Stephen Wallick February 28, 2018 No Comments

IRS now has the power to revoke your passport

The passport provision is now officially law. The title of the new section is “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” The idea goes back to 2012, when the Government Accountability Office reported on the potential for using the issuance of passports to collect taxes.

The law says the State Department can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in an amount in excess of $50,000. Administrative details are scant. It could mean no new passport and no renewal. It could even mean the State Department will rescind existing passports.

The State Department will evidently act when the IRS tells them, and that upsets some people. We think of passports when traveling internationally, but they are being used domestically in many cases too. The list of affected taxpayers will be compiled by the IRS. The IRS will use a threshold of $50,000 of unpaid federal taxes. But this $50,000 figure includes penalties and interest. And as everyone knows, interest and penalties can add up fast.

You would still be able to travel if your tax debt is being paid in a timely manner, as under a signed installment agreement. The rules are not limited to criminal tax cases or where the government thinks you are fleeing a tax debt.

In fact, you could have your passport revoked merely because you owe more than $50,000 and the IRS has filed a notice of lien. A $50,000 tax debt including interest and penalties is common, and the IRS files tax liens routinely. It’s the IRS way of putting creditors on notice. The IRS can file a Notice of Federal Tax Lien after the IRS assesses the liability, sends a Notice and Demand for Payment, and you fail to pay in full within 10 days.

 

If you have a question about the IRS’s ability to revoke your passport, or you have fallen victim to this, contact me today at 615-326-TAX9 for a free consultation.

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Stephen Wallick February 7, 2018 No Comments

700 New Ways For the IRS To Audit

The IRS is increasing your chances of being audited by adding 700 audit and enforcement personnel. 

IRS enforcement will increase. No one wants to be audited, but the truth is that the tax system needs more audits. Recently, IRS audits of individuals reached an 11-year low. That made many taxpayers happy, of course. Even if you are certain that you filed your taxes properly, providing receipts is maddening, audits often seem dangerous.

The IRS is auditing less than 1% of individual taxpayers. Positive thoughts about the IRS are at an all-time low. But most Americans realize that we must pay taxes and that someone must collect them.  That is where sympathy or understanding for the role of the IRS ends. Recent scandals involving the IRS, evasive responses to Congress, failed approaches to security, and diffidence to the public and legislators have not won the IRS any friends.

If you owe the IRS and have not filed back taxes, Give us a call.  We are Middle Tennessee’s Tax Resolution Experts.

615-326-TAX9

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Stephen Wallick January 17, 2018 No Comments

What to Do First When the IRS Contacts You

No one wants to get a call or a letter from the IRS, but DON’T PANIC!

If the contact is via email, it’s fraudulent

Do not respond to the email or click on any links in it. This is an attempt to steal your personal information. Forward the message to phishing@irs.gov, then delete the original email.

The IRS will never make initial contact by phone

The agency will contact you initially via postal mail. However, even if you have already had legitimate contact with the IRS, do not assume that a phone call is legitimate. There are many scams out there.  Even if the caller ID has a Washington, D.C., area code (202) or says “Internal Revenue Service,” do not provide the caller with any information. Say you cannot talk now and will call back shortly. Ask for a name and badge number. Then call the IRS directly using the phone number provided on IRS.gov: (800) 366-4484. Only then will you be able to determine if the call was legitimate.

It is also important to understand that the IRS will not threaten arrest you, so any communication stating otherwise is fraudulent. Some people who intentionally commit tax fraud and evasion by purposefully lying to the IRS, underpaying the tax they owe or failing to file a tax return do eventually end up in jail after repeatedly refusing to cooperate with the IRS. However, ordinary taxpayers who have simply made a mistake on their return are not at risk of going to jail.

If the contact is via text message, it’s fraudulent 

As with an email, you should not reply, open any attachments or click on any links in the message. Instead, forward the text to the IRS at (202) 552-1226. If possible, send the IRS a second message with the number from which the fraudulent text originated, then delete the message.

If the contact is via postal mail, it may or may not be legitimate

There have been fraudulent IRS notices sent via mail. The IRS uses form CP2000 to inform taxpayers of proposed IRS adjustments to their returns. These notices are challenging to authenticate, but it can be done. Here are a few clues to help you discriminate: fake CP2000 forms have an illegitimate IRS address; they ask the taxpayer to make the check payable to the IRS rather than the United States Treasury (which is how you make out a check to the genuine IRS); they instruct the taxpayer to send payment immediately and dispute it later. The real IRS allows taxpayers to dispute claims of unpaid taxes first and pay after an agreement is reached.

DO NOT ASSUME that an IRS letter requesting payment or personal information is legitimate. Instead, go to IRS.gov and search for the relevant notice or form number and read the IRS’s page “Understanding Your IRS Notice or Letter.” You can also call the IRS directly at (800) 829-1040 to inquire about a letter’s legitimacy.

We are Middle Tennessee’s Tax Resolution Experts, if you have any questions about the IRS contacting you, call us at 615-326-TAX9

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Stephen Wallick January 3, 2018 No Comments

Does Extending April 15 Deadline Increase Odds of an IRS Audit?

Instead of rushing to April 15 to file your taxes, you can go on extension.  Does filing an extension increase your odds of audit?

Everyone can get six extra months by filing (electronically or by mail) an extension. You need to pay what you owe–the extension is to file your return not to pay–but there are good reasons to take the extension.

First, going on extension gives you more time to think. Use the time to gather your records and get professional advice.  File accurately so you don’t have to amend later. Amended returns often come about because people rush. File once correctly so you don’t have to do it again.

The extension is automatic – no IRS approval required. You just get the extra six months, period. But the extension is to file, not to pay. Make your payment and use the time to make your return accurate and complete.

Going on extension also allows for corrected Forms 1099 and K-1. You may be waiting for Forms K-1, gathering documents or seeking professional advice. But even if you have all your forms and are ready, what if you receive a K-1 or 1099 after you file?

The earlier you file, the greater the risk you will receive corrections. Going on extension makes it less likely that you will be surprised by a tardy corrected K-1 or 1099. You may as well file once and file correctly.

Some people say that going on extension increases audit risk. Some people say exactly the opposite. But there is no hard evidence to support either theory. It is worth saying it again: there is no increased audit risk to going on extension. All taxpayers worry about IRS audit risk. Opinions vary and there are many old wives’ tales about what triggers an audit. However, it is unlikely that going on extension increases IRS audit risk.

Going on extension is easy. To extend, you can mail a Form 4868, ask your return preparer, use commercial software, or do it yourself electronically. For more guidance, IRS tax topic 304 covers extensions of time to file your Tax return.

If you need an extension, give us a call.  We are happy to file this form for you free of charge. 

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Stephen Wallick November 21, 2017 No Comments

IRS Audit or Criminal Investigation?

The tax law is complex, and mistakes are common.

Unfortunately, common mistakes can lead to much bigger problems. Most criminal tax cases begin as simple civil audits. If an IRS auditor discovers something suspicious in a civil audit, the auditor can notify the IRS’s Criminal Investigation Division. And the IRS is not obligated to inform you of a criminal referral. In the case of criminal referrals, auditors will suspend the audit without explanation. You may think this is the end of your audit, but during this time, the IRS can be building a criminal case against you.

There are several things that put a civil audit at risk for becoming a bigger problem.

However, the number one mistake is omitting income. Whether you receive a Form 1099, W-2, K-1, or no reports at all, include ALL your income. Discrepancies can trigger audits, and if omissions of income are significant or appear intentional, the IRS will investigate. Exaggerated deductions are less likely to be viewed as seriously, but can also come under investigation. You are particularly at risk is you attempt to write off personal expenses as business related. It is always safest to separate your tax life into business and personal.

False statements to auditors are also a major mistake.

Conduct during the audit itself can be pivotal in a case. It is always advisable to hire a tax professional to help you through an audit. A lot of what goes on at the IRS is computer matching–the endless correlation of taxpayer identification numbers and payments. Be certain that if you report something to an auditor, it will be checked against IRS records. Even small mismatches can be caught. Keeping good records is also important, and you should keep them for at least six years after you file. Keep copies of your tax returns themselves forever. You may also need to keep basis records for an extended period. Home improvements can be called into question even 20 years later, if selling a house. Keep your receipts!

If you are visited by an IRS Criminal Investigation Division Special Agent, you should consult with an attorney.

Like the FBI, the IRS Criminal Investigation Division uses special terminology that is foreign to most of us. You are not legally required to talk to them. In fact, the Fifth Amendment to the US Constitution guarantees your right against self-incrimination. That means you can’t be compelled to answer questions that could be used against you in a criminal case.

In the early stages of an IRS criminal investigation, you may be told you are only a witness.

You may think that there is no harm in talking to an IRS Special Agent. You may even think that your cooperation will make the IRS leave you alone. Be careful Do not be afraid to exercise your Fifth Amendment right. As an investigation continues, a witness can become the target. Regardless of your communication skills, speaking to an IRS agent may actually help the IRS build a criminal case against you. Even if the IRS tells you that you are only a witness, you are entitled to retain counsel.

The ramifications of getting flustered by an IRS agent can be extreme.

Becoming nervous and saying too much is another possibility. If you answer a question falsely, you may face felony charges; making a false statement can be considered evidence of an attempt to conceal other criminal conduct. If you are approached and questioned by a Special Agent, ask for his or her business card. Firmly state that you do not want to answer any questions at this time, and that you will have your attorney contact the Special Agent. You can fully cooperate through your attorney.

We are Middle Tennessee’s Tax Resolution Experts, if you have any questions about the IRS contacting you, call us at 615-326-TAX9

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Stephen Wallick November 15, 2017 No Comments

A New Program to Help Settle IRS Audit Disputes

IRS audits are worrisome and time-consuming.  Then, when they are finally over, you must decide whether to pay or dispute the bill. Disputing the outcome of an audit takes additional time and money. It is your right to protest the IRS audit findings and go through the IRS appeals process. But this is a long process, and you will end up with additional accounting fees and legal fees. Fortunately, the IRS has a way to speed up this process. It’s called Fast Track Settlement. Although this isn’t exactly a new program, its availability to millions more taxpayers is new.

Fast Track Settlement can resolve audit disputes in as little as sixty days, rather than the months or years it sometimes takes.

Normally, if you don’t agree with the results of an audit you must dispute them before you can even get to Appeals. This stage can take months or years while you wait to be assigned to the IRS Appeals division. A hearing is then scheduled with an appeals officer (more time), and the case is either settled or moves on to court. The Appeals process is tedious and repetitive.

Fast Track Settlement has been available for complex audits with the IRS Large Business & International Unit (LB&I) for some time.

In the mid-2000s, this option became available to smaller taxpayers in certain cities. It is now available to all taxpayers audited by the Small Business/Self-Employed (SBSE) division, which handles most audits of small businesses and individuals.

The idea of Fast Track Settlement is for you and the IRS auditor to agree on the issues, with the help of a mediator from the IRS Appeals Office.

The mediator tries to find middle ground.  IRS auditors usually can’t settle issues. If the auditor thinks you owe $500,000, and you think you owe nothing, this usually requires IRS Appeals. However, the goal of the Fast Track Settlement program is to find a quick deal. Fast Track Settlement could resolve your audit within sixty days.

Acceptance into this IRS program requires you, the IRS auditor, and the auditor’s manager to agree.

You and the auditor must prepare an application packet, IRS Form 14017 along with a list of specific issues for possible settlement. If you are accepted, the IRS mediator will review both sides and set a conference to discuss the issues. Both sides will present a position and acceptable resolution. At the end, the mediator will propose a deal. You are not obligated to accept this deal, and you can withdraw from the process at any time.

Fast Track Settlement is only available if the IRS auditor agrees. If you have a poor relationship with your auditor, or his or her manager, they may not be willing to accommodate you. So, keep things friendly, even if you disagree. Determining the best course of action can be difficult, so be careful, and consult a tax professional for guidance

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Stephen Wallick November 8, 2017 No Comments

10 Important Things to Know About 1099 Forms and Taxes

Every year at tax time, the 1099 forms roll out and into mailboxes across the country. You may think no one likes 1099s except for the IRS, and you would be right. The IRS loves them, because they allow for easy computer matching of Form 1099 data against individual tax returns. Businesses may not like the hassle of sending them, but there are penalties for failing to issue them. In turn, taxpayers may not like to receive them.

Here are 10 important things for businesses and taxpayers to know about the 1099 form.

1. It is better to give than to receive. Businesses must issue the forms to any payee, except for a corporation, who was paid $600 or more during the year. This is the basic threshold rule, but there are many exceptions. Banks, for example, send out 1099 forms for all interest-bearing accounts, regardless of the amount of interest earned.

2. Report EVERY 1099. The purpose of the 1099 form is IRS matching. Every 1099 includes the payer’s employer identification number and the payee’s Social Security number. The IRS matches each 1099 with the payee’s tax return. Payers must submit copies to the IRS, so the IRS knows. Even if you disagree with the information on your 1099, you must include it on your tax return. Do not ignore it. It is reported income!

3. There are different varieties of the 1099. A 1099-INT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds or unemployment benefits; 1099-R for pensions and payouts from retirement accounts; 1099-B for broker transactions; 1099-S for real estate transactions. But the Form 1099-MISC, for miscellaneous income, covers the most territory and raises the most questions.

4. Timing is NOT everything. Businesses are required to send out 1099 forms by January 31 for the prior calendar year. CAUTION…don’t assume you do not need to report the income if you don’t receive a 1099 by February, or even March. There are penalties for businesses that issue 1099s late, but it happens and some can come as late as April, when you may have already filed your return. You don’t need a 1099 form to report income. Even if you have not received one, but know you have income, you MUST report it.

5. Notify your employer of a change in address. 1099 information will be reported to the IRS based on your Social Security number, regardless of whether you receive the form. Update your address directly with payers, as well as putting a forwarding order in with the U.S. Post Office. Just because you do not see a 1099, doesn’t mean the income can be forgotten. If the IRS sees it, you want to see it, as well.

6. The IRS gets what you get. The deadline is January 31 for mailing 1099s to taxpayers, but the payer can have until the end of February to send all its 1099 forms to the IRS. In 2017, the IRS has moved up the filing date for 1099-MISC forms by payers. The reporting date for payers will now be the same, January 31.

7. Report errors immediately! If there is an error on a 1099 form tell the payer immediately. There may be time for the payer to correct it before sending it to the IRS. If the payer has already sent the incorrect form to the IRS, ask the payer to send in a corrected form.

8. Read IRS Notices. If you forget to report a 1099 form, the IRS will send you a computer-generated letter billing you for the taxes. Save yourself some trouble…if it’s correct, just pay it.

9. Remember state taxes, too. Most states have an income tax, and will receive the same information as the IRS. If you missed a 1099 on your federal return, your state will bill you, as well.

10. Sometimes it’s best not to ask. If the payer has your correct address and you don’t receive a 1099 you expect, consider not asking for it. If you are expecting a 1099, you know about the income, so just report it. The IRS has no problem with that. If you call the payer and ask for a 1099, it could result in you being issued duplicate 1099s, and no one wants twice the income.

We are Middle Tennessee’s Tax Resolution Experts, call us at 615-326-TAX9

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Stephen Wallick October 18, 2017 No Comments

What To Do If You Are Being Audited By The IRS

The IRS conducts audits on 1.4 million taxpayers a year (1% of all returns filed).  The bad news is that getting audited is only slightly more pleasurable than root canal surgery.  The IRS is stepping up the number of audits being conducted, targeting higher income individuals. 

Of course, you have no control over whether the IRS chooses to audit your return, but it is helpful to know what the IRS considers red flags.

Here are a few of the most common ones:

  • Large charitable deductions
  • Large business expenses
  • Inaccuracies on filed returns
  • Excessive itemized deductions
  • Prior tax problems or audits; and
  • Complex business or investment transactions

Statistically, you will be audited in your life-time.  Doing a good job maintaining your records will assist you if the IRS send you a notice.

These records include:

  • At least three years of tax returns and documents
  • Checkbook stubs
  • Receipts from all purchases throughout the year
  • Cost basis documents for property and taxable investments
  • All bills, which you should organize in folders; and
  • Deductible items, such as charitable contribution receipts and letters.

If you do get audited, here are some things you should do:

Be Prepared

The IRS has compiled a list of 10 tips for those who have been audited and six of them start out with “Be prepared to…” The first step in being prepared is to have a thorough understanding of your tax return. This is easier said than done if you have a complicated return that was submitted by an accountant. The next step is to organize your records so you will be in a better position to answer questions posed by the IRS.

Get Help

Some people can go it alone, this is a huge risk and you should have a professional on your side. Hiring an individual that has extensive experience in these matters is your best option.

Do Not Volunteer Additional Information

A lot of honest people want to appear to be open books. They have nothing to hide, but – whether you have a correspondence audit or an office audit — it is a bad idea to give the IRS more information than it requests. Doing so may open you up to a new investigation. If the IRS examiner asks you for information not mentioned in its notice, politely decline to respond unless the agency files a formal request for it. In a related matter, if the audit is related to your business, remind all employees that they should not give any information to an IRS examiner. All inquiries should be directed to you.

Tape It

About 10 days before your meeting with the IRS examiner, give the IRS written notice that you will make an audio recording of the meeting. (Video recordings are not allowed.) This recording may help you later and you will want to do it especially if you don’t have an accountant or lawyer with you.

The moral of this story is to pray that you don’t get audited, but if you do, prepare yourself as if you are going into battle, because you will be.

Contact your Middle Tennessee tax resolution specialists at, 615-326-TAX9

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Stephen Wallick October 11, 2017 No Comments

What To Do If You Have Past Due Payroll Tax Issues

Past due payroll taxes can cause you to lose your business and in some cases, your freedom. The IRS is focusing increased tax compliance efforts on small businesses so it is important to know the common payroll tax audit triggers and learn how to avoid severe IRS penalties, huge tax debt and federal criminal investigation.

Here are 7 common payroll tax audit triggers you should know.

1) Small businesses are the most likely target of increased tax compliance enforcement.

Small business owners have been identified by the IRS as the largest source of uncollected taxes. And because they are known to be big tax evaders, the IRS tends to focus their enforcement efforts on small businesses.

2) You can lose your business due to extremely aggressive IRS collection tactics for past due payroll taxes.

When it comes to payroll tax debt, the IRS collection Revenue Officer has unyielding power and authority. They have the power to padlock your front doors, putting you out of business, without obtaining a court order. They can seize your machinery and equipment. They can contact your customers, and if your customers owe you any money, the IRS will intercept these funds through their powerful levying authority. You must take immediate action to deal with a payroll tax issues, or you will find yourself out of business.

3) Payroll tax penalties can add up quickly and generate huge tax debt.

The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase your total tax bill. Whether you operate your small business owners as a sole proprietorship, corporation, or LLCs, the taxes you owe can cause you to lose your business. There are three major penalties you can be hit with (failure to file, failure to deposit, and the failure to pay), which can add up to about 33% plus interest if you don’t pay in just 16 days after you have filed the Quarterly 941 (Payroll Tax Return) past the due date!

4) Not filing or paying your payroll taxes can be considered a federal crime.

The IRS can refer your case to the Criminal Investigation Division and ultimately to the Department of Justice if they can prove that you intentionally (very low thresholds) didn’t file and/or pay.

5) Borrowing from payroll taxes is against the law.

Many small and mid-size businesses use the money they collect from payroll taxes to pay their operating expenses. The money collected from employees to pay their share of federal withheld tax, FICA and Medicare (Social Security) does not belong to the business and must be accounted for and paid to the government. Generally, one must make a federal tax deposit (by tax filing service, phone, or in person at a bank) 3 days after the pay date of the pay roll checks.

6) The IRS can come after business owners individually for payroll taxes owed.

The IRS can access what is called the Trust Fund Recovery Penalty (TFRP) against owners and shareholders. The IRS is the only creditor on the planet that can “pierce” the corporate veil and go after individuals, which can be a very scary situation.

7) What do I do if I get audited?

If you owe payroll taxes, you need to get expert professional help before it’s too late. Representing yourself before the IRS would be like going to court without a lawyer. And you do not want to take any chances when dealing with the IRS.

You need the help of experienced Certified Tax Resolution Specialist who have experience negotiating hundreds of these cases. We can defend you and advise you on viable options including Payment (“stepped”) plans, Offers in Compromise, Computational Abatement of Penalties, Abatement of penalties due to reasonable cause, and analyzing the Statute of limitation to assess. Contact us today to get started.

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Stephen Wallick October 5, 2017 No Comments

The IRS Will NOT Tolerate Payroll Tax Violations

The Treasury Inspector General for Tax Administration, an IRS watchdog, has issued a surprising report about serious employment tax crimes. Payroll tax violations are on the rise, and the IRS plans to put a stop to this trend. The previously imposed penalties are not enough, and the IRS is urging its Criminal Investigations Division to act. Employment tax embezzlement is a felony punishable by up to five years in prison! Employers are required to withhold payroll taxes, including federal income taxes, Social Security and Medicare taxes from employee pay. Willful failure to remit them is a crime.

This report sets forth the different levels of payroll tax noncompliance, as well as the extent of civil and criminal enforcement actions taken by the IRS. This report recommends that the IRS:

  • Increase their focus on employment tax negligence.
  • Expand the criteria for referring potentially criminal cases– all cases involving over $1 million and individuals involved in multiple companies with payroll tax negligence. IRS officials have already agreed with these recommendations.

Make no mistake 

Employment tax noncompliance is a serious crime. When employers withhold employment taxes, they are holding them in trust on behalf of the federal government. Failing to make timely federal tax deposits is stealing from the government. And this money is used to fund important federal programs, such as Social Security and Medicare. The government is forced to borrow from general tax revenues to replace the funds that are missing due to negligent employment taxes. As of December 2015, 1.4 million employers owed approximately $45.6 billion in unpaid employment taxes, interest, and penalties.

The report sees unpaid employment taxes as a growing problem. Assessing 100% penalties on all employers who fail to pay employment tax is an effective enforcement tool that the IRS can use to discourage employers from continued employment tax noncompliance. In 2015, the IRS assessed the 100% recovery penalty against approximately 27,000 responsible employers. That may seem like a lot, but it was 38 percent less than in the year 2000. The number of employers with employment tax noncompliance for 20 or more quarters of delinquent employment taxes is still growing. It has more than tripled in the past 17 years, so even the 100% recovery penalty fails to deter everyone.

59 individual employers were assessed the recovery penalty for 10 or more separate entities. Their negligence was recurrent and blatant. Yet, only 5 of the 59 individuals had been investigated by the Criminal Investigation Division of the IRS for potential criminal prosecution. There were also approximately 700 employer accounts that were assessed with over $1 million recovery penalties from 2010 until 2015, yet fewer than 50 of those individuals were the subject of criminal investigations.

Willful failure to remit employment taxes is a felony; however, there are fewer than 100 criminal convictions per year. This information indicates that penalties and fear of prosecution are not strong enough deterrents to stop payroll tax violations.  Therefore, the IRS is being urged to increase their focus in this area. So employers, beware!

We are Middle Tennessee’s Tax Resolution Experts, if you have any questions about payroll tax violations, call us at 615-326-TAX9

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