpayers affected by the glitch. All installment agreements erroneously defaulted would be reinstated with payments continuing as usual moving forward. Despite the recent hiccup and the concern of TIGTA with DDIA defaults, the program still offers the most reliable way for taxpayers and the IRS to enter into lasting agreements.

[Infographic] 5 Tax Mistakes You Don’t Want to Make

Confronting an actual or potential tax liability with the IRS can be worrisome and overwhelming — it’s important to know what mistakes to avoid. There are may nuances to understanding how to work though a situation effectively. But, there are also some very simple rules that will be beneficial to both you and your business in the long run.

As a business owner, this infographic outlines five tax pitfalls that you DON’T want to make when dealing with a liability.

Five Tax Mistakes You Don't Want to Make

There are solutions available to taxpayers who owe taxes. The key to making the experience as manageable as possible is knowing a few easy tips about what to avoid.

You can always learn more about the ways in which we can help you and your situation, or feel free to contact us with any questions.

To download a high-resolution version of this infographic, please click here. 

[Infographic] 7 Types of Installment Agreements

Installment Agreements (also known as Payment Plans) are the most accepted and common resolution strategy with the IRS. It takes experience, time and preparation to successfully negotiate an Installment Agreement and no negotiation goes exactly like the other.

We’ve created this simple guide to help illustrate the various types of Installment Agreements that may be available to you depending on your particular situation.  Take a few minutes to better familiarize yourself with their differences — and remember, we are always here to help.

7 Types of Installment Agreements

Learn more about ways we can help or feel free to contact us with any questions.

To download a high-resolution version of this infographic, please click here

20/20 Representative Teaches at NAEA’s 2015 NTPI Conference

20/20 Tax Resolution’s Vice President, David Miles, EA, taught two different classes at the National Association of Enrolled Agents (NAEA) NTPI 2015 National Conference in Las Vegas Nevada on August 3rd.  As an outstanding education provider, the NAEA developed the National Tax Practice Institute (NTPI) — a three-level program of study that covers all facets of representing clients before the IRS.

Miles describes NAEA’s NTPI conference as, “an extraordinary opportunity to come together with some of the most experienced and talented collection representatives in the country.  Being able to participate as an instructor alongside these gifted and talented individuals was an honor.”  In his Level 1 class, Miles works to establish a foundation for all that practice before the IRS Collections Division.  In his Level 2 Appeals class, there is a more acute focus on the nuances of the IRS’ Collection Appeal programs coupled with practical problem-solving lessons.  When asked about gauging the success of each specific course, he explains, “The real success of the conference are the attendees, which includes Attorneys, CPAs, Enrolled Agents, etc. Their energy and commitment to practice is truly inspiring.  My single focus as an instructor is to be good enough for them.”

With over 18 years of tax representation and consultation experience, Miles continues to be an active educator for other tax practitioners on both a local and national level.  20/20 Tax Resolution is proud to be at the forefront of the tax representation industry and recognizes the importance of building relationships and networks while attending this annual conference.  When reflecting on these recent events, Miles sums it up perfectly, “The best part of attending NAEA’s NTPI conference is seeing practitioners throughout the country sharing experiences and knowledge for the sole purpose of improving our service to our clients.  It’s a unique and vital camaraderie.”

20/20 Attends the 2015 Nationwide IRS Tax Forum

On July 29, 2015, 20/20 Tax Resolution’s Vice President, David Miles, EA, and Senior Associate, M. Anita Ward, EA. were in attendance of the 2015 Nationwide IRS Tax Forum in Denver, Colorado.  Taking place in the Hyatt Regency Denver at the Colorado Convention center, the forum featured a full agenda of the latest tax law information which covered key federal and state tax issues from the IRS and leading industry experts.  On top of that, the event provided numerous networking opportunities and exhibits featuring the latest products and services for those in tax preparation and representation industries.

The 20/20 team helped to run the National Association of Enrolled Agents (NAEA) booth.  Throughout the day, they were able to successfully promote the Enrolled Agent (EA.) designation while simultaneously informing the tax professionals in attendance of the forum about the valuable resources offered by the NAEA.  Staying abreast of IRS updates, advocating for sensible and more permanent changes to the tax code, and providing a forum for EAs to have technical questions answered by other EAs were just a few topics that were covered by 20/20 representatives throughout the course of the day. 20/20 Tax Resolution is a proud partner of the NAEA and was excited to be able to attend such a great event!

The Beginners Guide to Collection Representation

20/20 Tax Resolution’s Vice President, David Miles, EA, was recently published in The National Association of Enrolled Agents (NAEA) July-August 2015 bi-monthly publication, EA Journal.  This prestigious publication allows members of the NAEA to stay up-to-date on any industry trends, tax updates and association news.

In the article, The Beginner’s Guide to Collection Representation, Miles focuses on the nuances that go into effective collection representation work.  He explains that the goal of this piece is to, “give practitioners just beginning in collection representation the tools necessary to build a solid foundation of their practice. This foundation is critical to ensuring proper representation for taxpayers while practitioners continue to gather experience over time.”  

This will be the fourth time in the last five years that Miles has been published in the EA Journal.  Click here to read the full article.

Don’t Be Penalized for Foreign Bank Accounts

Did you know that you could find yourself with an unexpected tax penalty for not informing the IRS that you have a bank account abroad? Although this rule only applies if your total amount on all foreign accounts at any time of the calendar year exceeds $10,000, it has to be obeyed even if these accounts don’t produce any taxable income for you. All you have to do to stay out of trouble is to file IRS form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, along with the completed schedule B of your Income Tax Return (form 1040). Failure to do so results in the highest tax penalty the IRS can assess.

There are already numerous cases when taxpayers have paid millions of dollars to the IRS to satisfy FBAR penalties. A similar thing happened to Carl Zwerner, a director at First State Bank in Florida. This 87 year old taxpayer now owes the IRS over two million dollars in penalties for not reporting the annual value of his Swiss bank account. This amount was calculated as 50% of the annual value of this account in 2004, 2005 and 2006. Although Mr. Zwerner’s case is more complicated than just a failure to file form 114, it is still a good example of the consequences of non compliance with IRS rules.

The IRS form 114 can be filed online through the Bank Secrecy Act (BSA) E-Filing System at http://bsaefiling.fincen.treas.gov/main.html. It is an easy to follow program that allows you to submit all BSA forms and to track the status of your returns online. The IRS also provides help with filing FBAR forms over the phone at 866-270-0733.

In addition, in January 2012 the IRS started a new offshore voluntary disclosure program for those taxpayers who failed to report their offshore income and foreign bank accounts in previous years. Although participating in this program will not eliminate all penalties, it is still a way to minimize the chance of criminal prosecution for failure to disclose foreign accounts and assets.