Avoid Criminal Consequences & Find Harmony

When the IRS sees a business owner with a history of failure to remain compliant, in addition to seeking repayment of back taxes, they can set out on a path to preclude that owner from opening or operating additional businesses.  This path leads to an injunction being sought by the Department of Justice (‘DOJ’) to preclude further business activities that may result in additional taxes going unpaid.  In doing this, the IRS looks to lessen the damage that may come from schemes promoting tax fraud.  Unfortunately, many who have simply run into tough times and have fallen behind on their taxes can become the target of one of these injunctions.

When an injunction is put into place and subsequently violated, the failure to comply is pursued with criminal prosecutions for contempt of the injunction order as well as civil remedies which can involve the forced closure of a business.

“Lead the people with administrative injunctions and put them in their place with penal law, and they will avoid punishments but will be without a sense of shame. Lead them with excellence and put them in their place through roles and ritual practices, and in addition to developing a sense of shame, will order themselves harmoniously.” –Confucius

Shame is a word that no one wants to be associated with.  When we feel shame, we reminisce on our failures that lead to the shame.  Often times, shame follows the failure.  Confucius tells us that by developing a sense of our own shame, we can allow the shame to precede the failure and subsequent punishment that may come from that failure and instill practices that prevent the failure from coming about.Young female entrepreneur working in a home office

The IRS is out to prevent future failures by way of injunctions.  We are here to prevent future failures by helping our clients develop the processes necessary to remain compliant and show the IRS that an injunction is not necessary.  We encourage the use of a payroll company for all future filings to ensure that nothing falls behind.  We partner with the largest payroll providers in the country to streamline implementation and allow you to stay focused on your day to day business operations.  Additionally, we work the the IRS to make sure that all deposits paid timely are communicated to revenue officers handling the case, so they do not find the need to recommend an injunction to the DOJ.

If your business has fallen behind and you are not sure how to address the liability, contact us today.  Once our representation is in place, we will work diligently to prevent the need for an injunction to be sought and get your business back into compliance with the taxing authorities.

Tax Resolution – What it is and isn’t.

Tax debt can be confusing and finding good advice and an adviser with your best interests at heart can be a trying process.  You can find positive and negative reviews for just about every provider in the industry so it can be tough to pull the trigger and hire help when you can’t afford to be wrong.

Critics, unfamiliar with the nuance of our practice, often claim that the process can be handled on your own at a fraction of the cost, with no need for expert advice while others target the fact that many companies operate without credentials.  At 20/20, we are a firm of Enrolled Agents, licensed to practice before the IRS.  We have been in business for nearly 20 years representing clients and offering our expertise to help resolve tax debt through the most effective means possible.  Additionally, we know first hand how arduous dealing with the IRS can be.  According to the IRS, a 2015 study showed that only 37% of calls to IRS customer service were actually answered with the average wait time being 27 minutes.tax calculation

Everyone Can Settle Tax Debt – A Marketing Gimmick

Advertisements push the notion that your debt can be reduced and you will only pay a fraction of the amount owed.  While this is true for some, others will find this may not be an option.

The IRS and most states base their willingness to reduce a liability to less than the principal tax owed on the financial condition of the debtor.  If they believe, based on a financial analysis, that there is a greater good that can be achieved by settling the debt and focusing on future compliance, they will agree to settle the liability.  As tax resolution experts, we work diligently to make the argument that a client’s financial condition warrants the acceptance of an offer to settle, or as it is known, an Offer in Compromise.

Some will find the Offer in Compromise process is not one that best meets their needs since they don’t meet the qualifications.  In those instances, we work to reach a resolution that works within a client’s budgetary constraints so they can remain protected from enforced collection.

Easy Enough To Do On Your Own – A Dangerous Rhetoric

In some cases, the tax resolution industry is criticized because individual debtors can obtain installment agreements without a financial review when their liability falls below a certain threshold.  These agreements are known as Streamlined Agreements and involve either a 72 or 84 month limit on the time required to repay the liability.  In a situation where the Streamlined Agreement amounts to a lower monthly payment than a financial review suggests, we do recommend these, but only if it is the most effective resolution.

There is a lesser known solution whereby a debtor can reach an installment agreement that doesn’t amount to paying the liability in full, but makes payments through the collection statute expiration date (‘CSED’).  While there are exceptions to the CSED rule of 10 years that can toll the time frame, in most cases, a debt becomes non-collectible 10 years after it originally becomes due.  These types of agreements are reviewed no less than every two years to see if the debtor can increase their monthly payments, but typically result in a greater savings than a full pay installment agreement.

In addition to compromises and payment plans, we work to abate penalties and lessen the impact of tax liens imposed on our clients.  Most of the time, a taxpayer will be eligible for a first time penalty abatement (‘FTA’).  The FTA is a no strings attached abatement that can be given without cause provided there was a history of compliance with no penalties for 3 prior tax periods.  In addition to the FTA, we are able to submit a reasonable cause penalty abatement.  An abatement for reasonable cause must be constructed to represent that the failure to file or failure to pay was not a result of willful neglect, but rather the result of reasonable cause.  Typically, the IRS applies the cause stated to their reasonable cause assistant to determine if the threshold has been met to abate the penalties.  Even if an initial request is denied, a qualified tax resolution expert can contest the ruling through an appeals process.  In cases where liens pose a problem, solutions are available.

Representation Matters

Did you know the right to representation exists in the IRS collection process?  If sued by a creditor for the same amount that the taxing authorities allege, would you represent yourself?  Maybe, but most likely not.  The IRS recognizes the adversarial nature in which they are pursuing their best interest, not yours.  As a result, the right to counsel in the collection process is afforded by the Taxpayer Bill of Rights.

It is important to understand that the resolution process is not one where a licensed expert can make your liability disappear with an incredibly low settlement offer, but rather one where an expert can analyze your profile and your debt and develop the solution that saves you the most time and money in the long run.  We believe we offer the most intelligent and thorough solutions in the industry today and strive to offer solutions that we believe are attainable in order to provide our clients the service and solutions they deserve.

Is the IRS Allowing Private Collection Agencies to Bully Low Income Taxpayers?

The National Taxpayer Advocate’s 2017 Annual Report to Congress suggests that the IRS has done little to protect vulnerable taxpayers from its private debt collection initiative.  The main vulnerability comes from private collection agencies setting up repayment terms that fell within the streamlined guidelines, which taxpayers can obtain without submitting financial information.IRS - file cabinet label

Often, a streamlined repayment option puts the debtor in a situation where the payments are more than they can afford.  While the IRS offers repayment options that are based on the ability to pay, the report found private collection agencies are pushing for repayment based only on streamlined conditions.

It is important to know that like most debts, when back taxes are owed to the IRS, you can find a repayment option that does not amount to paying the liability in full.  If you have fallen upon hard times or are simply facing a debt that is beyond your means, completing a financial information statement is the first step in determining your eligibility for alternative repayment options.

At 20/20, we believe our team of Enrolled Agents provides the best representation money can buy.  We work with taxpayers to regain their footing and develop a resolution that works for them.  At the same time, we recognize that there are many who simply cannot afford to hire a representative for themselves.  In these cases, it is important to know that there are Low Income Taxpayer Clinics. According to their website, “Each clinic determines whether prospective clients meet income guidelines and other criteria before agreeing to represent them or provide consultation services.”  If you feel you might be a candidate for their assistance, we encourage you to reach out and ask for help.  In the event you don’t qualify, contact us and see how we can help.  Ultimately, the difference in going it alone versus having representation could be a costly one.

20/20 Success Story: Douglas

Tough times and tough decisions forced couple into bankruptcy, losing their business and leaving them with hundreds of thousands in unpaid tax debt.

Situation:

As any business owner will attest, managing a company can be a delicate balancing act. During prosperous times, it’s easier to keep a steady ship. But when challenges arise, difficult decisions made under duress can come back to haunt you.

That’s a business lesson not unfamiliar to Douglas Smith and his wife, Dana. The one-time co-owners of an ambulance service provider had managed their successful business for many years until tough times forced the couple to make arduous economic choices. Squeezed between paying employee salaries and keeping current on all tax obligations, the couple chose the former – thinking they would “catch up” when financial pressures eased. However, as interest and penalties accumulated, the unpaid taxes became a hurdle too big to overcome. Forced into bankruptcy and struggling to pay bills and keep the company, the Smiths were distressed and disillusioned.

“There were some extraordinarily dark times,” recalled Doug Smith. “It certainly wasn’t the most joyous of times or the most anticipated of consequences.”

Analyzing Business Data - pen and numbers on paper

The Problem:

In the case of the Smiths and their business operations, there were actually multiple problems – all requiring attention at once. But perhaps the most pressing issue was the constant pressure from the IRS to settle the matter. Faced with a struggling business and a tax bill reaching “hundreds of thousands” of dollars, the Smiths were under an increasing amount of stress both at work and at home.

“You still have to pay your bills,” Doug said. “You still have to try to make your business work. We were still running the company trying to get a contract so we could get out of this mess. It was not good times.”

“There was a lot of stress. A lot of emotion,” Dana added. “We saw a lot of tears.”

With such a large amount of money owed and no way to pay it, the Smiths were becoming concerned about the potential consequences, including the fear that jail time might be a possibility.

“I don’t really know if it was a possibility but we’d heard stories,” Doug said. “Certainly with over a hundred thousand dollars at stake, I’m not sure how forgiving a prosecuting attorney would be if it had ever gotten to that point.”

Fortunately, it never did.

The Solution:

With the recognition that their tax troubles were only getting worse – and a desire to move forward with their lives in a positive way – the Smiths decided that professional help was in order. Disappointed by the lack of support they were finding in their community, the couple was understandably wary of seeking outside help. Yet, the Smiths needed help from someone familiar with, and adept at, solving the tax problem they were facing. Fortunately, 20/20 Tax Resolution possessed the exact experience the couple required.

“I did research online just to look for relief,” Doug said. “When I checked 20/20 Tax Resolution, I also checked their Better Business Bureau rating and decided they were the ones I wanted to call.”

Satisfied with 20/20’s BBB, the Smiths contacted the firm and were quickly blown away by the attention to detail and responsiveness of their 20/20 representative.

“They were very understanding and very clear on what we needed,” Doug said. “We were moving forward and making good progress when my bankruptcy came back to throw a bump in the road.”

During the process of finalizing an Offer in Compromise (OIC) with the IRS, it was determined that the Smith’s bankruptcy filing had not been “fully discharged” – which means the couple possessed remaining assets not considered in the OIC. (An OIC allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed.) As a result, the original OIC was returned, but Doug said that 20/20’s commitment to resolving their issue never wavered.

“They were diligent, caring and showed the highest integrity,” he said. “My case took a few curves and hit some bumps along the way, but all were masterfully handled by them. I have nothing but the greatest of praise and highest recommendation for anyone needing 20/20’s tax resolution services.”

After a very long process, a new OIC was secured for the Smiths which effectively reduced their debt to a fraction of the couple’s original tax debt. (You can view the actual OIC here.) For the first time, the Smiths could see a light at the end of their very long, dark tunnel.

“For anyone going through this, I would say find a very good advocate for yourself,” Doug said. “I believe I found an excellent advocate at 20/20. My team was worth a million bucks. They were there whenever I had an issue. Sam Million and his assistant, John Casanova (the Smith’s 20/20 team) were exquisitely talented in helping with my case and understanding the stress I felt throughout the case. Thanks to their efforts our life has improved considerably.”

In fact, Dana said the assistance of 20/20 may just have saved the couple’s marriage. Today, the Smith’s are “starting over” and rebuilding their lives free of the worry and burden that overtook their lives for nearly six years. If everything works according to plan, the couple will purchase a new home this year – something unimaginable just a few short months ago.

Dananananananana Tax Scams!

If you can hear yourself reading that title to the tune of the old Batman song, you’re not alone.  Unfortunately, not even Batman can help you if you fall victim to one of the many tax scams targeting taxpayers this time of year.  The two most prevalent and pervasive scams prey on taxpayers soon to receive refunds and those that have a delinquent balance owed to the government.batman

The first type, one which preys on refunds, is carried out by attempting to steal identifying information so a fraudulent tax return can be filed on the taxpayer’s behalf in order to have the refund sent to the criminal.  Ways in which one might fall victim to this is by way of an e-mail or link impersonating an official organization requesting information that would typically be found on a tax return.  Such information includes your social security number, address, past tax return information and potentially even your pin # that you may have chosen with the IRS.

If you believe you have fallen victim to this type of scam, there is something that can be done immediately.  The filing of Form 14039 with the IRS notifies them that you may have had your information stolen and they will begin to work with you to correct any fraudulent returns filed on your behalf.  It also results in the creation of an Identity Protection PIN which can be used for future returns and should not be shared with anyone.  Taxpayers can also preemptively file Form 14039 to request the creation of an IP PIN in order to protect their filing process before it becomes compromised.

The second type of scam is one we see far too often here at 20/20.  When a taxpayer has a delinquent tax account and owes either the state or IRS, it is common for a lien to be filed against them.  Scammers will typically pose as state agents or IRS revenue officers claiming that there is a tax lien of public record in your name and insist you pay immediately while making threats of criminal consequences.  The IRS insists they will not initiate contact with a taxpayer by phone, however that comes with the caveat that they may make contact by phone after previously sending notices regarding the tax debt.  This contact is typically made by a revenue officer and you can request they provide their ID # as well as contacting your local IRS Taxpayer Assistance Center to confirm their legitimacy.

If you still believe you cannot safely handle your back tax debt alone, we are here to help.  At 20/20, our Enrolled Agents work directly with Revenue Officers and State Agents every day to assist taxpayers in need of affordable resolution options.  Contact us immediately to get a Tax Facts Report and engage us to step in on your behalf to lower your tax liability and find a manageable resolution.

20/20 Success Story: John

Facing tens of thousands in owed back taxes, Texas man turned to 20/20 Tax Resolution and discovered the meaning of sweet redemption

Situation:

John Mohan lived his life on the edge – but without ever realizing it. An electrician by trade in the small Texas town of Alvin (located about 40 miles south of Houston), John worked as an independent contractor for many years and never bothered to file a tax return for any of his contracting income. It wasn’t a conscious decision to disregard a responsibility, but more of an oversight that over time became an “outta sight, outta mind” kind of habit. Similar to others in the construction industry, John worked a variety of jobs over the years, ranging from electrician to carpenter. But when John took a job with a larger company that withheld taxes from each paycheck, the Internal Revenue Service took notice.

“I received a letter saying that I owed $4,000,” John, 53, said. “So I assumed that’s all they wanted and I went in to the IRS to try and finance that $4,000. That’s when they said ‘Wait, that’s $4,000 for ONE year.’ They wanted immediate filings for the last six or seven years.”

Man holding blue helmet close up

The Problem:

Like so many in the construction industry, John hadn’t kept meticulous records of his past earnings. He couldn’t afford to hire an accountant to help him go back nearly a decade and determine all the revenue he had earned and how to file his back returns. He was, in his own language, “devastated.” And the IRS was breathing down his neck.

“I wanted to just quit my job,” he said. “The IRS was threatening to garnish my wages right off the bat. I’ve heard horror stories about people going through this and I just had no idea what I was going to do. I had no idea where to even begin with something like that.”

John left the IRS office that day feeling sad, depressed and “all alone.” He knew he could be facing an insurmountable amount of back taxes and penalties. Losing sleep and worried about his economic future, John owed nearly $45,000 in back taxes spanning multiple years.

The Solution:

In what could be called an amazing coincidence, John returned home from the IRS to find a letter in his mailbox from 20/20 Tax Resolution. He had never heard of the Colorado-based firm with more than two decades of experience helping people just like him.  The letter arrived at the perfect time for John to take action.

“That really got the ball started,” John said. “Just contacting 20/20 really started to emotionally put me at ease.”

From the very onset of working together, 20/20 was able to remove the fear, worry and unrest John was constantly feeling about his tax situation. An aggressive IRS was sending John threatening letters and communicating ultimatums John wasn’t able to fully understand.

“They said don’t worry about it, just send the letters to us,” John said. “Every time I got a letter, I would pick up the phone immediately and call 20/20.”

That attention and compassionate assistance made a world of difference to John. He was able to better focus on his work and life – and remove the doubts and concerns from his mind. He was a bit concerned at the outset that 20/20 was located in Colorado while he lived in Texas. But those worries were quickly displaced by gratitude.

“I actually forgot about the whole situation a lot of times,” he said. “20/20 was just great. Those people are awesome. They even worked with me on creating a payment plan for the cost to resolve my situation.”

In the end, John received the greatest news of all: 20/20 was able to successfully negotiate an Offer in Compromise for John with a settlement of only $234! Although he’s still in the process of getting liens removed and he will need to stay on top of future tax obligations, John feels 20/20 helped him dodge a bullet that would have hampered his life for many, many years.

“I feel very blessed that I called 20/20,” John said. “I’d recommend anyone who has any tax problem at all to call 20/20. They are outstanding people.”

A Perfect Storm

The 2000 film, “The Perfect Storm”, details the harrowing events of the fishing vessel, Andrea Gail. In the film, the ship and crew were lost at sea as a result of numerous weather elements coming together to form a force of nature that was unstoppable. A similar storm may be forming with respect to the enforcement and collection of unpaid payroll taxes.

A year ago, the Treasury Inspector General For Tax Administration (“TIGTA”) published a report in which they indicated a greater need for a focused strategy in effectively addressing egregious employment tax crimes. In the report, TIGTA recommended that criminal prosecution be sought by the Department of Justice more frequently to create a greater general deterrent.

Additionally, on March 2nd 2018, Deputy U.S. Attorney General Rod Rosenstein stated that the Trump administration would vigorously pursue offenders that fail to pay payroll taxes. The criminal offense associated with failing to pay payroll taxes is set out by 26 U.S.C.§ 7202. It states that “Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.”Boat in Pond

These reports and comments are typically heard as rhetoric intended to encourage compliance, however a recent case from Wisconsin brings potential for concern. While prosecution rarely happens for minor offenses of 26 U.S.C.§ 7202, a Wisconsin business owner, Gary Auerswald, was recently targeted for prosecution by the US Attorney from the Western District of Wisconsin.  What makes the case unique is that the amount in question was only $24,482.43 and only for the 4th quarter of 2014. While there may be more to the story that is unknown, this may also be the start of the crackdown Rosenstein spoke of.

One thing is for certain; there has never been a more important time to get in front of back taxes, especially unpaid and unfiled payroll taxes. If you think your business may have delinquencies, do not hesitate to contact us and see how we can help you get out in front of any delinquencies and not be another target for the US Attorney to prosecute.

Tax Liens & Credit Reports: Will you benefit with a higher credit score?

Do you have a tax lien?  If so, how it impacts your credit profile may soon change.

The three major credit reporting agencies (TransUnion, Equifax, & Experian) have come to the realization that they cannot include tax lien information on consumer credit reports and still be in compliance with the Fair Credit Reporting Act, 15 U.S.C. § 1681 (“FCRA”).  The FCRA requires credit reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates”.  Simply put, credit reporting agencies have found it too costly to accurately report tax liens on consumer reports and will therefore no longer include this information beginning April 2018.Wooden Gavel

It is important to understand how a tax lien impacts your financial profile to determine whether this new development will benefit you.

Credit reporting agencies compile data and then this data is used to formulate your FICO score.  The FICO score was developed in 1956 by Bill Fair and Earl Isaac, to measure consumer credit risk and is used by most financial institutions to make decisions on whether to furnish or deny credit.  Since your FICO score is based off of reporting by the three major credit bureaus that will no longer include tax liens, it is likely you may see an increase in your credit score.  Depending on the type of credit you are seeking, your FICO score can play a major role in determining the cost and amount of credit you are eligible for.  If you received credit of any type while you had a tax lien on your credit report, you may want to consider talking with your lender to see if you are eligible for a rate reduction.  They will likely pull a new credit report and that report should no longer include your tax lien, thereby increasing your score and reducing your credit risk.  This is likely to work with loans that involve a less intensive underwriting process.

Loans that are typically reviewed with greater scrutiny (e.g. mortgages) may not be impacted in any way as a result of this new development.  Lenders will still be privy to tax lien information if they seek it out specifically.  Companies such as LexisNexis offer reports on liens and judgments and claim to be accurate on over 99% of their reports.  If your lender specifically seeks out this data, the removal on your credit report will likely have zero impact on your ability to secure or renegotiate a loan.

If a tax lien is still creating problems for you, there are permanent solutions to find relief.

Form 12277 must be filed with the IRS in order to request a tax lien be withdrawn and no longer reported anywhere.  While anyone can file Form 12277, the filing begins a formal review process that is most successful when navigated by a seasoned tax professional.  At 20/20, we have an excellent track record of formally having tax liens withdrawn.  Please contact us for a consultation to discuss the merits of your tax lien and how we can assist you in obtaining a formal withdrawal.

 

Tax Tip: What to do post resolution

Whew! You made it through to the other side! Congratulations on navigating the difficult maze of regulations, processes and emotions to successfully finalize a resolution to your tax problems. Time to relax, forget about the past and move on to a better future, right?

Well, not exactly. During 20/20’s two decades of working with clients, we’ve seen the pitfalls that can await taxpayers on the other side of the resolution process. We strongly advocate that our clients create a “post-resolution plan” to help them steer clear of future problems. Without a thoughtful approach to your new reality, the chances of needing additional help down the road increases.

The first step is to make certain you understand all aspects of your resolution, any payment plan that may be in place, the expected duration of the plan and – perhaps most important – how you will pay it. Don’t wait until your first payment is due to fully comprehend everything you agreed to in the resolution. Delaying this step is what typically leads to a first mistake: missing a payment (something you don’t want to do).

To avoid missing any payment deadlines, consider scheduling a direct deposit. If you choose to use traditional U.S. mail for your payments, remember that each payment must be received by the actual due date. Unlike filing a tax return, payments are not considered to be on time by their postmark. If you opt for snail mail, make certain to leave enough time for the post office to punctually deliver the payment.

A lot of managing your resolution just comes down to staying on top of it and identifying problems before they occur. At 20/20, we have been very successful at setting up manageable resolutions for clients for 20 years. We’ve found that very often, the root cause of problems can be traced back to a taxpayer’s individual habits, business practices or organizational skills.

While some businesses struggle to stay current due to genuine financial hardship, we often see business owners and officers neglect to establish effective business practices. One of the most effective ways to ensure compliance is to engage the services of a payroll firm. At 20/20, we partner with payroll and sales tax solutions in order to assist our clients in developing good and effective business practices. It’s important to make an honest assessment of your business and lifestyle to see if these solutions are right for you and your company.

Ask yourself the tough questions: Is your business undercapitalized? Are you overspending? Are there lifestyle changes you should consider to help keep you on better financial track? All of these are important considerations to study to keep you moving forward and avoid future tax problems.

Light at the end of the TunnelFinally, now that you have what probably feels like a new lease on life, don’t take it for granted. Keep vigilant on your resolution and be proactive if and when you have any problems surrounding the payment terms. Remember that communication is key to staving off future issues with the IRS or other tax authorities. Don’t hesitate to speak up when problems arise.

If you’re still concerned about the ability to successfully manage your resolution and steer clear of future problems, 20/20 offers a monitoring program called POA+. POA+ is a monthly, pay-as-you-go service that allows 20/20 to maintain an active role in your tax resolution plan. Our team will be able to receive and monitor notices from the taxing authorities to promptly address issues that arise as well as remain available to answer questions.

However you proceed, enjoy the relief that comes from knowing you are managing your tax obligations and taking the best care of your business. And be certain to stay on top of your resolution requirements! If things ever get out of hand again, remember that 20/20 is here to help.

Tax Returns: Why We Procrastinate

A quick online search of “tax returns” brings up all kinds of conflicting advice. Should you file early? Should you wait for the deadline? Is it damaging to file an extension? There are “experts” out there who will give you the opposite answer for each of the three questions. It’s no wonder people want to cover their heads and just wait until May. But what exactly is causing so many people to delay?

If you fall into one of the above categories (or you’ve cleverly created a new reason to procrastinate of your own), don’t worry. You’re in good company. According to the IRS, about one-third of Americans will wait until the last minute to file their taxes. In fact, in 2016 more than 29 million individual returns were filed between April 8th and Tax Day (this year it falls on April 17, 2018).

So kick back, relax and take your time. After all, it’s only March.