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Archive for the ‘Tax Solutions’ CategoryThe Difference Between an Audit Reconsideration and an Audit AppealThursday, January 26th, 2012There is an important distinction between an audit reconsideration and an audit appeal, and these options are part of our arsenal of tactics to fight the IRS. How Does an Audit Reconsideration Differ from an Audit Appeal? You might have found yourself in a situation where you don’t quite agree with the IRS’s decision to audit your taxes. While your first reaction might be terror, there’s likely nothing to be afraid of. Little Known Fact Could Save You 25% in IRS Failure to File PenaltiesTuesday, January 17th, 2012
Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser. We’re interviewing Tax Attorney Jeff Fouts in order to uncover the real deal behind IRS rules, procedures and penalties. Today’s audio edition talks about a little known fact that could save you up to 25% in IRS tax penalties. The interview is approximately 7 minutes long and includes a transcript below. Originally recorded November 2011 MALE SPEAKER: Great. So we’re talking with Jeff Fouts, tax attorney, and we’re talking about IRS penalty abatement or removing tax penalties. Are you there, Jeff? JEFF FOUTS: Yes, I am. MALE SPEAKER: So why don’t you start off by just giving us an overview of what this looks like at the IRS. JEFF FOUTS: Sure. As time has gone on, the IRS has created more and more penalties. Every time there is a new tax legislation that appears, there is an additional penalty added. The stated reason for the imposition of penalties is to help taxpayers understand that their noncompliant behavior is wrong and to emphasize that their compliant behavior is right. So of course it’s my opinion that tax payers don’t need a penalty to tell them what’s right or wrong, that they have to pay their tax or file their tax return. And supposedly, according to the IRS, the purpose of the penalties is to deter or stop noncompliance by imposing a cost on that activity. Well, that sounds good on paper, but their real…very real problem is most people don’t even know that the penalties really exist or how much they are or that they’re tied to compliance. They kind of have some nebulous idea, but they don’t understand it, okay? And so what’s the use of hitting someone if your hitting them doesn’t benefit anybody? As a matter of fact, the penalties increase the likelihood of further noncompliance because the tax liability grows to a point where the taxpayer can’t pay it and the IRS can’t collect it. And actually, that was the whole reason for the creation of the Offer in Compromise Program. Congress saw that the tax liabilities on the books were increasing exponentially and that the IRS wasn’t able to collect it. And so they agreed to allow the taxpayers to have a potential option to settle their taxes for less than they owed. Well, the – you know, the IRS does its job too well. If you’re wanting to give someone pain, well now you’ve given them so much pain because of their non filing or nonpaying, that they potentially will never be able to pay; and now you’ve created so much fear in them that now they don’t want to file the next year and the next year and the next year. Serial noncompliance. MALE SPEAKER: Right. JEFF FOUTS: So there are two penalties that most taxpayers will come in contact with: One is failure to pay their tax on time in full; the second is failure to file your tax return on time in full. The second, is failure to file your tax return on time. The good news is that if you don’t have a liability on your tax return, then there’s no penalty because the penalty is on the – calculated on the tax itself. So if you don’t owe anything but you don’t file for three years, you’re not going to have a failure-to-file penalty because there’s no tax liability to calculate it on. MALE SPEAKER: Okay. JEFF FOUTS: There’s also not going to be a failure-to-pay penalty either. That’s good news. MALE SPEAKER: Yeah, that is good news. So does that every happen anyway? Does that happen ever? JEFF FOUTS: Oh, it happens a lot. It happens – well, I shouldn’t say a lot, but it happens on a very regular basis that taxpayers haven’t filed, but they end up not owing anything. MALE SPEAKER: Right. But in the meantime, they’ve paid the penalty? JEFF FOUTS: No, there’s no penalty. They just live in fear. Now, they may – we’re getting a little off topic, but let’s just say, for example, the IRS sees on its records that you did not file a return. And so they create a dummy return for you, but they don’t give you credit for an exemptions, deductions, and they file you as if you were single. They don’t give any mortgage interest deduction, charitable deduction or anything like that. And so it will look like you have a tax liability, and there will be interest and penalties on that. But if you – once you file a correct return, that return, if it shows there’s no liability, the tax goes away, and the interest and penalties go away. MALE SPEAKER: Okay. JEFF FOUTS: Now, let’s talk about the failure-to-file penalty. As a general rule, even if you don’t have enough money to pay the tax, you should always file the tax return. Why is that? Because the failure-to-file penalty can be up to a 25 percent penalty on the tax, but the – and another issue with it is it accrues so fast. In a moment, you’ll understand what I mean. It’s a 5 percent penalty per month for each month you’re late. MALE SPEAKER: Okay. JEFF FOUTS: Up to 25 percent. So after five months, you’ve accrued the whole 25 percent penalty. That’s fast. MALE SPEAKER: Um-hmm. JEFF FOUTS: And then interest accrues on the penalty amount as well. MALE SPEAKER: Okay. And do they have a set rate for that? JEFF FOUTS: It varies. They set it periodically based upon – I don’t know what it’s based on. It may be the federal funds rate. I don’t remember what it’s set on. I don’t remember. But they change it…I don’t remember if it’s monthly or quarterly. But now it’s actually pretty low. Now, contrast that with – contrast that. A failure-to-file penalty is 5 percent penalty per month up to – but over five months, it accrues up to a maximum of 25 percent. So you’re in hurting status, the hurt locker as they say, fast. Contrast that with the failure-to-pay penalty. It’s one half of 1 percent per month up to 25 percent. MALE SPEAKER: Wow. JEFF FOUTS: So they really, really want you to file that tax return. MALE SPEAKER: Um-hmm. JEFF FOUTS: But people don’t know. I mean, do they know that they’re going to… MALE SPEAKER: That’s right. JEFF FOUTS: And the time starts when the tax return was due. So if you’ve asked for a legitimate extension, it counts from the extension time. MALE SPEAKER: So that’s a way of saving some money if you know to do that. JEFF FOUTS: Right. MALE SPEAKER: Is that right? JEFF FOUTS: Yes. If you file that tax return, you save yourself a lot of money. MALE SPEAKER: Yeah. So, I mean, if you had a pretty average amount…let’s say you owe $10,000. After five months, you’re talking about $2500 in fees, right? JEFF FOUTS: Yes. MALE SPEAKER: So, yeah, big difference. Versus $250 I believe because you said half a percent would be if it was the…failure to pay is half a percent? JEFF FOUTS: Right. MALE SPEAKER: We’re good. Anything else? JEFF FOUTS: Do you have time? Oh, I’ve got tons more, but, I mean, is this enough for today? MALE SPEAKER: It is enough for today, absolutely. So thanks, and we’ll talk to you next week. JEFF FOUTS: Thank you. Bye. Note: Because we ran out of time, we plan to have a future audio interview where we get Jeff’s insight on removing tax penalties (this is called penalty abatement). Broken Promises: IRS Tax Problems Settled for Pennies on the DollarSunday, November 6th, 2011Have you seen the TV commercials where the advertiser says your IRS tax case will be resolved for ‘pennies on the dollar’? Some of my former competitors that have had major legal and business problems with this practice include tax attorneys JK Harris, Roni Lynn Deutch and more recently TaxMasters. In the case of JK Harris, they have a record of run-ins with State Attorney Generals in many states and most recently they settled a million dollar lawsuit in Texas for misleading sales practices. This month the JK Harris tax law firm filed for bankruptcy. Not exactly what you want in the team representing you before the IRS. The video below discusses the case, has statements from former clients, and the Texas State Attorney General. This news is close on the heels of TV Lawyer Roni Lynn Deutch shutting down her national firm in California after continued pressure from the California State Attorney General for what amounts to poor business practices and broken promises. She surrendered her license to practice law and resigned from the state bar in May 2011 TaxMasters, another ‘big’ firm with TV advertising, is facing pressure of their own from State Attorney Generals for the same kinds of misleading advertising and sales practices where clients are promised a successful offer in compromise.
These tax firms all have something in common.
You won’t find any of those things about me or my team here at tax attorney Jeff Fouts and Associates. We have an A+ BBB rating, no complaints with the State Attorney General in any state and no bad press from mainstream media.
It’s often difficult for businesses to stay true to their original vision and ethics when they grow too fast or seemingly get greedy. I take a different approach with my tax law practice. That’s probably why we’re in our 18th year of service. We work hard for our clients and we fight the IRS even harder. I have a small but tireless staff that are very experienced. Here’s an example. Dale is my Special Assistant and he’s one of the people you’ll speak with when you first contact my office. Dale’s been with my firm a long time, he knows your issues, he’s patient and understanding. He doesn’t make promises that I can’t keep and he follows up promptly to all your issues. Pennies on the dollar Pennies on the dollar is possible, but not because of some legal voodoo. Basically, the IRS determines what percentage of your outstanding tax liability it can reasonably collect in the next 2 years. This is called your “reasonable collection potential” and it’s why pennies on the dollar cases happen. Think about your ability to pay if you presently have a high income vs. if you’ve been out of work for six months and haven’t found a new job. What we do here at my firm is a proper analysis of your case facts and history. My special assistant Dale will tell you that we can’t make any promises on your case, and can’t assess your chances of a successful offer in compromise case until I’ve completely reviewed your case facts. Even then, we don’t promise success. What I can do is promise that everyone on my team will do our best. With 18 years experience and and A+ rating with the BBB I’d encourage you to call us and find out if we can help you. Until next time, Jeff Fouts, Tax Attorney Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating. I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff of tax specialists. You can put off your tax problem, or put us to work for you. How To Get Your Offer in Compromise Approved by the IRSMonday, October 31st, 2011An Offer in Compromise is an agreement made with the IRS that allows you to settle your tax liability for less than you owe. It can be an option for people who are unable to pay their taxes in full, or for people whom tax payment creates financial hardship. The IRS will consider your ability to pay, income, expenses, and asset equity when determining whether or not you qualify for an Offer in Compromise. The IRS encourages an Offer in Compromise only after all other options have been exhausted. IRS Collection Process: Offers in CompromiseWednesday, October 12th, 2011Listen to an audio transcript of an IRS Enrolled Agent explaining the process of filing an offer in compromise, and who may file for an OIC. Jeff Fouts Tax Attorney – Ripoffreport.com getting ripped off?Monday, September 19th, 2011
Do you ever wonder if the comments on Ripoffreport.com or sites like complaintsboard.com are true? I never did until I read comments about my own business and wondered who all the anonymous comments were from that I didn’t recognize. I’m a small business and the problems that my clients have actually had with me or my staff over the years are few and far between. And when I do have a problem, I hear about it and try to resolve it. IRS Tax Problems: Jail or Offer in Compromise?Wednesday, August 31st, 2011
Choosing between jail time and negotiating with the IRS to reypay back taxes and fines seems like an easy choice. But for many, their fear keeps them from acting and before long the IRS comes calling. If you have a tax problem, you don’t have to repeat this mistake. Many people don’t realize that you can often negotiate a lower tax bill with the IRS using what is called an IRS Offer In Compromise or OIC. With an IRS offer in compromise, you can lower your overall tax debt and make monthly payments that let you not only avoid jail time, but wage garnishments and IRS levy’s as well. Here’s an example of what not to do and more on the IRS Offer in Compromise: IRS Employee Tax Problems Include Failing To File Tax ReturnsSaturday, July 2nd, 2011IRS employees have their own tax problems. According to the Treasury Inspector General for Tax Administration Audit Report, between 2004 and 2008, the IRS tracked more than 8,000 potential noncompliance issues among their employees and found that action was warranted one-third of the time. The most common suspected offense was failing to file at all, which is hard to imagine for an IRS employee. The TIGTA report also identified 133 additional employees in tax years 2006 and 2007 who were noncompliant with their tax obligations but weren’t identified by the computer match. You have to wonder what the most powerful collection agency in the world is doing when they aren’t obeying the same rules they’re forcing the rest of us to live by. It would be galling to know that the Revenue Agent auditing you was not filing their own tax return or paying their tax liabilities. This finding has implications that extend beyond tax fraud.
There are additional facts and related links you may want to read here on Ashlea Ebeling’s Forbes article – IRS Employees In Tax Trouble. Until next time, Jeff Fouts, Tax Attorney Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer, (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating. I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work. IRS Offer in Compromise Tax Settlement Help by Tax AttorneyFriday, July 1st, 2011 Get the facts about an IRS Offer in Compromise This is a guest post from Regina King You may have heard that in an IRS Offer in Compromise you can “settle your IRS tax debt for pennies on the dollar” (an Offer in Compromise should not to be confused with general debt relief). This is true in some cases but be wary of any firm that over emphasizes your potential savings without having thoroughly reviewed your case. A review includes reviewing all your tax records. Here are some facts about an IRS Offer in Compromise.
The aim behind an Offer in Compromise, sometimes abbreviated as OIC, is to increase tax receipts (money coming in to the IRS) by making it easier to you to come forward to the IRS and pay what you can afford. Offer in Compromise Requirements and Guidelines as stated by the IRS According to the IRS, you may submit an Offer in Compromise if you meet one of the following requirements.
Filing For an Offer in Compromise Settlement To file an Offer in Compromise settlement, you need to submit a number of forms that vary with your particular situation, such as:
Other things to know about submitting an offer in compromise
Why You Should Use a licensed tax professional for an Offer in Compromise The IRS rejected 76% of all Offer in Compromise submissions during the last fiscal year. Those are tough odds. An experienced tax attorney can offer you the protection of attorney-client privilege, plus years of experience in working with the IRS. They use tools to avoid errors that can harm your chances, and their knowhow to maximizes the chances of your Offer in Compromise being accepted. This includes understanding changes to rules and procedures that the IRS makes from year-to-year, or even month-to-month sometimes. The reality is you need true legal expertise to help you with your IRS problem just as you need a medical specialist to help you if you have a heart problem. The good news is even if you can’t qualify for a reduced tax bill with an Offer in Compromise, many people still qualify for other good options, like affordable monthly IRS payments. The goal is to allow you to resolve your tax issues and move on with your life. Tax Problem Procrastination and Failing To File Income TaxesFriday, June 24th, 2011
This is the profile of someone who creates a tax problem:
This is the profile of a ‘problem’ tax personality:
All of these keep the person from taking action to fix their IRS problem so they can get on with their life. They’re “stuck” right where they’re at, and their life will not progress in this area until they take action to seek help with their IRS problem. When you put the profiles together you get tax problems. For a small number of people, these behaviors and traits seem to completely define them. They complain about anything. Someone else is always at fault. While this extreme is the exception, procrastination is the norm for my clients. I’m proud of my clients because they’ve taken the step in getting professional tax help in dealing with this difficult problem in their life. In that sense they are being very brave. The fuel of procrastination is the desire to avoid the real or perceived pain of their IRS problem. They also often have a lack of knowledge which causes their fear or anxiety. Some of my clients have gone years worrying about their tax problems before finally picking up the phone and calling me. When they do, many are elated to hear that their tax problems are common, and that there’s a way to fix things with the IRS. My best advice for dealing with tax problem procrastination is to take one thing at a time. First step, get educated right? No, not for procrastinators. You just get stuck in an endless loop of passive Internet research. Instead, write down a small goal for today and do it. Make it really simple at first and something you can accomplish on your own. This will get the ball rolling. Something like, ‘write down 5 things I’ll enjoy when I fix my tax problem.’ A good next step is to contact someone who can help. I’d suggest you call because it’s a more active form of action than an email. But, if a call feels daunting then use email. The IRS Tax Advocate is an example of someone you can call. You can also call an experienced tax attorney to take advantage of both their expertise and the protection of attorney-client privilege. I’m not going to tell you things are easy. Dealing with an IRS case is not fun. When I work with clients I must ask them to give me a lot of financial information and documentation. If they are non-filers, they must begin filing certain tax returns. If they are non-payers, they must begin paying current estimated taxes or correct tax withholdings. But people can deal with this when things are spread out on a monthly payment. Even if the news is not what you want to hear, you’ve taken the first step. And procrastinators know that once you begin anything, it’s easier to take the next step. For many, their tax problems are far less severe than they have imagined. I can’t tell you how many people have minor tax issues and imagine that they’re going to jail! Don’t do this to yourself. Believe it or not, reality can be your best friend, not the monster we often make it out to be. I also want to encourage people to see these characteristics for what they are, a series of past behaviors and traits. Current or past behavior need not define us or our future situation. While a character trait like procrastination may be your go-to response under pressure, people have proven just as able to change once they become conscious of their own responses and actions. I’m not trying to be your new psychologist or motivational coach, but I am saying that I’ve seen people turn their financial situation around completely once they found the courage to act. For my clients it’s about fixing their tax problems. And the major cause of that change wasn’t a tax lawyer like me, but an individual just like you. Until next time, Jeffrey I. Fouts, Tax Attorney Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating. I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work. | |
