Category Archives: Tax Debt Help

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.”

Success Story: 20/20 Assists SMB Owner in New Jersey

Back in April of 2013, a small business (SMB) owner from Hackettstown, New Jersey, approached 20/20 Tax Resolution for help in resolving a $60,000 liability with the IRS. We worked over the next several months to obtain the appropriate documentation and analyze the taxpayer’s current financial condition. Because of the precarious situation the business was in when they came on board, we also filed several appeals on behalf of the business so as to keep them safe from enforcement actions (levies on bank accounts, seizure of assets, etc.), while we took the time to analyze their situation.

In July of 2013, we submitted a proposal for an Installment Agreement in the amount of $300 per month to resolve the liability through what’s called a Partial Payment Installment Agreement. Although we knew that this agreement would need to be reviewed every two years, the taxpayer could not afford a larger monthly payment to meet the six-year rule so as to avoid the two-year review. After submission of our proposal, there was the normal back-and-forth of negotiations and collection of additional supporting documentation as well as awaiting the appeals process for the previously filed appeals.

During this time, we also had to deal with a Revenue Officer who was not playing by the rules and issuing erroneous levies. We were successful at getting these levies released based on the rules and regulations set forth in the Internal Revenue Manual (IRM), but all of these issues lead to a delay in obtaining a formal resolution.

By April of 2014, the business’ financial condition was only worsening. Things were even more dire than they were a year prior. This being the case, we decided to move forward with an Offer in Compromise on behalf of the business. The taxpayer was skeptical at first that we could work out an agreement of this type, but we discussed with him the new rules and regulations surrounding the Offer in Compromise based on the Fresh Start Program and showed him why his business qualified for the program. By October 2014, we completed the Offer in Compromise and sent it to the taxpayer for signature and to forward with the appropriate down payment and filing fee. Unfortunately, the taxpayer forgot to send in the Offer, delaying our efforts a bit longer. By February of 2015, the Offer was submitted and we were then tasked with awaiting an Offer Specialist to be assigned to the case. The Offer process is quite lengthy and can take up to two years before a formal determination is made on the case. After negotiations back and forth, we were finally successful at resolving this case through the Offer in Compromise program, compromising the liability for a total of $324 in February of 2016.

We were all very pleased with the final results and received this “thank you” from the taxpayer:

I wanted to write to you to say thank you for all the work that you did for me to help me resolve this tax issue. As you may remember, we had previously used another company, which charged us huge fees and did not advance the process of settling the debt. That company went bankrupt. I had mistakenly turned over all my documentation to that company. I lost all of it. That was an enormous error on my part. I trusted the wrong people. I also lost all my records, which made your job even more difficult. I, not only, lost my money to that company, I also found that the tax issues worsened. I was quite “gun-shy” when I hired your company. However, you were very patient with me throughout the process. I thank you so much for that. When you laid out my options, I could not have imagined that this would have been settled so fully and completely. It is like a breath of fresh air. So, I just wanted to thank you so much for your professionalism, diligence, and patience.”

As you can see, not all cases are cut and dry, and the IRS can be an extremely difficult entity to deal with. This being said, with proper representation, and maybe a little bit of patience, your case could be resolved just as completely as this one was. Get in touch with us today to learn more about how we can help with your particular situation.

IRS Collection Cases: Top 5 Myths

It’s that time of year.  Taxpayers across the country are preparing returns only to learn that they owe taxes they cannot pay.  What’s the consequence of owing the Internal Revenue Service (IRS) unpaid taxes?  That’s a question that is difficult to answer since every case depends on the facts and circumstances of the specific situation.  However, what owing taxes does mean is that the taxpayer is likely to encounter the IRS Collection Division.

The Collection Division is responsible for collecting taxes that have not already been paid or placed on a voluntary resolution program.  Unfortunately, there is quite a bit of misinformation regarding cases assigned for collection by the IRS.  Regardless of your circumstances here are a few of the most common myths of IRS collection cases:

  1. You’re not responsible for mail you never get: Many taxpayers believe, mistakenly, that if they don’t let the IRS know their most current address they are not responsible for collection letters the IRS is sending.  Nothing could be further from the truth.  Generally, the IRS’ requirement for service by mail is the taxpayer’s last known address.  Therefore, if the taxpayer has not notified the IRS of an address change the taxpayer will actually be the one to suffer by being in the dark.  This issue can end up costing a taxpayer valuable collection appeal rights.
  2. The IRS will settle for “pennies on the dollar”: The IRS does have a settlement program called the Offer in Compromise (OIC). Interestingly, offers happen probably more often than many tax professionals think, but a lot less than taxpayers have come to believe. The IRS’ own numbers over the past two years show an Offer in Compromise acceptance rate of roughly 40%.  Still, the key to a successful offer is the pre-qualification process.  There are many nuances to an Offer in Compromise case and as a result, there is no substitute for experience when it comes to presenting a viable, realistic offer. 
  3. The IRS can collect against you for a lifetime: Sometimes dealing with IRS Collections for more than a day can feel like a lifetime.  Especially, if you’re on hold.  In fact, the rules concerning how long the IRS can pursue unpaid taxes are quite clear.  Generally speaking the IRS’ statute of limitations for collection is ten years from the date a liability is assessed.
  4. The IRS will take your home: In actuality, the IRS is not going to take your home.  That’s not to say that the IRS can’t take it… only that the IRS doesn’t do it.  Seizures (which can include home, car, boat, etc.) themselves are fairly rare for the IRS.  In the past two fiscal years, the IRS has reported fewer than 500 total seizures.  And because policy statement and stricter rules make seizing a primary residence more difficult it becomes increasingly difficult to face that proposition.
  5. At least the IRS can’t get to your retirement accounts: Unfortunately, the IRS can get to retirement accounts.  There are very few assets exempt from the reach of an IRS levy.  They are outlined specifically in the Internal Revenue Code and include (here), but are not limited to, Workmen’s Compensation, Unemployment Benefits and minimum exemptions for salaries and wages.  What one won’t find exempted by rule are 401k accounts, stock accounts or Social Security benefits.

Of course, dealing with IRS Collections is a nuanced process that should not be taken for granted.  But, dispelling the myths above should help bring more clarity to what one may face when dealing with IRS Collections.

[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. 

“I’ve Got My Tax Liability Under Control”

Over the nearly 20 years that I have been in practice I can’t tell you how many times I spoke with taxpayers believing that they had their resolution under control by making voluntary payments.  These soon-to-be clients suffered from all too common misperception that these payments would in some way deflect attention from their case or cause it to be put to the bottom of the collection pile.

Unfortunately, they couldn’t be more wrong and it’s usually a levy or lien that brings about the realization.  Yes, of course, voluntary payments are important to paying unpaid taxes.  In fact, they are the first thing I recommend in nearly every case, especially employment tax cases.  But to think that voluntary payments alone will alter the course of one’s case can be a huge miscalculation.  State and IRS collections are done by system.  They’re not whimsical or based on good faith.  Until a tax liability is paid in full or a formal resolution, such as installment agreement, is agreed to the collection process moves forward exposing taxpayers to liens and levies.

Just recently, in fact, I encountered this very situation.  A taxpayer came to me at the end of last year irate about being levied by the IRS.  The company owes the IRS just over 100k in employment taxes but the owner of the company had been making voluntary payments of $2,000 per month.  He hadn’t spoken with the IRS but had noted less mail was coming since beginning the voluntary payments.  He was angry that the levy followed his very obvious effort at resolving the situation.  Unfortunately, this taxpayer had assumed that his payments had directly influenced the IRS’ lack of urgency with his case.

Immediately, I began my effort of educating the taxpayer about the collection process.  Most every state and definitely the IRS has a set protocol for collecting unpaid taxes.  The process begins with notification of a balance due, letters with an increasing demand for payment and ultimately assignment to a field personnel for collection.  Every collection case goes through this protocol until the liability is paid or a collection determination is made.  A collection determination means the state or IRS’ decision on how the liability will be resolved.  A tax practitioner’s goal is to mold and influence that collection determination within the rules to their clients’ best interests.

The point here is that making voluntary payments, while advisable, does not alter the collection process.  Short of full paying the liability proactive and consistent contact with the authorities is not just recommended but required in order to ensure that a client remains protected from enforcement action.

If you find yourself in this situation, it is now more important than ever to get in contact with us. We are always here to answer any questions that you might have about your particular situation. Make it a point to contact us today so that we can get your life back on track.

The Importance of Compliance

When working with the IRS Collections Division, tax compliance is fundamental to resolving any case.  Compliance in this regard refers to the filing of all outstanding returns and the remittance of required tax deposits for the current period.  This is also known as being “current.” Specifically, a taxpayer who is current can show they are capable of meeting deposit requirements.  Their representative can also argue that they should not be subject to collections and are eligible to be considered for a formal resolution.  In turn, the IRS can make a case that further accruals have stopped and they are no longer a risk to the Service.

Most importantly, compliance is a prerequisite to any case resolution.  When a case is with IRS collections, the taxpayer’s compliance with returns and deposits is subject to higher scrutiny.  The Service simply seeks to draw a line in the sand to stop accruals otherwise known as “pyramiding.” When an individual or business is current and not pyramiding, they are more likely to be protected from collections such as bank levies and garnishments.  They can be protected by being placed into “pending installment agreement status” if a formal proposal is made.  Further, an IRS revenue officer is also more likely to grant a hold on collections and work on a timeline for resolution.  Finally, if an appeal is filed, the Office of Appeals is more likely to consider their case without collections to achieve a resolution.

In its simplest form, the IRS can only formalize a resolution with a taxpayer who is compliant, for the exact periods with balances due.  If returns are outstanding or current deposits are not made, the total balance due is also unknown and terms for an agreement cannot be set. More so, after an agreement has been established, if a taxpayer does not rForm 1040emain compliant, new periods outside of agreement have been created.  This automatically breaks the terms of any agreement and the entire process must start over to encompass all periods with balances due.

For an individual, this means that all personal income tax returns (Forms 1040) must be submitted.  Keep in mind an extension to file a return is not an extension to pay.  Therefore, if a balance is expected on any return on extension, it should be filed at once so it can be included in the resolution.  In addition, if required, sufficient year to date estimated income tax deposits must be made in order to show compliance.

For a business, all payroll tax returns (Forms 941), unemployment returns (Forms 940) and corporate income or partnership returns (Forms 1120 & 1065) must be filed.  Primarily the business must show that in the quarter in which it is currently in, sufficient and timely payroll tax deposits have been made.  If current deposits are late, sufficient payments to cover penalties should be addressed as well.

Very often the IRS is also more likely to formalize a resolution for a taxpayer who is compliant in working with a third party payroll service provider.  Specifically, payroll service providers can help establish a very efficient, formal schedule for deposits and filings under the control of a business owner.  This significantly lowers the risk for accruals, which helps both the taxpayer and IRS in the future.

Overall, cases can easily turn in a taxpayers favor when they first can establish compliance.  Being current must be the primary focus of any individual or business working with IRS collections.  Ultimately, having the experienced representatives at 20/20 Tax Resolution, Inc. will make this process easier and more successful in the long run. Please feel free to contact us with any questions — we are here to help.

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.

The Importance of Form 433B

Form 433BLet’s start by saying you have a business tax liability with the IRS. After you have begun making your current deposits and filed all of your back tax returns, it becomes time to focus on the debt.

Now, let’s take a look at how the IRS views this exact situation:

  • A: Do you have assets (liquid or illiquid) to pay the debt? In other words, do you have the cash or something that you can sell for cash to write the IRS a check? Probably not, but that’s the first thing it will look at.
  • B: Do you have the cash flow to pay back the debt over time? What does the businesses’ cash flow look like? This is what the IRS will evaluate to determine if you can afford an Installment Agreement (Payment Plan).

You may be curious as to how the IRS knows these things about your business. For starters, it will ask you for a financial statement and require that the statement be submitted on one of its standard forms. In this particular case, Form 433 B: Collection Information Statement for Businesses, would be requested. This form is what the IRS will use to determine how much and how fast you can pay it back.

It’s very important to be accurate when filling out this form because it will back up any statements you make to the IRS about how much you can afford to pay. If your financial statement overstates your cash flow and / or assets, you guessed it, the IRS will ask you to pay back more than you can actually afford. If you understate your cash flow and / or assets, the IRS will think that your business is insolvent.

The bottom line: don’t view the task of filling out one of these forms as something that is merely a formality and fail to put the proper attention towards this essential task. Completing these forms without mistakes is a very important part of the negotiating process.

Your Unique Tax Resolution Strategy

Once you’ve taken the first step and hired a representative to help you negotiate your tax debt, he or she should conduct a thorough examination of your financial situation before proceeding with a set resolution strategy.

At 20/20 Tax Resolution, this initial examination begins immediately after you hire us. Your representative will schedule a conference call with you and anyone else that you’d like to be involved (CPA, Attorney, significant other, etc.) to discuss your current financial situation as well as your expectations for a resolution. During this conversation, your 20/20 representative will ask you questions about you or your businesses financial condition so that he or she can assess the correct strategy for your situation. Additionally, your representative will be able to understand the desired outcome(s) that you expect during your relationship with our firm.

Keep in mind, any authorized representative can propose a cookie cutter resolution strategy based on your financial state. However, at 20/20Calculator Tax Resolution we strive to understand what our clients need and want out of the relationship while simultaneously addressing any concerns.

The reality is: every situation is different. Some clients are worried about the IRS taking aggressive action, while others have had a history of dealing with aggressive action and are not necessarily worried about the threat of a levy. There are clients who are looking for additional time in order to file their returns, and there are those that want a resolution on the debt immediately through a payment plan or compromise.

At 20/20 Tax Resolution we take the time to understand your entire tax debt situation, not just the black and white reality of numbers on a page. We pride ourselves on this personalized approach and hope that within the first 24 hours of our representation you are able to see that clearly.

Hiring a Representative: the Power of Attorney

Power of Attorney As soon as you make the decision to hire someone to represent you in from of the IRS or state, things should start to more pretty quickly if you’ve brought on an experienced and reliable representative.

The very first thing any representative should do when working on a case is to get a signed Power of Attorney (POA) over to the IRS. This allows the representative to contact the IRS on your behalf and discuss your situation with whomever is in control of the case – whether it be Automated Collections or a Revenue Officer. One major thing to note is that many companies pre-populate a Power of Attorney form for you to sign even before you decide to hire them. This is a big no-no. Ultimately you will have an individual who is licensed at that company represent you, but if you receive a blank Power of Attorney, you will not know who your representative is until after they have signed the form. You should always be the last one to sign a Power of Attorney so that you know what tax periods the document covers and who your representative is.

If you hired a representative and you haven’t received a signed Power of Attorney with the tax periods indicated on the first page within the first 24-48 hours after your decision, you may want to rethink who you want representing you.