When is a Collection Due Process Hearing Available?

A taxpayer has the right to a collection due process hearing with the Internal Revenue Service Appeals Office under certain circumstances.  This hearing can be very beneficial to a taxpayer in terms of preventing enforcement action such as a bank levy or wage garnishment and by a means to establish or propose an agreement with the IRS such as an installment agreement or offer in compromise.

The video below has been prepared to provide information as to when a taxpayer may be able to request a collection due process hearing.  If you are experiencing any issues with the IRS, you can speak with a tax attorney, by contacting The McGuire Law Firm.   As a tax attorney John McGuire has assisted many individual and business taxpayers before the IRS, including via collection due process hearings with the IRS Appeals Office.

Denver IRS Tax Attorney

IRS Appeal Rights

What are my rights as a taxpayer?  What appeal rights do I have regarding IRS actions or decisions?  These are common questions a taxpayer may have when a tax liability is owed to the IRS and the taxpayer is in the collection process with the IRS.  The information below has been provided for general information purposes.  If you owe taxes to the IRS and/or the IRS is attempting to collect the tax liability, it is highly recommend you speak with a tax attorney regarding a resolution to the matter.

Many IRS collection actions can be appealed to the IRS Appeals Office.  The appeals office is a separate office from IRS collections and is supposed to make independent decisions apart from IRS collections.  You can review Revenue Procedure 2012-18, which provides more in depth information regarding the IRS appeals’ office independence from collection.

The appeals office follows two main procedures regarding appeal action.  These two procedures would be Collection Due Process (often referred to as CDP) and Collection Appeals Program (CAP).

A Collection Due Process Hearing would be available under the following circumstances:

  • The IRS Filed a Notice of Federal Tax Lien
  • The IRS Issued a Final Notice of Intent to Levy
  • The IRS Issued Notice of Jeopardy Levy
  • The IRS Issued a Notice of Levy on Your State Tax Refund
  • Post Levy you request a hearing

A Collection Appeals Program would be available under the following circumstances:

  • Before or after the IRS files a Notice of Federal Tax Lien
  • Before or after the IRS levies or seizes your property
  • Upon the termination or proposed termination of an installment agreement
  • Upon the rejection of an installment agreement
  • Upon the modification or proposed modification of an installment agreement

A Collection Appeals Program (CAP Appeal) will generally result in a quicker appeals decision and as stated above is available for somewhat of a broader set of circumstances.  However, one should not that you cannot go to court after the CAP Appeal if you disagree with the CAP decision.

Can I represent myself?  This is a common question, and yes, just like in any court matter you can represent yourself, but you may want to consider speaking with a tax attorney if you are not experienced in IRS procedure and tax law. You can also be represented by a family member, or if you are business, a full time employee can represent the business or partners and/or officers of a business can represent the business.

The above article has been prepared by John McGuire of The McGuire Law Firm.  Mr. McGuire’s practice focuses primarily in taxation, including the representation of both individual and business taxpayers before the IRS.

IRS Appeal Rights Denver Tax Attorney

 

Embezzlement or Fraud Involved With 941 Taxes

Embezzlement or theft may be a more frequent issue faced by small and medium sized businesses than many people think.  Often office managers or employees will improperly take money or assets from a business.  Although, perhaps not as common as an employee misappropriating monies or assets, I have seen professionals, such as the businesses CPA embezzle or steal money, which when done is typically a much higher dollar amount and more damaging to the company.  One means by which I have witnessed a CPA or professional embezzle monies from a business is through the employment tax (941 tax) process whereby federal tax deposits are paid to the IRS on a weekly or monthly basis.  Below I have provided examples of this embezzlement or fraud scheme, which hopefully can prevent some business owners from falling victim.

One situation whereby I have witnessed a CPA or office manager involved with theft or embezzlement from a company was when the CPA or office manager was preparing the 941 employment tax returns and in charge of making the federal tax deposits.  The scheme was conducted under the following facts & circumstances.  The corporation would run payroll and net payroll checks would be paid to all employees and officers.  A payroll report was provided to the corporation stating gross payroll, net payroll and the total employment tax liabilities.  The correct amount(s) were withdrawn from the corporation’s bank account to pay the tax deposits, but the deposits were not paid to the federal government or state agencies.  The deposits went to another account, usually an account under the control of the third party responsible for the embezzlement or fraud.

Thus, when looking at the bank statements, payroll records and 941 tax returns, everything would appear ok.  The net payroll was paid to employees and the appropriate amount was being withdrawn for tax deposits.  The internal books of the business would be in line.  When preparing the 941 returns, the correct return was provided to the necessary parties or officers for review and signature, but then a zero ($0) 941 was filed or no 941 was ever filed at all.  The business owners can be personally responsible for the trust fund portion of the 941 tax!

You may be asking yourself, how does the IRS catch on, or why did the IRS not catch on?  The IRS will catch on, because in all likelihood the business must issue correct W-2s to employees so employees can file their individual returns.  Eventually, the IRS will see that the W-2s are not matching up with the 941s and the federal ta deposits, but this could easily occur 12-24 months after the fact and thus the fraud could have been ongoing for 24-36 months.  Furthermore, if the individual responsible for the fraud also receives the IRS notices and is responsible for IRS contacts, knowledge to the business owners could be further delayed.

As a business owner, what can you?

  • Making the actual federal tax deposits yourself is the safest manner to prevent this fraud or embezzlement
  • If you do not make the deposits, make sure you obtain receipts of the deposits paid through eftps.gov and check these deposits against the bank withdrawals and applicable documents
  • Make sure the 941s are accurate based upon payroll and ensure they are filed. If filed and a balance is due, you would receive a notice within 15-60 days.
  • Make sure you are receiving all IRS and tax notices.

If you or your business have been the victim of theft or fraud through a similar 941 scheme, please feel free to contact The McGuire Law Firm to discuss your options with the IRS.

CPA Theft CPA Embezzlement

IRS Audit Tip On Mileage Deduction

If you take mileage as a deduction on your income tax return, the IRS audit tip below may help you.  Many individuals will claim mileage as a non-reimbursed employee expense on Form 2106, or if self-employed, on a Schedule C, or the deduction may even be stated on another business income tax return.  Most individuals know that to substantiate the mileage deduction they need to keep a mileage log stating where they drove, the total mileage and other information such as the business purpose for the travel.  What many individuals may not be aware of is that the IRS may also request them to verify the total mileage driven on their vehicle with third party records.  This issue is discussed below in greater detail.

Recently, I was involved with an individual income tax audit with a client over multiple periods of 1040 Schedule C (self-employed) filings.  The individual drove a decent amount in their business and had taken the mileage deduction on multiple vehicles that were used for business purposes.  The individual had maintained mileage logs for each vehicle and properly claimed the deduction on their schedule C.  During the audit, the IRS examiner requested that the individual obtain maintenance records to substantiate the total miles driven in each vehicle during the year.  This request was not to produce a mileage log of business miles driven, but records from oil changes and other maintenance records to show and verify the total number of miles, personal, business and commuting, over the course of the year.  For example, the examiner wanted to see the report from Grease Monkey stating the total mileage on the vehicle and be able to track and substantiate the mileage driven to see if the business miles claimed appeared reasonable and within the total mileage driven on the vehicle.

After the above incident, it is apparent the IRS is not only requiring a mileage log, but some form of 3rd party document to verify that the miles claimed are in line with the actual miles driven.  This being said, in addition to maintaining a mileage log, it is apparent that taxpayers taking the mileage deduction would be best served by maintaining all reports and maintenance records to verify their mileage.  Remember this the next time you take your car to the shop for an oil change or any repair!  It is probably best to even make a copy of the maintenance records and maintain the document with your mileage log and other tax related documents.  Tell your mechanic to keep the receipt clean!

John McGuire is a tax attorney and business attorney at The McGuire Law Firm.  Mr. McGuire’s practice focuses on tax issues before the IRS, tax planning, business transactions and tax implications to his individual and business clients.

Denver Tax Attorney Denver Tax Lawyer IRS Tax Attorney

 

Can The IRS Refile a Tax Lien?

Can the Internal Revenue Service refile a Notice of Federal Tax Lien?  This is a very important question if in fact the IRS has filed a tax lien on you or your business.  The answer, of which, greater detail is provided below, is yes, the IRS can refile a tax lien.  The article below has been prepared by John McGuire, a tax attorney in Denver, Colorado at The McGuire Law Firm.  Please remember to always discuss your tax issues and related questions with your tax attorney or tax advisor.

Some background and overview will assist in answering the question above and general procedures followed by the Internal Revenue Service.  A statutory lien arises when a taxpayer does not pay a tax debt after demand has been made.  If no notice of federal tax lien is filed, the duration of a statutory lien will depend only upon the collection statute.  When the Notice of Federal Tax Lien is file, the statutory lien is impacted by such lien notice.  A statutory lien is always extinguished when the collection statute expires, but a statutory lien can also be released through self-releasing lien language on the Notice of Federal Tax Lien.  The self-releasing lien language may apply even if the collection statute was extended, or perhaps suspended.

The main policy behind a self-releasing lien is to ensure the government’s compliance with certain laws.  Under Internal Revenue Code Section 6325, the IRS must issue a lien released within thirty days of the liability becoming legally unenforceable or the liability being paid.  The trigger for a self-releasing lien will coincide with the initial collection statute expiration date, which helps to ensure that the IRS property releases the tax lien within the period of time mandated by law.

When it is determined there is a need to continue the statutory lien and the Notice of Federal Tax Lien, Form 668Y is used to notify creditors (and the public) that the statutory lien and Notice of Federal Tax Lien remain in full force.  It is very important to note that the refiling of a tax lien can only occur while the tax liability can be collected upon, meaning the collection statute has not expired or the collection statute has been extended or suspended.  The IRS does not have to refile the lien though, even if the collection statute is open. Generally, the IRS will only refile the liens when there is a need to preserve the attachment of the statutory lien to certain assets and maintain priority lien position amongst other creditors.  When the lien notice is refiled Internal Revenue Code Section 6323(g) the IRS’ lien position is preserved.

All this being said, what is the refiling period?  The time the IRS has to refile a notice of Federal Tax Lien has a beginning and end date.  The refiling period is a 12 month period.  This one year period the IRS has to refile the tax lien is the one year period ending 30 days after the ten-year period following the assessment of the tax for which the lien was filed.  For example, if the tax was assessed on April 15, 2010, the refiling period would be April 16, 2019 through April 15, 2020. In short, the IRS has until 30 days after the collection statute expiration date to refile the lien.

The above article was prepared by John McGuire of The McGuire Law Firm.  As a tax attorney and business attorney, Johns practice focuses primarily on tax issues before the IRS, tax related opinions & advice and business transactions.

Denver Tax Attorney Denver Tax Lawyer IRS Tax Attorney

Can I Plead The 5th Amendment Before the IRS

Can I plead the 5th during the course of my communications with the Internal Revenue Service?  This a common question I am asked by clients and taxpayers who may be under an IRS audit, IRS debt matter or other related tax issue.  The article below has been prepared to provide general information regarding this matter, and it is recommended that you consult your tax attorney regarding the disclosure of information to the IRS.

The 5th Amendment of the United States Constitution holds that a person should not be compelled to be a witness against themselves.  Thus, it is possible to plead the 5th Amendment in certain tax proceedings if answering a question would incriminate the summoned individual.  However, what a taxpayer should understand is that information, documents and other related evidence that has been produced voluntarily by the taxpayer (or another witness) who has been summoned, can be used against the taxpayer even if the information would be incriminating.

Internal Revenue Code Section 7602 authorizes the IRS to summon taxpayers and other third parties to testify as well as provide records, documents and information.  Although a summoned person can plead the 5th amendment regarding an inquiry or question that may tend to incriminate them, as stated above, this does not apply to documents that may have already been voluntarily provided to the IRS.  This is so because the government did not compel the summoned person to produce the information when the information was voluntarily produced.  In certain circumstances the actual act of producing and providing documents can incriminate an individual because the mere act of providing the documents is an admission that the documents and information actually exist.  Whether or not the actual act of production would incriminate an individual would be based upon the facts and circumstances of the actual case at hand, but, the person may have a valid argument using the 5th Amendment privilege against producing existing documents that were voluntarily created.

What about third parties who may have received information or documents from the individual that is asserting their 5th Amendment privilege?  If a taxpayer has transferred information and documents to a third party, the IRS can summon such individual, and the taxpayer cannot argue the 5th Amendment to prevent the summoned party from disclosing documents and information to the IRS.  This is because the 5th Amendment is personal and therefore only the taxpayer can assert the privilege.  That being said, what about when the taxpayer provides information to their tax attorney?  If the taxpayer would have been able to avoid producing the records prior to transferring them to their tax attorney, the attorney-client privilege will prevent the IRS from summoning the attorney given the records were transferred to obtain legal advice.

The above article has been prepared by John McGuire from The McGuire Law Firm.  Mr. McGuire is a tax attorney whose practice focuses primarily on tax issues before the IRS, tax law & planning and business matters.

Denver IRS Tax Attorney

IRS Offer in Compromise Resource Page

The article below has been prepared to act as an IRS Offer in Compromise resource page whereby individuals can obtain necessary information regarding an IRS Offer in Compromise.  Please note, this information is not legal advice and should not supplement the advice of a tax attorney or tax professional.

What is an IRS Offer in Compromise?

An offer in compromise allows a taxpayer to settle their tax debt with the Internal Revenue Service for less than the total amount of tax owed.  Generally, the IRS will accept an offer in compromise if the offered amount by the taxpayer is the most the IRS could collect from the taxpayer within a certain period of time.

Offer In Compromise Pre Qualifier Tool

The IRS has an Offer in Compromise Pre Qualifier tool that can be very useful to taxpayers wondering if they would be eligible for an IRS Offer in Compromise.  The pre qualifier tool initially asks the taxpayer questions related to tax return filings, estimated payments and other tax payment & filing issues as well as bankruptcy (click for initial questions).  These issues could dictated whether or not a taxpayer is even eligible to submit an IRS Offer in Compromise.  Thereafter, the Offer in Compromise Pre Qualifier Tool asks financial questions related to income, expenses, assets, asset values and loans.  These financial questions break down a taxpayer’s equity in assets and disposable income which are the major factors considered by the IRS when accepting or rejecting an offer in compromise.

IRS Offer in Compromise Form

Form 656 is the form submitted to the IRS when submitting your offer in compromise.  Form 656 states the taxpayer’s information, the tax types and periods of which the taxpayer is attempting to settle, and perhaps most importantly, the offer in compromise amount and terms for payment.  In addition to Form 656, the taxpayer must submit the proper financial statement.  An individual taxpayer will submit Form 433A OIC, and a business taxpayer will submit Form 433B OIC.  If an individual has ownership interests in a business, the individual would likely need to file Form 433B for such business.

Where To Submit Your IRS Offer in Compromise

Your offer will initially be submitted to one of two offer in compromise units, which are in Memphis, TN and Holtsville, NY.  Where you live, will determine the office where you will file your offer.  The offer in compromise booklet provides the correct address based upon where you live.

What Decisions can the IRS make regarding my Offer?

The IRS can either accept, reject or return your offer.  Acceptance, of course would be preferred!  If the IRS rejects your offer, they may reject the amount, but agree to a larger amount and thus you may still be able to settle your tax debt.  You can also appeal the rejection by filing Form 13711.  The IRS will return an offer if, for example, the taxpayer is out of compliance.  You do not have appeal rights on a returned offer.

What Information is Public?

The IRS does make certain information regarding offers public.  Click, “information” for addresses of IRS offices with information open to public inspection.

Publication 594

IRS Publication 594 discusses the IRS collection process and may be useful to you as you are considering submitting an offer in compromise to the IRS.  Generally, submitting an offer to the IRS acts as a hold on enforcement.

If you have questions regarding the IRS Offer in Compromise process or your ability to settle a tax debt, you can discuss these issues with a tax attorney at The McGuire Law Firm.  A free consultation is provided to all clients.

IRS Offer in Compromise

Streamlined OVDP by Denver Tax Attorney

What is the Streamlined Offshore Voluntary Disclosure Program (OVDP)?  Simply put, the Streamlined OVDP is a program established by the IRS that may be considered “shortened” or “simpler” than the normal OVDP, and has a reduced or lesser penalty of 5% in comparison to the OVDP.  Certain criteria must be met to be eligible for the Streamlined OVDP, one of which is that the taxpayer must show the failure to report the assets and income was non-willful.  That being said, the IRS would define non-willful conduct as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of good faith misunderstanding of the requirements of the law.”

If an individual is eligible for the Streamlined OVDP the scope and effect of the streamline procedure is as follows:

The taxpayer must file amended tax returns, including all of the required informational tax returns (8938, 3520, 926 etc.) for each of the three most recent years for which the tax return due date has passed. For example, if it is May 20, 2015 and Joe Taxpayer has filed his 2012, 2013 and 2014 1040 tax returns, but failed to report all gross income due to foreign financial assets (and may have failed to file the FBAR), Joe would amend his 2012, 2013 and 2014 1040s to include the necessary income from the foreign financial accounts.  In addition:

  • The taxpayer must also file FBARs for the most recent 6 years the FBAR was due and should have been filed. FBAR is filed by filing FinCEN Form 114 online, which was previously TD F 90-22.1.
  • The taxpayer must pay the necessary offshore penalty, which is currently 5% for the Streamlined OVDP. The total amount of tax due when including the necessary income in gross income, interest and the streamlined offshore penalty should be remitted when filing the amended tax returns.

 

Now that we know the procedure for the streamlined program, how is the 5% penalty calculated?  The offshore penalty of 5% is calculated by taking 5% of the highest aggregate balance (or value) of the taxpayer’s foreign financial assets that would be subject to the offshore penalty for the years covered by the tax return and FBAR period.  The highest aggregate balance is determined by taking the year-end balances and year-end asset value(s) of the foreign financial assets that would be subject to the offshore penalty for the applicable periods of tax return and FBAR filings.  The highest value for a single year, for the applicable years would then be subject to the penalty.

 

What assets are subject to the 5% offshore penalty?  If a foreign financial asset should have been reported on an FBAR, but was not, the asset is subject to the penalty.  An asset can also be subject to the 5% offshore penalty even if the asset was reported, but gross income from the asset or in respect of the asset was not included in the taxpayer’s gross income.

 

If you have failed to report foreign financial assets and/or income, a tax attorney at The McGuire Law Firm can represent you before the IRS and assist you with your obligations.  This article has been drafted by John McGuire, a tax attorney in Denver, Colorado with The McGuire Law Firm.  Mr. McGuire’s practice focuses primarily on tax matters before the IRS, tax planning & related issues and business transactions.  You can schedule a free consultation with a Denver tax attorney by contacting The McGuire Law Firm.

OVDP Denver Tax Attorney

IRS Supporting Document Request

Taxpayers may receive a IRS Supporting Document Request from the Internal Revenue Service requesting supporting documents for certain items, issues or positions taken on a tax return.  Common issues of which the IRS would request a taxpayer support could be IRS Filing Status.  For example, if a taxpayer filed head of household, the IRS may want documentation to verify the dependent and elements that allow a taxpayer to claim head of household.  Furthermore, a common document request by the IRS is to verify children and the related elements that are necessary to claim certain tax credits.

Generally the taxpayer can compile the necessary records and documents, and forward to the Internal Revenue Service via mail and the document request is not necessarily an audit whereby the taxpayer would meet with an examiner.  If the taxpayer after reviewing the necessary requirements and elements realizes they should not have claimed a certain filing status or taken a specific position on the tax return, they can agree with an assessment of tax that would have occurred had the taxpayer not claimed a certain status, dependent, related credit or other issue.

The video below has been prepared a tax attorney at The McGuire Law Firm Denver Tax Attorney to provide additional information regarding the IRS requesting additional documents to support positions taken on a tax return.

John McGuire is a tax attorney in Denver Colorado representing clients before the Internal Revenue Service on matters such as IRS tax audits, IRS tax debts, United States Tax Court Cases and other tax disputes.  Additionally, John works with many small and medium sized businesses from a business start up and business formation, to contractual matters and the eventual sale of a business or business interests.  If you need to speak with a tax attorney or business attorney, you can contact John at John@jmtaxlaw.com

 

Offshore Voluntary Disclosure Program

What is the Offshore Voluntary Disclosure Program?  Often referred to as the OVDP, this program was created to allow taxpayers with foreign financial accounts and interests to voluntarily disclose their interests for a reduced penalty.  Currently the foreign bank reporting requirements require that taxpayers with foreign financial accounts or interests report these interests when the aggregate amount in the accounts exceeds a certain threshold, which is currently $10,000.  This is often referred to as the FBAR.  When taxpayers fail to report such interests, penalties can be assessed by the Internal Revenue Service.  Thus the OVDP provides a means for taxpayers to be in compliance with the FBAR requirements, and reduce penalties that would apply if they do not voluntarily disclose and are eventually caught by the Internal Revenue Service.  John McGuire is a tax attorney in Denver, Colorado with The McGuire Law Firm and has prepared the video below to provide additional information regarding the Offshore Voluntary Disclosure Program.  You can speak with a tax attorney by contacting The McGuire Law Firm and schedule a consultation.