When a business owes payroll taxes to the Internal Revenue Service the liability or exposure goes beyond the business owing the payroll taxes.  When employment taxes are owed to the IRS, the IRS can personally assess individuals from within the business a portion of the employment taxes known as the Trust Fund Recovery Penalty (TFRP).  To assess individuals the TFRP, the IRS conducts a trust fund investigation.  This article has been prepared by a tax attorney to provide information relating to the trust fund investigation process. Contact the McGuire Law Firm to speak with an attorney about the trust fund investigation process.

What is the 941 Trust Fund?

Prior to discussing how the IRS goes about their trust fund investigation, it is important to understand what the trust fund is.  The trust fund amount is the amount of social security and Medicare tax and the federal withholding tax withheld from an employee’s paycheck.  This amount is deemed to be held in “trust” by the IRS to be paid over to the Department of Treasury so the individual receives credit for the withholding.   The IRS takes the trust fund amount very seriously, hence why they can personally assess and collect the trust fund separately from the corporation, LLC or entity that has accrued the underlying the 941 or payroll tax debt.

When is the Trust Fund Investigation Conducted by the IRS?

First and foremost, for the IRS to conduct the trust fund investigation there must be a 941 tax liability.  That being said, once a revenue officer is assigned to collect the employment tax debt from the business entity, one of the first steps the revenue officer takes is to begin the trust fund investigation.  Thus, the trust fund investigation will generally be initiated within a few weeks to a month of when the IRS revenue officer is assigned whether or not known to the business owners. 

What Does the Trust Fund Investigation Consist Of?

The investigation will consist of the revenue officer reviewing corporate or partnership documents such as tax returns, articles of incorporation or organization, bylaws or partnership agreements, bank statements, cancelled checks and any other information or document that may shed light as to who within the business has the necessary authority and control to be personally assessed.  The IRS revenue officer will also conduct what is called the 4180 Interview.

What is the 4180 Interview?

The 4180 Interview is an interview conducted by the IRS with individuals within the business of which the IRS feels may be willful and responsible parties.  The 4180 Interview asks questions relating to an individual’s role, position and duties within the company, their knowledge and actions taken relating to the payroll tax debt and who else, if anyone could conduct certain actions within the business.  The 4180 Interview provides significant information to the IRS about the individual taking the interview and others within the business who may also need to be interviewed.  Generally, any owner, officer or director within a business would be asked to conduct the 4180 Interview.  The failure to conduct the interview may lead to the IRS proposing the personal assessment of the trust fund to the individual if other information, such as the tax returns or the bank signature cards show the individual held a certain position of control of authority within the business.

What are Common Documents Requested or Obtained by the IRS During the Investigation?

The IRS will almost always request the bank statements, cancelled checks and bank signature cards for the business for the tax quarters whereby the 941 taxes were accrued.  Additionally, the IRS will generally request and review the employment tax returns and income tax returns for the business as well as internal business documents and agreement depending upon what the business may or may not have. 

What Happens After the IRS Has Conducted the Trust Fund Interview?

After the revenue officer has conducted their trust fund investigation, the revenue officer will propose the personal assessment of the trust fund to the individuals the revenue officer has determined is a willful and responsible party for withholding and paying over the withholding taxes.  The IRS can propose the trust fund assessment to one or more individuals within the business and the debt is a joint and several liability meaning that the IRS can collect the full amount of the trust fund from one individual even when multiple individuals have been assessed.  

Can the Assessment of The Trust Fund be Appealed?

Yes, you can appeal the proposed decision of the trust fund.  When the IRS proposes the assessment, you have 60 days from the date of the notice to appeal the assessment.  The appeal will be held with an IRS Appeals Officer and the appealing individual needs to show why they do not have the requisite power, authority and knowledge to be held responsible.  

What Happens Once an Individual is Assessed the Trust Fund?

Once assessed, the trust fund becomes a personal liability to the IRS.  The IRS can file a federal tax lien attaching to the individual’s assets and take collection action against the individual such as bank levies, wage garnishments and the potential seizure of other personal assets.

How Can I Get Assistance with an IRS 941 Trust Fund Investigation?

If a business you own, manage or have any control over owes payroll taxes (941 taxes) to the IRS it is likely you could be subject to the trust fund investigation.  It is recommended you speak with a tax attorney regarding your personal exposure to the trust fund.  A tax attorney can represent you before the IRS prior to and during the 4180 Interview as well as appealing the assessment or resolving the tax due if assessed.  You can contact The McGuire Law Firm for a free consultation with a tax attorney regarding the above matters.

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.

IRS Notice LT 11: Intent to Levy

If you owe taxes to the Internal Revenue Service you have likely received many notices.  While some notices issued by the IRS may be more benign in nature, certain notices issued by the IRS  require immediate attention.  One such notice that should require immediate attention is the notice LT 11.  This article has been prepared by a tax attorney to provide additional information relating to Notice LT 11 from the IRS and the options a taxpayer has if or when an LT 11 is issued by the IRS.

If you’ve received Notice LT 11 and you have questions, get in touch with us to discuss your situation.

What is Notice LT 11?

An LT 11 is a final notice of intent to levy that is issued by the Internal Revenue Service.  The LT 11 is issued after the Internal Revenue Service has issued multiple notices to the taxpayer on a tax balance due and the taxpayer has not satisfied the tax debt or has not established a formal agreement with the IRS.

What Does the Notice LT 11 Mean?

The LT 11 is issued by the IRS as part of the due process afforded to the taxpayer when a tax balance is due.  The LT 11 tells the taxpayer that the tax balance needs to be paid, a formal agreement entered into or a hearing requested by the taxpayer to prevent enforcement action such as bank levies, wage garnishments or the seizure of assets by the IRS to collect the past tax due.  The LT 11 explains that if action is not taken, the taxpayer will be legally open to enforcement action by the IRS on the past due tax balances.

Who Issues the LT 11 or How is the LT 11 Issued by the IRS?

The Notice LT 11 can be issued by automated collection even if a revenue officer is not assigned to your case.  The Notice LT 11 can also be issued by an acting revenue officer if a revenue officer has been assigned and is generally one of the first notices issued to the taxpayer if a revenue officer has in fact been assigned to collect on the tax debt.  A revenue officer may also issue a Notice 1058, which is a very similar notice to the LT 11 and gives both the taxpayer and IRS similar rights.

Can an LT 11 Be Issued to Both an Individual or Business?

An LT 11 can be issued to either an individual or business depending upon who or what owes the tax liability to the Internal Revenue Service.  

What Should I Do If I Have Received an LT 11 From The IRS?

First, you may want to consider speaking with a tax attorney about your tax liabilities and current tax issues.  If you owe a relatively small amount and would have no problem paying the tax debt, it could be best to just pay the tax bill and move on, but again, you may want to speak with a tax attorney or tax professional to better understand the situation.  If you are unable to pay the tax debt in full, you could establish an installment agreement with the IRS and this agreement would act as a hold on enforcement and thus negate the threat of enforcement the LT 11 is issued for.  If you are unable to get under an installment agreement for whatever reason or wish to have more time to consider resolution alternatives, the LT 11 does give the taxpayer the right to request a hearing.  The hearing is known as a Collection Due Process Hearing and if filed within 30 days of the date the LT 11 was issued, the hearing request acts as a hold on enforcement for the tax periods stated on the LT 11 under most circumstances.

What Happens if I Request a Collection Due Process Hearing in Response to an LT 11?

If you request a Collection Due Process Hearing, there should be an automatic hold on enforcement for the tax periods stated on the LT 11 that you are requesting the hearing on.  The hearing request will be sent to the IRS Appeals Office and you will be contacted by an IRS Appeals Officer.  It generally takes 3- 4 months to be contacted by an appeals officer from the date you submit the hearing request.  The appeals officer will establish a hearing or conference date whereby you will be able to submit information such as financial information to propose a resolution to the tax liabilities as opposed to the IRS needing to enforce collection of the tax debt through the seizure of assets.  If you submit an installment agreement request, the appeals officer can make a determination on the installment agreement proposal.  If you decide to submit an offer in compromise, the appeals officer can hold the file in appeals while the IRS Offer in Compromise Unit makes a determination on the offer.  After the hearing has been conducted with the appeals officer, the appeals office will issue a determination as to the outcome of the hearing, which will likely state the alternative collection action that has been agreed upon or that an agreement was unable to be reached at that IRS levies and enforcement action is sustained.

What If I Do Not Respond to the LT 11?

If you do not respond to the LT 11 within the 30 days from the date issued, you are open to enforcement action such as bank levies, wage garnishment and the seizure of assets.  The IRS would not need to provide you any further notice to seize a bank account, take wages or seize other assets.  Thus, it is extremely important to properly respond to the LT 11 and work to have a plan in place to resolve the tax debt or have an agreement established.

If you have received a Notice LT 11 from the IRS, please feel free to contact The McGuire Law Firm to speak with a tax attorney.  The tax attorneys at The McGuire Law Firm have responded to many LT 11s issued by the IRS and assisted many taxpayers in resolving their tax liabilities without unnecessary enforcement action by the IRS. 

Comprehensive Review of Your Rights to a Collection Due Process Hearing Before the IRS

Under certain circumstances and upon the Internal Revenue Service issuing certain collection notices, you have the right to request a Collection Due Process Hearing. Requesting and holding a Collection Due Process Hearing before the IRS Appeals Office can be a very beneficial tool in resolving an outstanding tax liability. The article below provides detailed information relating to a Collection Due Process Hearing.

What is a Collection Due Process Hearing?

A Collection Due Process Hearing is a right afforded to a taxpayer when the IRS has proposed a levy or enforcement action to collect on a tax debt. The hearing allows the taxpayer to work with an impartial appeals officer towards a collection alternative to resolve the debt as opposed to the proposed levy action by the IRS.

When Can a Taxpayer Request a Collection Due Process Hearing?

The most common time a taxpayer has the right to request a Collection Due Process Hearing is upon the IRS issuing a Final Notice of Intent to Levy. A Final Notice of Intent to Levy is also known as Letter 11 (L 11) or Letter 1058 (L 1058). A taxpayer has 30 days from the date on the Final Notice of Intent to Levy to request the hearing.

How Does a Taxpayer Request a Collection Due Process Hearing?

The taxpayer makes the request by filing Form 12153 with the service center or revenue officer who issued the Final Notice of Intent to Levy. Form 12153 is completed with the taxpayer’s general information, the tax periods of which the Final Notice of Intent to Levy was issued upon or included on the notice, the reason the hearing is being requested, and the proposed collection alternative. The hearing request can be faxed and/or mailed to the appropriate party within the IRS.

What Are the Benefits or Potential Benefits of Requesting a Collection Due Process Hearing?

While there are many benefits to requesting a Collection Due Process Hearing, perhaps the biggest or most advantageous benefit is the stay or hold on enforcement action that is afforded the taxpayer when a timely hearing request is filed. When a taxpayer timely requests a collection due process hearing, there is an automatic hold on IRS collection actions such as bank levies, wage garnishments, and other asset seizures. Please note that the automatic stay on enforcement action may not apply when the taxpayer owes 941 employment taxes and the taxpayer is not in compliance with the current quarter. This stays on enforcement, which allows the taxpayer time free of levies and seizures to prepare for the hearing and make a proposal to resolve the outstanding tax liability based upon their current financial circumstances.

Once a Collection Due Process Hearing is Requested, What Can I Expect?

Generally, the taxpayer will receive a notice from the IRS Appeals Office within 30-60 days from requesting the hearing that their hearing request has been received, and an appeals officer will contact the taxpayer once assigned to the case. Thereafter, the taxpayer will receive a notice from the appeals officer assigned calling an initial hearing or conference date. The initial hearing or conference date can be adjusted by the taxpayer, but the taxpayer must contact the appeals officer to reschedule the hearing date. The notice from the appeals officer will generally request additional information the taxpayer wishes to present and produce during the hearing relating to the resolution proposal the taxpayer is proposing. This information could be financial statements and information relating to an installment agreement, an offer in compromise, or perhaps a request that the liabilities be placed in a currently non-collectible status.

What is the Procedure or Process of Working With the IRS Appeals Office?

First, the appeals officer will verify that the IRS has taken all required and legal steps towards a collection of the debt and that the taxpayer has received their proper due process. Further, the appeals officer verifies that they have had no prior involvement with the applicable case or taxpayer and are a true impartial party to the matter. Upon establishing the hearing or conference date, the taxpayer will need to compile the necessary information, documents, and statements to submit to the appeals officer along with their proposal to resolve the tax liability. If the taxpayer was an individual and owed individual income tax, they would draft an individual collection information statement, also known as Form 433A, and compile all of the necessary attachments such as W-2s, income statements for self-employment income, bank statements, current statements for stocks, bonds, 401(k)s, mortgage statements, etc., to verify the income, expenses, and assets stated on the financial statement. If the taxpayer was a business or the applicable individual owned a business, the taxpayer would also need to compile Form 433B, which is a collection information statement for businesses. The taxpayer would use the financial statements and documents to propose an installment agreement or request their liabilities be placed in a non-collectible status. A taxpayer can also request a settlement, known as an offer in compromise, through the hearing process. If a taxpayer requests an offer in compromise through the hearing process, the offer will be submitted by the appeals officer (usually) to the IRS Offer in Compromise Unit, and the appeals officer will maintain the file while the IRS Offer in Compromise Unit makes an initial determination on the offer. If the determination on the offer needs to be appealed to the appeals office and the taxpayer appeals the initial offer determination, the appeals officer will then have control or jurisdiction of the appeal. Inevitably, through the appeals hearing process, the appeals officer will make a determination relating to a resolution of the liabilities.

What Are the Potential Outcomes of Holding a Collection Due Process Hearing?

The outcome or determination issued by the appeals officer through the hearing process may be dictated by the resolution proposed by the taxpayer. If the taxpayer has proposed an installment agreement and the appeals officer and taxpayer agree on the terms and conditions of an installment agreement, the appeals officer will issue a determination that an installment agreement has been reached, and thus, the levy action proposed by the IRS is not sustained. In short, if the taxpayer and appeals officer come to a collection alternative, then the appeals officer will issue their determination stating the agreement that has been reached and that collection action is not sustained. However, if an agreement or resolution cannot be agreed upon with the appeals officer, the determination made by the appeals office will state that the proposed levy action by the IRS is sustained, and thus, the taxpayer is open to enforcement such as levies once the file or case is returned to IRS Collections or the IRS revenue officer.

What if I am Unable to Establish a Formal Agreement Through the Collection Due Process Hearing?

If you cannot come to an agreement with the appeals officer, it does not mean an agreement is not possible. You are still able to enter into an installment agreement or submit an offer in compromise through the IRS Offer Unit, but you would do so outside of the context of the appeals hearing or appeals office. The key would be to work on formalizing or proposing an agreement as quickly as possible after the appeals hearing concludes because, technically, once the matter is back before the IRS Collections Department or the revenue officer, you are subject to enforcement because there is no longer a stay or hold on enforcement.

Comprehensive Review of an IRS Final Notice of Intent to Levy

Receiving any notice from the Internal Revenue Service is enough to make most people’s heart
skip a beat. However, one notice in particular that is issued by the Internal Revenue Service, the
Final Notice of Intent to Levy may strike the most fear and concern in taxpayers and rightfully
so. This article provides detailed information relating to a Final Notice of Intent to Levy and
your rights as a taxpayer.

What is a Final Notice of Intent to Levy?

When a tax liability or tax debt is owed, whether individual income tax or business-related
taxes, the IRS issues a series of notices. The first notices issued by the IRS act more to provide
notice of the liability and request for payment. If the liability is not paid in full or an agreement
reached with the IRS, the IRS will continue to issue notices and the notices increase in severity
eventually leading to the Final Notice of Intent to Levy. The Final Notice of Intent to Levy is the
IRS’ means to provide the taxpayer notice due process and that the government intends to levy
the taxpayer’s property such as bank accounts, wages, sources of income, and even real estate or
other assets if the tax liability is not paid or certain agreements with IRS are not formalized or
proposed. The Final Notice of Intent to Levy issued by the IRS allows the taxpayer 30 days to
make the proper arrangements or proposal to prevent levy or enforcement action. If certain
agreements or proposals are not reached within these 30 days from the issuance of the Final
Notice of Intent to Levy, the taxpayer is then open to levy and enforcement action from the IRS
to collect on the tax debt.

When and How is a Final Notice of Intent to Levy Issued by the IRS?

After the IRS has issued multiple notices regarding the tax liability and the tax liability is not
paid or a proper agreement formalized or proposed with the IRS, the IRS will eventually issue a
Final Notice of Intent to Levy. The timing of issuing the Final Notice of Intent to Levy can
differ depending upon whether the tax liability is with IRS Automated Collections or if the tax
liability has been assigned to an IRS Revenue Officer. If the tax liability is with automated
collections, it may take longer for the Final Notice of Intent to Levy to be issued, and the notice may be
issued from an IRS collection service center. If the tax liability has been assigned to an IRS
Revenue Officer, generally one of the first actions taken by the revenue officer is to issue the
Final Notice of Intent to Levy. While the issuance of the Final Notice of Intent to Levy does not
necessarily mean the revenue officer will immediately levy if they are legally able to, but rather
the IRS wants to have the ability to levy and enforce collection of the tax if necessary and thus
one of the primary reasons the revenue officer will usually issue the notice relatively quickly
once they have been assigned to collect on the tax. In short, the enforcement action available to
the IRS can be used if the revenue officer deems it necessary instead of waiting to find out if the
final notice has not been issued.

What is a Levy Under the Context of a Final Notice of Intent to Levy?

Under this context, a levy is a taking property by the IRS to collect on the underlying tax debt.
This means the IRS takes or seizes your property to satisfy all or a portion of the tax bill. A
common levy for the IRS would be a bank levy or a levy of your wages or income. Under the
context of a bank levy, the IRS will issue a notice of levy to the bank or banks they know or feel
the taxpayer may have a bank account. Upon receipt of the levy notice, the bank is to “freeze” or
hold all of the funds in the bank account or accounts held by that bank up to the amount of the
levy. The bank is to hold these funds for 21 days and then release all of the funds over to the IRS
after the 21 day period unless the bank levy is released or other instructions are provided to the
bank by the IRS. Bank levies can cause problems beyond the taking of the money if the taxpayer
has written checks or other auto payments scheduled as the bank is likely to not honor these
payments and the checks will bounce or payments not go through. The bank levy is generally a
one-time levy, meaning the bank will not continuously hold funds and turn them over to the IRS,
but rather only hold and pay over the funds in the account the day the bank received
and processed the levy. In comparison, a wage levy is generally a continuous levy.
Under the context of a wage levy, the IRS issues a levy notice to your employer and the
employer then withholds a portion (a relatively large portion) of your wages and pays the funds
over the IRS. This wage levy is usually continuous meaning that with each payroll period, your
employer will withhold the levied funds until the levy is either released or the terms of the wage
levy are adjusted by notice from the IRS.

What can be done to Prevent an IRS Levy Once I Have a Received a Final Notice?

Once a taxpayer has received a Final Notice of Intent to Levy from the IRS they are definitely
under the gun to take action to prevent enforcement. Paying the liability in full or establishing a
formal payment installment agreement with the IRS will prevent enforcement such as bank or wage
levies. Formally proposing an offer in compromise that is deemed processable will prevent
levies as well. In addition to the above, the Final Notice of Intent to Levy provides the taxpayer
with what can be a very useful tool of due process, which is the right to request a Collection Due
Process Hearing. The Request for a Collection Due Process Hearing acts as a hold on any
enforcement action on the tax periods included within the Final Notice of Intent to Levy if the
request is filed within 30 days from the date of the Final Notice of Intent to Levy. Upon
requesting a Collection Due Process Hearing, your file or the tax liabilities are sent to the IRS
Appeals Office and a hearing or conference will be scheduled to discuss collection alternatives as
opposed to levies to collect or resolve the tax liability. There is an automatic stay or hold on
enforcement until you have been able to conduct a hearing and communicate with an appeals
officer regarding a resolution to the tax liabilities. If an agreement is reached with the appeals
officer through the hearing, this will act as a hold on enforcement. If an offer in compromise is
submitted through the appeals officer, this will also act as a hold on enforcement until a
determination is reached regarding the offer. If you are unable to reach or propose any collection
alternative with the appeals office that acts a hold on enforcement, the IRS Appeals Office will
issue a determination sustaining the levy action proposed by the IRS and your case will either go
back to general collections or the revenue officer and you will be subject to or “open” to levy and
enforcement, which is not preferred and what you are trying to avoid. It is important to note that
even if you do not request a Collection Due Process Hearing within 30 days from the date of the

final notice, you still have the right to request a hearing called an equivalent hearing with the
appeals office. The biggest difference between the equivalent hearing and collection due process
hearing is that the equivalent hearing does not necessarily act as or guarantee you a hold on
enforcement action, which may be problematic if you request the equivalent hearing and the IRS
moves forward with levy and enforcement action.

Can a Bank Levy or Wage Levy be Released?

The good news is, yes. If the IRS has issued a bank levy or wage levy, you may be able to have
the levy released or partially released. If the IRS has levied your bank account, under certain
circumstances (generally those showing an economic hardship has been created) the IRS can
agree to a full or partial release of the levy. If the IRS agrees to any type of release of the bank
levy, the IRS will issue a notice to the bank either providing for a full levy release or releasing a
portion of the funds the bank is holding pursuant to the bank levy. If the IRS is levying your
wages, the IRS can agree to release the wage levy in full, or the wage levy can be
adjusted/lowered to an amount that you are able to show does not create an economic hardship.

Does the Release or Adjustment of a Levy Mean the IRS Will Not Levy Again?

Not necessarily. If the IRS releases a levy but you fail to fully resolve the tax matter with a
payment agreement or settlement, you could be open to another levy in the future. Generally, if
the IRS is forced to levy again, they may be less likely to release the levy given the prior release
and fact the underlying issues leading to the need to levy have not been resolved.

Receiving a Final Notice of Intent to Levy from the IRS means that you have a tax liability that
needs immediate attention. If you are unable to resolve the tax liability immediately after
receiving the final notice, it is highly recommended you speak with a tax attorney to discuss the
facts and circumstances of your case, your options to resolve the tax matter and the necessary
procedural steps to resolve the matter without enforcement action from the IRS.

Contact The McGuire Law Firm to discuss your tax issues with a tax attorney.

Tax-exempt and/or nonprofit organizations may be required to file form 5471. There are several instances where form 5471 would be required. Often, detailed analysis and thorough understanding of the tax rules are required to determine if there is a filing obligation. Failing to file (including late filing) for form is subject to a $10,000 penalty on a per form per year basis. The penalty may be abated if the taxpayer has reasonable cause for the failure to file the form 5471.

Please consult with a qualified professional when making determinations of form 5471 filing obligations. As you might expect, I am such a qualified professional. Please reach out with any form 5471 questions. Please see my contact information below.

When is a tax-exempt and/or nonprofit entity or organization required to file form 5471?

On its face, it seems unlikely that tax-exempt (TE) and/or a nonprofit (NP) entity or organization would ever be required to file form 5471, but there are a number of occasions where the form 5471 is required to be filed by a TE and/or NP entity .

To understand the form 5471 filing requirement, it helps to know who is required to file form 5471? In a very condensed summary, US persons (individuals, corporations, partnerships, trusts) are required to file form 5471 if they own or control certain percentage amounts of a foreign corporation. Specifically, if a US person owns, controls, purchases or disposes of 10% or more of a foreign corporation, there is a strong likelihood of a form 5471 filing obligation at some point in the lifecycle of the investment. US entities or people who own 10% or more of a foreign corporation are considered US Shareholders for definitional purposes of form 5471 filing obligations. For a more thorough discussion on when a form 5471 is required to be filed, please read this discussion.

US TE and NP organizations are generally organized in one of two ways: either as a state corporation or a trust. Both corporations and trusts are subject to the rules for filing form 5471 as they are specifically considered US persons as defined by the Internal Revenue Code (IRC). As such, TE and NP organizations would be considered US persons for purposes of applying the form 5471 filing rules.

There are a couple reasons why a TE and/or NP organization would own shares in a foreign corporation. First, and the most obvious, is the organization has established an entity in foreign country to carry out its mission. For the vast majority of TE and/or NP organizations, this scenario won’t arise, but could be a possibility. Second, the TE and/or NP has invested in a foreign corporation either directly or indirectly through its fund investments. The most likely instance a TE and/or NP organization would have a form 5471 filing obligation arises when that organization has made investments in non-open market vehicles such as hedge fun or private equity fund investments. Hedge fund, private equity fund and special purpose investments can give rise to form 5471 filing obligations depending on how the investment is structured.

Why should a TE and/or NP organization care if had or has a form 5471 filing obligation?

In short, penalties. Failure to file form 5471 may result in a $10,000 penalty per form per year. Additional penalties may apply depending on category filer the shareholder falls into for form 5471. Filing the form 5471 late is considered a failure to file the form and subject to penalty.

For a large organization, the failure to file penalties can add up to a large amount if it is determined the organization has failed to file multiple forms 5471 over several years.

What can be done to prevent the form 5471 penalty?

Timely filing the from 5471 will prevent a penalty. If the 5471 is already delinquent, the organization may be able to avoid the penalty if it has reasonable cause for its failure to file. Note, reasonable cause is ill defined and a fairly subjective standard in the hands of an IRS examiner.

Where does form 5471 get filed?

Generally, the form 5471 is attached to an income tax return. For a TE and/or NP entity, the form 5471 is generally attached to form 990-T, whether or not the organization has any unrelated business taxable income.

How can a TE and/or NP organization tell if they have a form 5471 filing obligation?

The only sure way to tell if the organization has a form 5471 filing obligation is through a thorough analysis of its investments. Often, it is not obvious that an investment has been made in a foreign corporation, but taking the following steps could help make the determination:

• Step 1
  • Analyze each of the investments the TE and/or NP has made to determine if it is a foreign or US formed entity.
• Step 2
  • If the entity is foreign, determine what type of entity it is and if there have been any US choice of entity elections made.
• Step 3
  • If the foreign entity is a corporation for US tax purposes, determine how much of the entity is owned by the organization. This ownership analysis includes determining the percentage owned of value of the foreign corporation and the percentage owned of voting rights of the foreign corporation.
• Step 4
  • If the organization owns between 10% and 50%, determine how much of the entity is owned by other US Shareholders (those owning vote or value of 10% or more). This analysis helps determine if the entity was a controlled foreign corporation while the organization owned its interest.
• Step 5
  • Determine if the entity owns an interest in other foreign entities.
• Step 6
  • If you have owned this investment longer than the current tax year, analyze when the investment was made and make determinations as to whether there was a filing obligation in the past as well.

What is the point of all these steps?

The point of these steps is to gather enough information to determine if there is, or should have been, a form 5471 filing obligation.

Step 1 details:

In step 1, the entire list of the alternative investments made by the organization should be reviewed to determine if the entity is US or foreign. The best way to make that determination is to work through your investment consultant or inquire directly with the investment company.

Step 2 details:

In step 2, determining what type of entity will help direct what US tax forms may be required. With respect to form 5471, the entity in question would be a corporation for US tax purposes. There are a few ways to get an indication of the type of entity, but the best way is to inquire of the fund. Sometimes reliance on common sense will result in the wrong answer. For example, the fund may be organized as a limited partnership in the Cayman Islands. It seems clear the entity is a partnership in the Cayman Islands. For Cayman Islands legal (and tax) purposes, that entity is in fact, a partnership. What can’t be determined just by the name of the entity is if the US owner (current or past) has made a check-the-box election to treat that Cayman Islands partnership as a corporation for US tax purposes. Certain entities are eligible to choose how they will be treated in the US for US income tax purposes, either as an association taxable as a corporation, a partnership, or a disregarded entity. If the owner made the check-the-box election to treat that Cayman Islands partnership as a corporation for US tax purposes, it should be considered a corporation for determining form 5471 filing obligations.

Inquiry to the fund asking specifically about any check-the-box elections is preferred.

Step 3 details:

At this point the form 5471 determinations can start to be made. Understanding the ownership percentages will allow the owner to determine if they are considered a US Shareholder or not. If the TE and/or NP organization is a US Shareholder then at some point a form 5471 should have been filed with respect to that ownership of the foreign corporation. If the TE and/or NP owns more than 50% of the foreign corporation, there is a clear form 5471 filing obligation for the TE or NPF organization.

Step 4 details:

If the TE and/or NP owns between 10% and 50% of the foreign corporation, certain annual form 5471 filing obligations will be required if the foreign corporation is considered a Controlled Foreign Corporation (CFC). A foreign corporation is a CFC when US Shareholders (US people that own 10% or more) own more than 50% of the foreign corporation. Thus, in the instance a TE and/or NP organization is consider a sub-50% US Shareholder of a foreign corporation, it will need to understand if there are other US Shareholder such that the foreign corporation is considered a CFC in order to determine how to file form 5471.

Step 5 details:

In step five, a determination or inquiry should be made to understand if the foreign corporation owned by the TE and/or NP organization owns an interest in other foreign corporations as subsidiary companies. If so, the TE and/or NP organization may be required to file form 5471 for those lower tier entities as the TE and/or NP organization is deemed to own what its investment owns in proportionate share.

Step 6 details:

Step 6 ensures that the TE and/or NP organization either has or doesn’t have delinquent form 5471 filing obligations.

What happens if a TE and/or NP is required to file form 5471?

If the discovery is made for the current tax year filing and the tax return is still timely and not late, then prepare and file the form 5471. That’s an easy thing to say, but the form 5471 is a relatively complicated form and understanding what needs to be completed on the form should be addressed. Generally, it is best to seek professional advice.

If it is determined that the form 5471 filing should have occurred in a prior year, the prior year return should be amended to attach the form 5471. As discussed earlier, late filed form 5471 is subject to penalty. The penalty may be abated if the failure to file was due to reasonable cause. Work with a qualified professional to determine how best to proceed.

Christopher Stroh, J.D. & LL.M (Taxation)

chris@jmtaxlaw.com

720-784-3296

Christopher has spent the majority of his career focused on the international tax implications for businesses, tax-exempt organizations and individuals who engage in some form of cross-border activity, either knowingly or not!  Christopher advises entities and individuals who need help or advice with the US international tax implications of structuring businesses (US or foreign) or has any sort of non-US activity that may require US tax reporting. In addition to planning and consulting on US international tax items, Christopher helps prepare and advise on all manner of US international tax forms.

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!

When gifting property, gift and estate taxes are two different types of taxes applied to wealth transfers. A gift is when someone gives away property without getting anything back in return. An example of a gift is giving your car to your friend. Estate taxes apply to the transfer of assets after death. The recipient of the asset pays these taxes. The gift tax is a tax that the giver of the asset pays. It is usually charged at a rate of 35 percent. The estate tax is generally set at a higher rate, depending on the size of the estate. For example, estates worth $5 million or more are taxed at 40 percent. Estates worth $10 million or more are taxed 50 percent. This article has been drafted by John McGuire, a Denver tax attorney at The McGuire Law Firm, to discuss tax matters related to gifting.

Gift Tax vs. Estate Tax?

Gift taxes apply to gifts given throughout your life. Estate taxes apply to gifts you give after you die. Both types of taxes are essential for many reasons. For example, you’ll owe gift taxes if you give away $10,000 worth of property while alive. If you give away $10 million worth of property after you die, the government will receive that money as income. That means you’ll owe estate taxes on that amount. These taxes are significant because they affect what you can leave behind for loved ones after you pass away.

Gift Tax Policy

The gift and estate taxes were initially designed to discourage people from transferring wealth to heirs at death. However, many people still try to avoid paying the estate tax. For example, people may give gifts to relatives instead of selling property. Or they may transfer property ownership to shell companies not subject to taxation. These actions allow them to pass on their wealth while avoiding the estate tax.

Estate Taxes

The federal estate tax applies to property transfer at death in the United States. The estate tax is imposed on the first $11.58 million of an individual’s estate. The estate tax rate is 40%. The combined estate and gift tax threshold for married couples filing jointly is $22.4 million.

Real Estate Gift Tax

However, the basis is a little trickier regarding a property with loss. When the donor has a basis in property greater than the fair market value and chooses to transfer it as a gift, the donee does not simply take the donor’s basis. This is a situation where there is a built-in loss at the transfer time. In other words, if the donor has a basis higher than the actual value at the time of the gift, more basis concerns must be considered upon the following disposition.

For instance, if the donor has a basis in the property of $50,000 and the fair market value at the time of the gift is $40,000, the donee will wait until the latter disposes of the property to determine his basis for gain or loss purposes. If the donee later sells the property for $30,000, then under §1015, the donee will take a basis equivalent to the fair market value of $40,000. This would allow the donee to recognize a loss of $10,000 rather than $20,000 if he had taken a basis equivalent to the donor’s basis.

The Capital Gains Tax Over The Long Term

For example, Joe’s parents bought the house when he was born. He will inherit the house if his parents die before him. But, because the house was purchased at a discount, Joe will get less money than his parents paid.

Joe will receive a gift when he sells his house. If he doesn’t give away the house, he will owe taxes on the difference between what he sold the house for and what he gave away. He will also get a larger tax deduction if he gives away the home.

Stay Informed About Gifting

When you give someone else your property, you may not realize there could be unexpected taxes or other financial implications. Before giving away anything, consider what happens when you pass away. You might need to pay inheritance taxes if you leave behind a large amount of money. Or you might need to pay capital gains taxes if you sell the item. If you plan, you can avoid any problems.

You can speak with a Denver tax attorney and Denver business attorney by contacting The McGuire Law Firm.

Qualified charitable distributions (QCDC) allow individuals over age 70 ½ to donate money directly from a taxable IRA without triggering a 10% early withdrawal penalty. This type of contribution is called a “qualified charitable distribution.” A QCDC does not trigger a 10% early withdrawal fee, unlike traditional IRA withdrawals. However, it is subject to income taxes and limits on contributions.

The maximum amount you can contribute each calendar year is limited to $100,000 ($200,000 if married and filing jointly). You must donate within 60 days of turning 70 ½ years old. In addition, you cannot use the funds for personal expenses such as home improvements or college tuition.

Eligibility and Qualified Charitable Distributions

Qualified charitable distributions are particular gifts that allow taxpayers to deduct their gift’s total value without worrying about how much money they spent on it or whether the charity gets taxed on the amount received. They’re often used to help families offset the costs of home improvements, college tuition, and medical expenses.

In prior years, the rules governing QCDs required re-authorization from Congress each fiscal year, and those decisions could be made late in the calendar. As a result, many people waited until the end of the year to ensure they qualified for a QCD.

With the passing of the Protecting America’s Affordable Health Care Act (ACA) or “Obamacare,” the QCD provision is no longer subject to annual re-authorization. Instead, the provision became law as part of the ACA and is now permanently part of the Internal Revenue Service code.

You can plan your charitable contributions and begin reviewing your tax situations early each year. You’ll want to know if you qualify for a QCD before making significant charitable contributions.

If you qualify for a QCD, you’ll receive a 1099 form from the charity indicating your donation amount. If you don’t qualify, you’ll receive a W-2G form from the charity showing what portion of the donation went toward qualifying items.

Tax Benefits of the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides immediate tax breaks for individuals and families impacted by COVID-19. This includes those affected by job loss due to the outbreak, self-employed people whose income drops because of the shutdown, and those who lose wages while working from home. In addition, the law extends unemployment insurance coverage to gig economy workers and expands access to free food assistance programs like SNAP.

Minimum Distributions Suspended

The IRS announced that it is suspending the requirement for people age 70½ to take mandatory withdrawals from their traditional IRAs and Roth IRAs. The move came just days before the deadline for taking those early withdrawals.

This probable relief for many who would’ve had to withdraw money from their retirement account. If you’re one of those folks, don’t worry — you’ll still be able to make gifts from your IRA. But if you’re younger than 70½, you might want to consider making a gift to a Colorado Foundation instead.

New Tax Incentives

The new tax incentives are included in the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act. This bill relieves individuals, families, businesses, and nonprofits during the COVID-19 pandemic.

The $1,200 check you receive will cover basic expenses like food, rent, utilities, and medical bills for most people. However, there are some exceptions. If you qualify for Medicaid or Medicare coverage, you won’t receive a total of $1,200. And if you’re self-employed or work for yourself, you’ll still pay taxes on the money.

But don’t worry about it too much because you can deduct your donations to qualified organizations. So if you donate $500 to charity, you could write off $250.

If you’re eligible for the standard deduction, you can contribute up to $300. If you’re itemizing, you can give away up to $600.

Key Takeaways

Charitable contributions from an individual retirement account (IRA) are qualified charitable distributions. These distributions are treated differently than regular income earned from stocks and bonds. For example, you can deduct up to 50% of your adjusted gross income (AGI) on your federal taxes. However, there are some limitations to contributing to an IRA. Here are three key takeaways about charitable giving from IRAs:

1. You can donate from an IRA without paying taxes. Contributions from an IRA are deductible from your federal taxes. This means that you don’t pay taxes on the money donated. If you donate $5,000 from an IRA to charity, you’ll receive a deduction of $2,500 ($5,000 x.50).

2. Your IRA trustees must report the distribution to the IRS on your tax form. Any contributions to an IRA must be reported on Schedule D of Form 1040, which reports all types of investments held within the IRA. Distributions made from an IRA are reported on Form 1099-R.

3. There are restrictions on how much money can be withdrawn from an IRA each year. For instance, withdrawals are limited based on age. Also, the amount withdrawn cannot exceed what is needed to cover certain expenses like medical costs or college tuition.

Please remember this article is not intended to be tax or legal advice, and you should always consult directly with your tax attorney or tax advisors. You can contact The McGuire Law Firm to speak directly with a tax attorney regarding any of your tax issues.

Typically, a taxpayer will find themselves in tax court after the IRS has issued a Notice of Deficiency.  When the IRS issues a Notice of Deficiency to a taxpayer, the taxpayer has 90 days to petition the tax court.  Generally, a Notice of Deficiency is issued to a taxpayer when a taxpayer is audited and the IRS is assessing additional tax.  A taxpayer may be able to make a “small claims” case or claim if the liability that is being disputed is below a certain threshold.

The video below has been prepared by a tax attorney at The McGuire Law Firm to provide additional information related to US Tax Court.  If you have questions relating to the US Tax Court, please feel free to contact The McGuire Law Firm to discuss these matters with a tax attorney.  The McGuire Law Firm has offices in Denver, Colorado and Golden, Colorado for your convenience and offers a free consultation.

Contact The McGuire Law Firm to schedule a free consultation with a Denver Tax Attorney.