Many people consider the IRS to be the largest and most powerful creditor in the world and they may be right.  That being said, many people are unaware as to how and when the IRS goes about collecting from a taxpayer when taxes are due.  This article has been prepared by a tax attorney at The McGuire Law Firm in Denver, CO to provide additional information regarding how and when the IRS can levy monies from taxpayers to collect on past due tax bills. If you are concerned about an IRS tax debt, contact the McGuire Law Firm for a free consultation. 

What is a Levy?

A levy is a legal taking of property or assets from a creditor to satisfy a debt.  In our specific situation here, we are discussing levies issued by the Internal Revenue Service such as a bank levy or wage garnishment (levy).

When Can the IRS Legally Levy?

When a tax debt is due, the IRS must provide the taxpayer proper notice before they can levy an asset as opposed to immediately seizing a bank account or other asset.  When a taxpayer files a return with tax owed, the taxpayer will initially receive a balance due notice from the IRS.  When the balance due is not paid or a formal agreement entered into, the IRS continues to issue notices and the notices get more serious.  Eventually, the IRS can and will issue a “Final Notice of Intent to Levy” (‘Final Notice’).  This Final Notice gives the taxpayer 30 days to either request what is called a Collection Due Process Hearing or establish an agreement with the IRS to resolve the tax debt.  If the taxpayer does not request a Collection Due Process Hearing, finalize an agreement or take other action that would act as a hold on enforcement, the taxpayer is then open to levies.  

What Are Common Levies Issued by the IRS?

The IRS is most likely to issue a bank levy or a wage levy (garnishment).

How Does The IRS Issue a Bank Levy?

The IRS may have information as to where a taxpayer holds bank accounts based upon financial statements provided by the taxpayer or the IRS is likely to know where a taxpayer banks or holds financial accounts because interest and dividends are reported to the IRS on 1099 forms.  When the IRS issues a levy to a bank, they send the bank a Form 668-A.  The Form 668-A is a Notice of Levy and provides the taxpayer’s information, the tax periods and amounts due and demands payment from the bank up and to the tax amount due on the form.  

How is a Bank Levy by the IRS Processed?

Different banks may process an IRS bank levy differently, but as a whole, the bank is supposed to hold the funds in the taxpayer’s account(s) with the bank as of the day the bank receives the levy notice up and to the amount stated in the levy notice for 21 days.  After the 21 day period the bank is to release the funds to the IRS.

Can the Bank Release Funds from the Levy?

Yes.  The bank can release the funds being held from the levy in whole or in part, but only after receiving a formal notice of release from the IRS.  Thus, a bank levy can be released in full or partially released.

How Does the IRS Levy Wages?

Just as the IRS is likely to know where you bank, the IRS is likely to know where you work from either prior W-2s or financial information provided by the taxpayer.  The IRS levies wages by issuing a Form 668-W, which is a Notice of Levy on Wages, Salary and Other Income.  A wage levy is a continuous levy whereby your employer is to withhold a certain amount of the wages with each pay check and pay the funds over to the IRS.  The amount of funds the IRS can collect is dictated by certain exemptions but the levy on wages can be a very large portion of each paycheck.

Can a Wage Levy be Released?

Yes.  A wage levy can be released in whole or in part by working with the IRS to establish a formal agreement or reducing the amount of the wage levy for each pay period.  To release the wage levy, a taxpayer generally must provide financial information to the IRS or establish an agreement.

What Other Assets Can the IRS Levy?

In short, the IRS has the power and authority to levy or seize almost any asset from a delinquent taxpayer although, a levy of a bank account or wages are the most common.

How Do I Prevent a Bank Levy or Wage Levy?

Once tax is owed, the best means by which to avoid a levy is to establish a formal agreement for the IRS.  A formal installment agreement or submitting an offer in compromise with the IRS will act as a hold on enforcement and the IRS should not levy under these circumstances.

You can speak with a Denver tax attorney by contacting The McGuire Law Firm.  A tax attorney at The McGuire Law Firm can assist you with your tax matters to prevent a levy or work to have a levy released. 

This article will discuss a tool that the IRS has to collect taxes from a Delinquent Taxpayer. The IRS’ nominee tax lien is a tactic used by the IRS to protect its interest in a property owned by a person who owes taxes to the government. If you have questions about a nominee tax lien or are in a dispute with the IRS, get in touch with the McGuire Law Firm to speak with a Denver tax attorney who can help you.

What is an IRS Nominee Tax Lien?

A nominee tax lien filed by the Internal Revenue Service is a collection tool or tactic used by the Internal Revenue Service to protect the government’s right or interest in an asset or property whereby the title to the asset may be held by a third-party that does not owe taxes to the IRS, but the asset in reality is owned by or controlled by a taxpayer that does owe taxes (the “Delinquent Taxpayer”).  The IRS can apply the nominee tax lien to prevent a Delinquent Taxpayer from hindering IRS collection efforts and, in essence, applied the substance over form doctrine.  The form or legal fiction is the asset or property is owned or titled by a third-party but in substance or reality the asset or property is owned or controlled by the Delinquent Taxpayer who the IRS is attempting to collect the tax debt from.

What is the Purpose of a Nominee Tax Lien?

The primary purpose is that of a collection attempt by the IRS to satisfy a tax debt.  By filing a nominee lien the government is securing their interest in the asset or property to help secure payment of the underling tax debt. By filing the nominee lien the government may be able collect on the equity in the asset that may have been fraudulently conveyed or titled to another individual or business in an attempt to avoid paying the tax debt.

What Assets or Property Can a Nominee Lien Attach To?

Generally, a nominee lien will attach to a specific asset such a piece of real estate and is not a broad and blanket lien such as when a notice of federal tax lien is actually filed naming a Delinquent Taxpayer.  For example, if Joe was a delinquent taxpayer and had his brother Mike purchase a home that Joe lived in and paid the mortgage, property taxes insurance and other costs of operating and living in the home, the IRS could file a nominee lien naming Mike as nominee and the lien would attach to the real estate that Mike owns but rather Joe is living in and maintaining the property. Thus, the lien is very specific to the piece of real estate and would only attach to the real estate.

Can the Nominee Request a Collection Due Process Hearing (CDP)?

No. Unlike the filing of a Notice of Federal Tax Lien, the nominee does not have the right to request a CDP.  The nominee would need to litigate in court that they are the true and rightful owner of the asset or property the nominee lien is attaching to.

What Elements or Facts Does the IRS Look for When Filing a Nominee Tax Lien?

There are generally a number of facts or elements that may allow the IRS to file the nominee lien, which would include the following:

• Often there is a close relationship between the owner of the property or asset and the Delinquent Taxpayer.
• The nominee or party who owns or holds title to the asset may have paid very little or no money for the asset.  Many times, the Delinquent Taxpayer will have paid for the asset but titled it to the nominee.  
• The Delinquent Taxpayer will generally own or control the asset in daily life and pay expenses associated with the asset such as with Joe in the example above.
• The Delinquent Taxpayer may have owned the asset and later transferred and conveyed the asset to the nominee for little or no consideration.

What Allows The IRS to File a Nominee Tax Lien?

The IRS has the authority to file a nominee lien under Section 6321 of the Internal Revenue Code.  Section 6321 states that a lien attaches to all property and rights to property actually owned by a taxpayer.  Thus, if the government feels the Delinquent Taxpayer “actually” owns the property, they are likely to feel they have the right to file the nominee tax lien.

If you are a taxpayer owing taxes to the IRS or you have an asset whereby the IRS has deemed you a nominee and filed a lien attaching to the asset, it may be wise to speak with a tax attorney.  You can contact The McGuire Law Firm to speak with a Denver tax attorney regarding any of your tax issues.

Tax season is upon us again, and you may ask yourself if there are benefits of hiring a tax attorney in Denver. This means filing returns, paying taxes, and dealing with any issues that arise along the way. While many try to handle things themselves, doing so can lead to severe consequences. For example, failing to pay your taxes can put you in danger of being audited by the Internal Revenue Service (IRS). If you owe money to the IRS, you might even be charged interest and fines.

As we know, there are many different types of taxes that individuals and businesses must pay every year. From payroll taxes to sales taxes to income taxes, it can become very confusing to figure out how much money you owe each quarter. This is where a tax attorney can help. A tax attorney specializes in assisting companies in navigating the complicated world of taxes. If you have trouble understanding what you need to do to file your taxes correctly, or if you need to resolve a dispute with the government over unpaid taxes, you’ll want to understand the benefits of hiring a tax attorney in Denver.

Additionally, you do not want to pay taxes to the IRS. After all, the government is taking money away from you. A tax lawyer can help you navigate the process of paying off your debts, including allowing you to avoid mistakes that could lead to additional charges.

What Is A Tax Attorney?

Tax attorneys are lawyers who specialize in federal and state income tax laws. A tax attorney must complete four years of college and three years of graduate-level coursework. After completing the requirements, they take the LSAT or the Law School Admission Test. 

Once the state bar exam is completed, a tax attorney works for a law firm specializing in taxes. Their main objective is to help clients file returns correctly and understand how to minimize their tax liability. Below are some of the benefits of hiring a tax attorney in Denver.

Understanding Tax Policies

The tax laws are updated now, and it is almost difficult for ordinary citizens to know what exactly is happening. This is where the benefits of hiring a tax attorney in Denver come into play. They are well-versed in tax policies and update themselves on new tax laws. As such, they can help you understand the current situation and ensure you comply with the law.

Filing Tax Returns

Tax season is here again, and it’s time to start thinking about getting everything done. But how do you know where to turn? You don’t have to worry anymore because your tax lawyer is there to guide you every step of the way. An experienced tax attorney knows the required forms and when they’re due. They’ll also help you determine whether you need to file a return or amend one. And if you need to file a late return, your attorney can prepare the necessary documents to get an extension.

Protect Your Finances and Property

The Internal Revenue Service has several collection options to help people pay back what they owe. One of those options is a wage levy. This allows the IRS to take a portion of your income directly out of your paycheck. Another option is a bank account levy. These are often used against individuals who fail to file returns or pay tax liabilities. However, there are several exceptions to both levies. For example, if you don’t have access to your bank accounts or if you can prove that it isn’t possible to pay off the debt, you won’t be subject to either levy.

If you receive a Notice of Intent to Levy, you have 30 days to respond. You must provide information about how much you owe, whether you can afford to pay, and why you believe you shouldn’t be required to pay. The IRS will consider waiving interest charges if you can’t pay and agree to a payment plan. However, the IRS will begin seizing your wages or bank accounts if you miss payments.

In addition to the above, certain protections are afforded under federal law. For instance, if you lose your job, you cannot be forced to sell your house, car, or other personal property just because you have yet to pay your taxes. Additionally, the IRS cannot garnish Social Security benefits without court approval.

Tax Disputes

If you receive a letter saying that the IRS is auditing your return, it’s essential to act quickly. They are likely looking for errors on your tax return; however, sometimes audits happen because of mistakes someone else made. You might think you did nothing wrong, but if you make a mistake on your taxes, it could cause problems down the road. One of the benefits of hiring a tax attorney in Denver is to help navigate the process and communicate with the IRS, so you don’t end up paying penalties and interest.

It means you’re still in luck if you owe the IRS money. You can reduce the amount owed by filing an Offer in Compromise. However, there are some things you’ll want to know about before applying.

A penalty abatement allows taxpayers to pay less than what they owe while avoiding the payment of interest or late charges. To qualify for a penalty abatement, you must file Form 656, Penalty Abatement Request. This form outlines the information needed to request a penalty abatement. Once submitted, IRS employees review your case and decide whether to approve it.

In addition to filing an OIC, consider paying off your debt early.

Maintain Your Credit

The Internal Revenue Service (IRS) does not report your tax debts to the three major credit reporting agencies—Experian, Equifax, and TransUnion. However, you could face severe consequences if you fail or cannot pay your taxes. A Notice of Federal Tax Liens (NFTL) is filed against you by the IRS. If you do not resolve the issue within 30 days, it becomes a judgment against you. Once recorded, your debt will be reported to the three major credit bureaus—Experian, Equifax, and TransUnion. These reports will remain on your credit history for seven years.

If you enter into a payment arrangement or offer in compromise with your local IRS office, you may avoid having an NFTL placed against you. Sometimes, a lien can be removed early, allowing you to rebuild your credit history sooner. An experienced tax resolution lawyer may be able to negotiate with the IRS to release the lien.

Tax Fraud or Evasion

The IRS has been cracking down on people accused of tax evasion and fraud. In 2017 alone, it charged over 5,500 individuals and businesses with crimes related to failing to pay taxes. This number jumped dramatically from 2016, when there were just 2,700 cases filed. And while the majority of the charges involved failure to file tax forms, there were also some instances of tax fraud.

A lawyer is essential in these cases because they can help you avoid serious consequences. If you refuse to file your taxes, you could face jail time. You could lose your home if you fail to pay what you owe. And if you reveal all your sources of income, you could end up paying hundreds of thousands of dollars in fines.

In addition to the penalties mentioned above, there are also civil consequences. For example, if you don’t file your taxes by April 15th, you could be fined $50 per day. You might also be required to pay interest and penalties on the amount owed.

Protection From Litigation

Businesses are often sued because of negligence. Negligence occurs when someone fails to act reasonably under the circumstances. For example, a business owner could only correctly train employees about safety procedures or provide adequate security measures. Even though businesses do everything possible to avoid lawsuits, some still sue them. When this happens, it is called litigation.

Litigation is expensive and stressful. You might lose your business if you need to learn how to defend yourself. One study found that the average cost of defending against a lawsuit is $1 million. Fortunately, there are ways to protect your business from the litigation without spending too much money.

An experienced tax attorney can help you build strong defenses against negligence claims. They can even draft legal documents, such as insurance policies and employment agreements, to protect your business. Another benefit of hiring a tax attorney in Denver is we can advise you about what types of evidence are most likely to win a case and how to best prepare for trial.

Intermediary Working For You

When dealing with the Internal Revenue Service, many different types of lawyers can help you. Some work directly for you, while others represent clients whose cases intersect with yours. But no matter whom you choose, you want someone who can help you navigate the process, provide advice, and guide you through the steps needed to resolve your issues. Some people call themselves “intermediaries” because they act like middlemen between you and the IRS. They help you understand what’s happening, explain your options, and negotiate resolutions to your problems.

Your intermediary might be a solo practitioner, a small firm, or even a large law firm. And although they won’t necessarily be able to do everything for you, they can offer guidance, assistance, and representation throughout the process.

Let JM Tax Law Provide You With The Most Benefits Of Hiring A Tax Attorney In Denver

The IRS is cracking down on people who owe money to Uncle Sam. They threaten to garnish wages, sue you and even put liens on the property. If you pay up, it could save you everything. But there’s hope. You can still avoid foreclosure, wage garnishment, and bank levies. We’ve helped thousands of clients just like you escape the clutches of the IRS.

At JM Tax Law, we understand how overwhelming this process can be. That’s why we’re here to help. Our team of highly experienced attorneys is ready to take action on your behalf. So call us now at 720-833-7705!

–          January 31, 2014: Employers must forward W-2s to employees and 1099s to payees

–          January 31, 2014: Employers or businesses must file the 4^th quarter 941 for 2013 and the 2013 940 (withholding return and unemployment tax return)

–          February 28, 2014: Employer’s are to file W-2s with the Social Security Administration

–          February 28, 2014: Payers are to file information returns with the Internal Revenue Service

–          March 17, 2014: Corporate Income Tax Returns are due.  A C Corporation will file an 1120 and an S Corporation will file an 1120 S.

–          March 17, 2014: Due date to file a six month extension for a corporation income tax return.  If an extension is filed, your 1120 or 1120S would then be due on or before September 15, 2014.

–          April 15, 2014: 1040 Individual Income Tax Returns are to be filed with the Internal Revenue Service.  1065 Partnership returns are due.  A limited liability company would file Form 1065 to report income and expenses, and pass through income, gain, loss or deductions with the IRS.

–          April 15, 2014: Deadline to file for a six month extension for your 1040 Individual Income Tax Return of 1065 Partnership Income Tax Return.

–          April 15, 2014: Deadline for 2013 contributions to certain Individual Retirement Accounts and education saving plans.

–          April 15, 2014: Your first estimated tax payment for 2014 is due if required based upon your circumstances.

–          April 30, 2014: 1^st Quarter 2014 941 is due

–          June 16, 2014: Your second estimated tax payment for 2014 is due if required based upon your circumstances.

–          July 31, 2014: 2^nd Quarter 2014 941 is due.

–          September 15, 2014: Third estimated tax payment is due if required based upon your circumstances.  If you filed an extension for your corporate income tax return, such return is due.

–          October 15, 2014: 1040 individual income tax returns and 1065 U.S. Partnership income tax returns are due if an extension was timely filed with the Internal Revenue Service.

–          October 31, 2014: 3^rd Q 2014 941 is due.

Please note that your business may have other requirements such as the payment of federal tax deposits.  Your depositing requirements are based upon your withholding tax liability and can differ.  Thus, if you have any questions regarding your 941 tax deposit requirements, please call our office.

A Denver tax attorney at The McGuire Law Firm can help you with the above requirements, or other tax issues and questions that you may have.  We work with both individuals and businesses regarding their tax obligations and tax planning.

Contact our law firm to schedule a free consultation with a Denver tax attorney!

Form 433A OIC is the financial statement that an individual, including a self employed individual would use when submitting an Offer in Compromise to the Internal Revenue Service.  This form, is not to be confused with Form 433A, which the Internal Revenue Service information collection statement for individuals and self employed individuals.

Form 433A OIC requests personal information from the taxpayer regarding name, address, contact information, employment information and ownership in any business.  In addition to this personal information, the form requests information regarding the taxpayer’s assets, income and expenses.  For example, the taxpayer must state information regarding their checking and savings accounts, retirement accounts, investment accounts, personal property, vehicles and other assets.  Further, the taxpayer must stated their total income, which includes: wages, interest, distributions, net business income, alimony, pensions, social security and any other source of income.  This income is then reduced by the taxpayer’s expenses to calculate the taxpayer’s disposable income.  When reviewing the taxpayer’s expenses, the IRS does establish standards for allowable expenses, known as the national standards for items such as food, clothing, housing, utilities, vehicle operation & ownership costs and out of pocket health care costs.  Other expenses the taxpayer may have may or may not be an allowed expense when calculating the taxpayer’s disposable income.  For example, generally, credit card payments which are unsecured debt would not be an allowable expense.  Further, amounts paid by the taxpayer that are in excess of the allowed standard may not be allowed by the Internal Revenue Service.  Therefore, it is not uncommon for the Internal Revenue Service to find a higher disposable income for the taxpayer than the taxpayer feels is their disposable income.

The 433A OIC assists the taxpayer in calculating their equity in assets by breaking the assets down into categories and stating the amount of the deduction a taxpayer can take for certain assets.  For example, the taxpayer may receive a 20% reduction in the fair market value of their home because the IRS takes into consideration the value of the home under a “fire sale value.”  Further, a taxpayer may be able to receive a 30% reduction in the equity of their retirement account because the IRS does take into account that the taxpayer would need to pay taxes on the account if the account were liquidated.

Thus, in short, Form 433A OIC is used to help calculate a taxpayer’s offer in compromise amount by helping the taxpayer calculate the equity in assets and disposable income, which are the figures used by the IRS to calculate a taxpayer’s offer amount.

John McGuire is a Denver tax attorney at The McGuire Law Firm and has submitted many offer in compromises for individual and business taxpayers.  Mr. McGuire is an experienced tax attorney and has significant experience in working with the IRS Offer in Compromise Unit.

Contact The McGuire Law Firm to speak with a Denver tax attorney and schedule a free consultation.

Form 2848 is titled Power of Attorney and Declaration of Representative.  Form 2848 must be filed with the Internal Revenue Service for an attorney, certified public accountant or enrolled agent to represent a taxpayer before the Internal Revenue Service.  A different form, or another power of attorney will not work.

Form 2848 requests the name of the taxpayer and the taxpayer’s identification number.  If the power of attorney was for an individual, the identification number is generally going to be their social security number.  If the power of attorney is for a business, the identification number is going to be employer identification number, which is the EIN.  Thereafter the address and phone number of the taxpayer is stated and the name, address, CAF number and other contact information of the individual or individuals who are to be representatives is stated.

Under the Matters Section, you will state the type of tax or matter description, form number and periods for which the representative is authorized to act for on behalf of the taxpayer.  For example, if a tax attorney was representing an individual on 1040 Individual Income Tax issues for years 2008 and 2010, you would state, “Income, 1040 and 2008 & 2010” in the matters section.  If a tax attorney was representing a corporation the type of tax or matter description would likely be Income, employment and unemployment, and the associated form would be 1120, 941 and 940 respectively.  If you are sure there is only a single period at issue, than you state only this period on the 2848.  However, if you are unsure or feel there may be other issues, it is best to give your representative broader authority and thus maybe you state a number of tax periods, such as 2000-2013 to ensure the authorization will allow your representative to discuss the issues with the IRS.

Certain acts such as signing a tax return must be specifically designated to your power of attorney on the Form 2848 or such power will not be given to your power of attorney.  You may also delete or withdrawal certain powers by stating such on the Form 2848.

To execute Form 2848, the taxpayer will sign, print their name and date at the top of page 2.  If the taxpayer is a business, the individual signing the power of attorney, must also stated their title within the business.  Your representative can be a number of people or professionals, but those most commonly on the power of attorney and with the most general authority to act on your behalf are attorneys, certified public accountants and enrolled agents.  Your representative will complete their portion below where you have signed and the power of attorney is ready to be filed with the Internal Revenue Service.

Form 2848 can be filed with the IRS CAF Unit, which is a general unit that then notes the representatives authority for the taxpayer, or you can file the Power of Attorney with a specific individual such as a revenue officer, appeals officer or an offer in compromise examiner.  Form 2848 can be mailed or faxed to the Internal Revenue Service.

As a tax attorney, John McGuire has acted as Power of Attorney on behalf of many taxpayers to represent them before the IRS and resolve their tax debts and/or tax issues.  If you have a matter before the IRS please contact our law firm to speak with a Denver tax attorney.

Contact our office and schedule your free consultation with a tax attorney!  Offices in Denver, Colorado and Golden, Colorado.

–          1^st Quarter covers January through March and is due April 30^st

–          2^nd Quarter covers April through June and is due July 31^st

–          3^rd Quarter covers July through September and is due October 31^st

–          4^th Quarter covers October through December and is due January 31^st (following year)

On the form you will state: the number of employees, total wages paid, federal income tax withheld, social security tax withheld and Medicare tax withheld.  Additionally, the employer will stated the Federal Tax Deposits that have been made during the quarter and thus the remaining balance if any when the tax return is filed.  An employer will have depositing requirements that are dictated by the tax liability, and a look back period.  Generally, the employer will be required to make the federal tax deposit each time payroll is paid, on a monthly basis or payment can be made with the return.  If the employer is a monthly depositor the deposit is due on the 15^th of the following.  For example, a monthly depositor would need to make the deposit for October on or before the 15^th of November to be in compliance.

The penalties for failing to timely make the federal tax deposits and/or timely filing the 941 tax return can be quite severe.  The failure to file penalty is 5% per month or a portion of a month that the tax return is late, and can be assessed up to 25%.  The failure to timely deposit penalty is generally 10%, but may depend upon how late the federal tax deposit was made.

A 941 tax debt to the Internal Revenue Service is a very serious matter.  Our Denver tax attorneys have worked with many clients who paid the net payroll to their employees but did not pay the taxes over to the Internal Revenue Service.  The reason why a 941 tax liability to the IRS can be so severe is that in addition to the business owing the tax, the individual business owners can be responsible for the trust fund portion of the 941 debt through the Trust Fund Recovery Penalty.  The Trust Fund Recovery Penalty is a “penalty” whereby the taxes withheld from the employee’s paycheck can be personally assessed to the willful and responsible parties, which is generally the business owners.  The trust fund portion is the social security and Medicare tax, and federal income tax that was withheld from the employee’s pay check.  The business owners or other responsible parties can be held personally liable for this portion of the tax debt and the IRS can collect from the both the business and the individual parties at the same time.

You can calculate the total trust fund amount from a quarter by reviewing the 941 tax return.  If you add the total federal income tax withheld to 50% of the social security and Medicare tax, this amount is the total trust fund for such quarter.  Of course, if deposits were made, the trust fund actually due or that an individual may be exposed to, would be less.

Due to the severity of the 941 taxes, our Denver tax lawyer recommends that all business owners understand the process of how these taxes are paid and when the deposits and tax returns are due.  The Internal Revenue Service also has instructions for the 941 tax return, which may be of help.

Contact The McGuire Law Firm to speak with a Denver tax lawyer and schedule your free consultation!

The Section 752 Treasury Regulations define the term “liability” by referring to the term “obligation.”  The term “obligation” is defined as any contingent or fixed obligation to make payment without regard to whether the obligation is otherwise taken into account for purposes of the Internal Revenue Code.

Below are examples of obligations:

–          Short Sale Obligation

–          Debt through a loan or note or other contract obligation

–          Tort obligation

–          Pension obligation

–          Derivative financial instruments- forward contract, an option or options, futures contracts

For the purposes of Internal Revenue Code Section 752 and in the context of a partnership, an obligation is a liability if, or when and to the extent that the obligation: creates or increases the basis of any obligor’s assets (including cash); gives rise to an immediate deduction to the obligor; or, allows for an expense that is not deductible in computing the obligor’s taxable income and is not properly chargeable to capital.  In Revenue Rule 88-77, the Internal Revenue Service ruled that unpaid expenses and accounts payable of a cash method partnership were not partnership liabilities or obligations.

For partners to share an IRC Section 752 liability, the partnership must be the obligated party.  If for example, another individual or entity is obligated and thus the obligor, the liability would not be considered a partnership liability unless an agent-principal relationship exists between the obligor and the partnership.

Under Section 1.752-5 of the Federal Treasury Regulations, a liability is an obligation to the extent that either: the obligation is not a Section 752 liability or the amount of the obligation exceeds the amount taken into account when incurring the obligation.  For these purposes the amount of the obligation is the amount a willing assignor would pay to a willing assignee in assuming the obligation via an arm’s length transaction.

Recourse Liability: A liability is treated as recourse to the extent any partner or a related person bears the economic risk of loss for the liability.  A related person is defined in Regulations Section 1.752-4(b).

Non-Recourse Liability: A liability is treated as non-recourse liability to the extent that no partner or related party bears the risk of economic loss for the liability.

A Denver small business attorney at The McGuire Law Firm can assist you and your partnership in understanding what constitutes a partnership liability, the type of liability and the impact of such liability.  Mr. McGuire holds an advanced degree in taxation, which is applied to business issues given the close relationship of business and tax.  Law offices in Denver  and west metro.

Contact The McGuire Law Firm to speak with a Denver small business attorney and schedule your free consultation.

In regards to sources of tax law and authority, the law may come from constitutional cases and other case law, the Internal Revenue Code (IRC) and treasury regulations (proposed, temporary and final regulations).  Treasury regulations may come about through legislation when Congress specifically requests a regulation to complete or “fill out” a statute, or due to interpretive need because the treasury does have the authority to prescribe all needful rules and regulations for enforcement of the Internal Revenue Code.  In general, the treasury regulations can help to explain the IRC and provide guidance regarding the interpretation of the IRC.

One question or issue analyzed by a tax lawyer is: How much deference should the courts give to the treasury regulations?  The Chevron case answered this question whereby the court established a 2 part test to determine the validity of a federal agency regulation.  First, you look to see if Congress has directly addressed the specific and precise question that is at issue.  If a statute is not ambiguous, then a regulation cannot impose a rule contrary to the language of a statute and such is the end of the matter.  Second, if the statute is in fact ambiguous, the courts may not disturb an agency regulation unless the regulation is arbitrary and capricious, or manifestly contrary to the statute.  The regulation must only be a reasonable interpretation, but need not be the best interpretation.

A Denver tax lawyer at The McGuire Law Firm can assist you with your tax matters and in analyzing the tax implications of certain situations and transactions.  A tax lawyer can read the IRC and federal treasury regulations, understand the implications of the law and apply this law to your circumstances and questions.

You can contact The McGuire Law Firm  via phone or email John@jmtaxlaw.com to schedule your free consultation with a Denver tax attorney.

Form 433A: Form 433A is an individual collection statement, and can be considered an individual financial statement.  The Internal Revenue Service requires individuals to complete this statement if the individual is requesting an installment agreement, and owes over a certain amount of money or the taxpayer wishes to pay a certain amount.  This collection statement requests the necessary information the IRS uses to make a determination and provides the IRS with information that can be used to enforce collection of the tax through a bank levy, wage garnishment or seizure of assets if necessary.  Form 433A asks for information such as: name, address, employer, ownership interests in businesses, bank account information, retirement and investment account information, real property ownership and leases, car ownership and leases, personal property, wages and other income and, expenses.  Further, if an individual is self employed, pages 5 and 6 of the 433A request information regarding the businesses assets and income.

Form 433: Form 433B is a collection information statement for a business.  The IRS would require that a business complete a Form 433B if the business owes taxes and is requesting an installment agreement.  Multi member LLCs, partnerships and corporations would complete Form 433B.  Form 433B requests the name and address of the business, individual owners, ownership percentage, business bank account information, assets owned and leased by the business and business income & expenses.

Form 656: Form 656 is the form used when submitting an offer in compromise to the Internal Revenue Service.  On Form 656 you state the taxpayer’s name, tax periods you are requesting to settle, the reason for the offer in compromise, the offer in compromise amount and terms for payment of the offer in compromise amount.  Additionally, you can state your extenuating circumstances on Form 656 and where you will obtain the monies to pay the tax settlement amount.  Form 656 is submitted with your offer in compromise application fee and the initial offer in compromise payment.

A Denver tax lawyer at The McGuire Law Firm has prepared many forms for clients to resolve our clients tax debts and tax issues.  Mr. McGuire is experienced in preparing these forms and discussing the forms with our clients and the Internal Revenue Service.

Contact The McGuire Law Firm to schedule a free consultation with a Denver tax lawyer!