Back Taxes:

Do you owe the IRS on multiple years? Tax forms?

If you owe the IRS taxes on any given year/years, you will quickly find out how difficult it is to handle the overall situation. Engage the tax experts @ Mason Accounting & Tax Services and put your mind at ease knowing your situation will be handled with the utmost care & consideration.

Unfiled Tax Returns

Do you have an urgent need to file your tax returns? Has the IRS filed a tax return for you, claiming you have a huge tax bill?

There are numerous practical reasons to file tax returns. Whether buying a home or financing a business, copies of filed returns must be submitted to the lending institution. Important programs like federal aid to higher education also require applicants to submit copies of tax returns to qualify for loans. And the filing of tax returns has a tremendous impact on the future. Social Security retirement and disability benefits as well as Medicare are all computed based on a person’s lifetime earnings reported to the IRS and the Social Security Administration. State benefits such as unemployment compensation and industrial insurance are also based on reported income.

For various reasons, you may not have filed your federal income tax return for this year or previous years. You may not have known whether you were required to file. You may not have filed because you owe additional tax that you cannot afford to pay in full. You may not have filed because you expect a refund and just have not taken the time to complete the return.

When the next year’s return is due, the taxpayer faces a dilemma. Will filing call attention to them? What about the forms needed to prepare the earlier return? What about the financial burden of paying taxes due in previous years? What if they have lost some of the records needed to prepare the earlier return? There is also the stress of worrying about being discovered by the IRS.

The IRS continues to improve its database of income transactions and increase its ability to identify people who have a filing requirement but have failed to file a return. Eventually, contact will be made and the correct tax liability computed. By this time, however, the original tax bill will be multiplied many times by the addition of interest and penalties. The IRS also has a wide range of civil and criminal sanctions available that can be imposed on persons who fail to file returns. From any perspective, the consequences of failing to file returns are just not worth it!

Has the IRS already garnished your wages or emptied your bank account? Did it seem that the IRS took more than they should have? You may be right. If you have not filed your tax returns and have allowed the IRS to File them for you, then you may be paying more than you owe. The IRS will use only the income information that has been provided to them by your employers, banks, title companies and investment bankers, to determine your tax based only on the income reported. You will not be given credit for allowable deductions you are entitled to.

Failure to file your return on or before the due date may result in penalties and interest. If your return was not filed by the due date (including extensions), you may be subject to the failure to file and failure to pay penalties. However, if you filed on time but did not pay in full, you will be subject only to the failure to pay penalty. Interest is charged on taxes not paid by the due date, even if you have an extension of time to file. Interest is also charged on penalties.

IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell

“WASHINGTON — The Internal Revenue Service today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”

Bank Levies

Is your rent payment going to bounce? Did you wake up to find the funds missing from your bank account?

We may be able to release your bank levy, but you must act fast!

If you do not pay your taxes (or make arrangements to settle your debt), the IRS may levy your bank account, garnish your wages, and seize and sell any type of real or personal property that you own.

IMPORTANT: If the IRS files a levy on your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows for time to resolve any issues with the IRS that may result in a release of levy. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.

For instance: The IRS could seize and sell property that you hold (such as your car, boat, or house), or they could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).

The IRS will usually levy only after these three requirements are met:

  1. They have assessed the tax and sent you a Notice and Demand for Payment;
  2. You neglected or refused to pay the tax; and
  3. They sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing.

You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice.

Some of the issues you may discuss include:

  1. You paid all you owed before we sent the levy notice
  2. The IRS assessed the tax and sent the levy notice when you were in bankruptcy and subject to the automatic stay during bankruptcy
  3. The IRS made a procedural error in an assessment
  4. The time to collect the tax (called the statute of limitations) expired before the IRS sent the levy notice
  5. You did not have an opportunity to dispute the assessed liability
  6. You wish to discuss the collection options, or
  7. You wish to make a spousal defense

At the conclusion of your hearing, the IRS Office of Appeals will issue a determination. You will have 30 days after the determination date to bring a suit to contest the determination. If your property is levied or seized, contact the IRS employee who took the action. You also may ask the manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the IRS Office of Appeals.

REMEMBER: If the IRS files a levy on your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows for time to resolve any issues with the IRS that may result in a release of levy. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.

In addition to IRS issues we can also assist you with the release of a wage garnishment or bank levy issued by a State tax agency. We represent clients in all states.

Wage Garnishments

A wage garnishment is a levy that is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt. Wage garnishments can cause real damage as they will result in a large amount of funds being taken from your gross pay each paycheck. You may suddenly find yourself unable to pay bills or even afford gas to get to work. This is one method the government uses to collect tax due and force taxpayers into compliance. While the can be difficult to get released. Our professionals know the exact steps take to get it lifted quickly.

Tax Liens

Liens give the IRS a legal claim to your property as security for payment of your tax debt.

Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.

Is the IRS taking a bite out of your personal property or real estate deal?

Notice of Federal Tax Lien Liens give the IRS a legal claim to your property as security for payment of your tax debt. A Notice of Federal Tax Lien may be filed only after:

  • The IRS has assessed the liability;
  • The IRS has sent you a Notice and Demand for Payment – a bill that tells you how much you owe in taxes; and
  • You neglect or refuse to fully pay the debt within 10 days after we notify you about it.

Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that the IRS has a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).

Caution! Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore, it is imperative that you call us immediately. We can help you to resolve your tax liability as quickly as possible, before a lien filing becomes necessary.

Payoff Amount

The full amount of your lien will remain a matter of public record until it is paid in full, including all accruals and additions. However, at any time an updated lien payoff amount may be requested showing the remaining balance due.

You can call us and we can help you obtain a current amount almost immediately. Obtaining this information as quickly as possible can sometimes be critical when you have a piece of real property in escrow.

Applying for a Discharge of a Federal Tax Lien

If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. You can Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien or you can let us do it for you and save you a lot of difficulty.

Making the IRS Lien Secondary to Another Tax Lien

In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Again, this is something our experts are prepared to handle for you.

Withdrawing Tax Liens

By law, a filed notice of tax lien can be withdrawn if:

  • The notice was filed too soon or not according to IRS procedures,
  • You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
  • Withdrawal will speed collecting the tax, or
  • Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.
  • The IRS will provide you a copy of the withdrawal, and if you write to the IRS, they will send a copy to other institutions you name.

Tax Resolution Strategies

Currently Not Collectible (CNC)

One of the ways to get out of paying off your tax debt is to be declared “currently not collectible.” The IRS can declare you as being currently not collectible after it reviews evidence that you have no ability to pay the tax you owe. As soon as the IRS determines that you cannot afford to pay any of your tax debt due to economic hardship and declares you currently not collectible, the IRS must immediately stop all collection activities including levies and garnishments.

While you are in the currently not collectible status, the 10-year statute of limitation on tax debt collection continues to run. If the IRS cannot collect the tax you owe within the 10-year statutory period, then your tax debt will expire and you’ll owe nothing to the IRS.

A taxpayer facing significant hardships or tax debt burdens should seek the advice of a tax professional specializing in resolving IRS tax debts.

Installment Agreements

If you don’t qualify for the IRS’ Offer In Compromise program, a payment plan may be the way to resolve your problem. This is an agreed settlement between the taxpayer and the IRS, based on National standards to determine what amount the taxpayer will be paying the IRS each month, but allowing the taxpayer to have the ability to afford food, housing, clothing, medical & transportation expenses. This is a complicated mathematical formula that has to be calculated. In most cases, the National standards do not have to be used for the first year. The actual expense of the taxpayer can be used and then they allow the taxpayer one year to come into compliance with the National standards. This is not something that the IRS will inform you of or assist you with. This is another reason why it is essential that you obtain professional assistance with this matter.

Payment Plans Based on Current Income

Most citizens do not realize that the IRS must consider your current income situation when they ask you for a payment plan.  The automated collections group ACS COLLECTIONS at the IRS will not inform you of your rights.  They will let you enter into a payment plan that they know you can never make.

Offer in Compromise (OIC)

The recently updated Fresh Start Program represents a significant improvement to the IRS’ previous Offer in Compromise program. If done correctly, you may be able to successfully settle your tax debt for significantly less than you owe. The chances of getting your tax debt forgiven are greatly improved with an experienced IRS professional by your side.

Penalty Abatement

To request an abatement or reduction of IRS penalties, you’ll need to prepare a Form 843, called Claim for Refund and Request for Abatement and submit it to the IRS. The form requires that you indicate, among other things, the type of penalty that you’re asking to be abated by identifying the actual law for which the penalty applies.

Two examples of penalties laws which are often used are:

  • Internal Revenue Code section 6651(a)(1) Failure to File Tax Return
  • Internal Revenue Code section 6651(a)(2) Failure to Pay Tax when Due

The Form 843 also requires that you explain the reasons why you’re asking for the penalties to be abated. Those reasons include, but aren’t limited to the following examples:

  • written or oral advice from the IRS,
  • advice from a tax advisor,
  • correction of an IRS error, and
  • fire, casualty, natural disaster or other disturbance.
  • Serious illness/death of taxpayer, spouse, close relatives

Some penalties can also be abated if you have a reasonable cause for not complying and can show that you exercised ordinary business care and prudence. To get an abatement of penalties due to reasonable cause, you must have an excuse or reason that indicates you had no control over the situation. For instance, you were unable to file your tax return timely because you were seriously ill.

We strongly recommend that you don’t attempt to request penalty abatement yourself. IRS’ penalty abatement review procedures are very strict. One wrong word or statement will be cause for automatic denial of your request.

The IRS threatens imposing heavy penalties as a deterrent for taxpayers who file tax returns late and pay taxes late. The IRS wants taxpayers to fear these huge penalties, much like the people who are financing a car purchase fear swift repossession, if they don’t make timely car payments.

Although you have a right to request abatement of penalties, it’s important to know that the IRS doesn’t easily agree to reduce or eliminate penalties against you.

Beware of inexperienced or unprofessional firms who promise you that they will definitely get your penalty abatement approved. No one can guarantee that the IRS will approve your request to abate penalties. Approval or denial is solely in the hands of the IRS, and their decision can take months.

However, if the IRS denies your request to abate penalties, you should know that you have a right to request that the IRS’ Appeals Division perform an administrative review of IRS’ decision. This process requires a separate request and meetings with an IRS Appeals employee. Because of our former IRS experience, including our work in the IRS’ Appeals Division, we can defend you in Appeals if the IRS does reject your request for penalty abatement.

We know the tax laws and use your personal circumstances to put together the best penalty abatement request possible. There are strict guidelines that must be followed when dealing with the IRS and filing penalty abatements. Filing an abatement request too early or late in the resolution process can result in its rejection. Mason Accounting & Tax Services has the experience that enables us to successfully get though the “mine field” known as the penalty abatement claim procedure.

Audit Representation

Our staff is well educated on representing taxpayers’ when their returns are flagged for audits. When the IRS issues you the required notice (CP2000), they are proposing to make changes to your tax return that might increase or decrease your tax debt along with associated penalties/interest. Our staff also has many years of IRS experience and we know how the IRS thinks and how to best serve your interests.

No matter how simple the request for information may be, we never advise any taxpayer to represent themselves in an IRS audit. Even if you have been absolutely honest and filed everything correctly, meeting with the IRS can be an intimidating experience. The IRS auditor represents the IRS, and is looking to find errors on your return. Shouldn’t you have someone on your side to ensure that the IRS doesn’t take advantage of you?

IRS Agent and Auditors are trained investigators. Although they may appear friendly during the audit, don’t forget that their job is to find mistakes on your tax return and perhaps find unreported income. If an Agent or Auditor discovers that you failed to report a significant amount of your income on several years of tax returns, did you know that you could be faced with criminal prosecution?

Handling the audit on your own is a big mistake! For instance, do you know the “trick questions” an Agent or Auditor might ask you during the initial interview?

We highly recommend that you hire a tax professional to represent you before the IRS.