Special Tax Benefits for Military Families

Posted by Wetenkamp on July 13, 2012 with 0 Comment

051207-N-3019M-010 — image via reddogreport.com

In the good ol’ United States of America, we love our servicemen and women and we try to treat them right. One way we honor them is by making sure that the Tax Code is chock-full of tax benefits especially for the military. And it’s not just fluff; these are good, practical benefits that are routinely acknowledged by the IRS.

Here are some popular tax benefits available to active members of the US Armed Forces:

Some unreimbursed moving expenses are deductible in connection with a permanent change of station
Military pay while serving in a combat zone is not taxable
Military personnel get automatic extensions on many IRS deadlines, including the filing of a personal income tax returns, which could also delay collection of back tax debt
The cost and upkeep of uniforms is deductible under certain circumstances
Joint returns don’t need to be filed by both spouses when one is deployed (kind of a lame benefit, but a benefit nonetheless)
Certain unreimbursed travel expenses available to reservists traveling away from home
Subsistence allowances paid to ROTC students participating in advanced training are not taxable
Certain expenses associated with transitioning back to civilian life (i.e., job search) are deductible
FREE TAX PREP!

See IRS Pub 3 (Armed Forces’ Tax Guide) for more information.

Can the IRS Seize your Property Without Notice?

Posted by Wetenkamp on July 12, 2012 with 0 Comment

If you fail to comply with the individual mandate under Obama’s new health care law — if you can’t afford to purchase insurance or you don’t get around to it — you may be responsible for paying a special “tax” that will be enforced by the Internal Revenue Service. And as I mentioned previously, the only real enforcement tool available to the IRS will be to capture any refund(s) that may be due to you to offset your tax debt.

Of course, if it’s actual taxes that you owe, you probably won’t be so lucky. The IRS can be quick to issue a levy and seize your property (wages, bank account, and other assets) and there are really only a couple prerequisites. Number one, the IRS must send you a bill. And number two, you fail to pay the bill.

However, it is important to know that the IRS notice showing the amount of tax owed doesn’t have to actually be received. As long as the IRS sends it to the last known address of record, then they are in full compliance with the law. Also, there are some scenarios in which the IRS is not even required to give notice (listed in IRS Pub 594):

collection of the tax is in jeopardy (i.e., the CSED is almost up)
state tax refund levy
levy served to collect the tax debt from a federal contractor
seizure of unpaid employment taxes

My experience is that most people who owe the IRS know they owe, or at least know there is some kind of problem. But it is always disturbing when the IRS comes knocking without sending a nastygram to tip the taxpayer off.

"Collection Statute Expiration Dates"

Posted by Wetenkamp on July 11, 2012 with 0 Comment

Many of our tax relief clients know from personal experience that the IRS can very persistently chase taxpayers around for years trying to collect what is owed. But the Statute of Limitations (SOL) prohibits the IRS from pursuing a taxpayer indefinitely. Once the SOL is up, the tax debt “expires” and the IRS can no longer collect the debt.

The SOL for collection of a back tax debt is 10 years from the date of assessment. Since each tax period/form is filed and assessed on different dates, each tax period normally has a different expiration date. In the jargon of IRS Collections, this is called the Collection Statute Expiration Date (CSED). See IRS Pub 594 for further details.

In a perfect world, a 2008 tax return is filed and assessed in April 2009 and then expires in April 2019. However, there are a number of events that can toll (or extend) the SOL on a back tax debt:

IRS investigation of a request for Installment Agreement
IRS investigation of an Offer in Compromise
Appeals determination
If you live outside the US for a period of 6 months or more
Bankruptcy (SOL tolled while the automatic stay is in effect)
IRS Collection Due Process hearing
Tax Court Proceeding
Request for Innocent Spouse Relief

Some of these procedures can last several months, which automatically adds the same number of months to the SOL. Anytime a taxpayer is considering one of the listed procedures, he/she should also take into account how it will affect the CSEDs. An experienced tax attorney can help with this important analysis.

The IRS "Bad Seeds"

Posted by Wetenkamp on July 10, 2012 with 0 Comment

Why is it so fun to hear about IRS employees cheating the system from the inside? Every warm-blooded taxpayer gets some kind of morbid satisfaction from the irony of these stories: the tax man, charged with the responsibility of enforcing the tax laws to a tee and collecting every last dime from others, bends and/or ignores the rules when it comes to his own tax obligations. The same person who issues a wage garnishment on Christmas Eve lacks the integrity to pay his own fair share.

This week we have been treated to two such stories.

One is the story of Domeen Flowers, a 48-year-old former IRS mail clerk who allegedly abused her access to taxpayer records, stealing several identities which she used to apply for credit cards. Good luck cracking down on identity theft, TIGTA and Commissioner Doug, if you can’t even keep good tabs on your own.

The other story involves Jacynthia Quinn, an IRS veteran of 30 years, who appears to have doctored receipts and bills in an attempt to substantiate her $95,000 in deductions (of which only $215 was allowed). Her response: she didn’t know she would be required to provide proof of her deductions! And Quinn was no mail clerk; she knew the rules and wilfully violated them.

One of the big barriers to voluntary compliance in other countries is corruption and distrust of the system. It’s nowhere near as rampant here as it is in countries like Italy or Greece, but these tax crimes by IRS insiders can’t be good for the IRS’ image.

www.mwattorneys.com

IRS Will Have to Get Creative in Enforcement of Obamacare

Posted by Wetenkamp on July 9, 2012 with 0 Comment

According to the Treasury Inspector General for Tax Administration (TIGTA), Obamacare will result in the most expansive set of tax law changes this nation has seen in 20 years. But from a collections standpoint, is it anything more than a bunch of new words?

Obama’s health care reform law charges the IRS with enforcement, but makes them do so with their “bare hands.” The IRS normally has a vast array of collection tools, or “weapons” at their disposal to enforce this nation’s tax laws. If we don’t pay, the IRS begins with threatening letters, then imposes penalties and interest on unpaid balances. Next, the IRS moves on to levies, liens, and wage garnishment. And if this doesn’t result in full payment of what is owed, the IRS will pull out the heavy artillery such as the civil suit or seizure of personal and real property. It is the threat of these weapons that convinces many taxpayers to seek professional help from a tax relief attorney or, if circumstances warrant, to just to find a way to pay it.

But the new health care law does not endow the IRS with the same collection tools they have always relied on. In fact, the only way the IRS is permitted to collect the individual mandate “tax” is by capturing a taxpayer’s refund, and even that will lose its effect once people figure out how to adjust their withholdings and avoid a big refund. I guess the pen will have to be the IRS’ new weapon — after all, they can always send those threatening letters.

Talk That (tax) Talk

Posted by Wetenkamp on July 7, 2012 with 0 Comment

Tax talk can be a little dull. Any time a tax attorney is presented with an opportunity to blog about Rihanna, he takes it.

This last week Rihanna was in the news for suing her accounting firm (as well as two accountants personally) for mishandling her fortunes, failing to advise her properly regarding her finances, failing to file tax returns which put her in the middle of an IRS audit, and for taking excessive commissions. The actual legal grounds for her suit are breach of contract and negligence.

Rihanna hired the Berdon accounting firm when she was just 16 years old (that’s 7 years ago, if you’re not keeping track). What I don’t understand is why it took her until September 2010 to fire these guys, knowing they were taking advantage of her celebrity and her wealth. If what she says is true, this accounting firm was paying itself commissions on gross revenues she earned from lucrative tours. For example, Berdon took 22% of the revenues from Rihanna’s “Last Girl on Earth” tour, leaving the diva with a 6% pittance. See full story here.

This litigation will be interesting to follow.

San Diego Couple Busted for Alleged Tax Fraud

Posted by Wetenkamp on July 5, 2012 with 0 Comment

Dr. James Francis Murphy, 51, and his wife Denine Christine Murphy, 49, from the San Diego area, ran a successful medical practice. But while Dr. Murphy was providing pain relief to his patients, he must have been sneaking toxic doses of tax relief for himself. According to the indictment, their crimes were “corrupt interference with the administration of IRS laws and presenting false claims to the United States for fraudulent income tax refunds” over a period of about 10 years.

This story illustrates the fact that there is no one demographic for those who would cheat the system by either failing to pay their fair share or by scamming the government out of money by way of false refund claims (or both). Many of the criminals as of late tend to be trafficking in stolen identities straight off the streets of Tampa, FL. But there are plenty of sophisticated “professionals” who are scam artists too.

One would expect that the more sophisticated tax criminals would engage in elaborate, complicated transactions to suppress their tax problems and make a buck, but Mr. and Mrs. Murphy preferred to keep it simple. Their master plan included the following basic components:

hide income
claim huge unjustifiable refunds
pay taxes with checks that bounce
threaten IRS employees

See full story here.

If you have to call TAS, at least dial the right number

Posted by Wetenkamp on July 3, 2012 with 0 Comment

switchboard — photo via gretachristina.typepad.com

The Taxpayer Advocate Service (TAS) has two main phone numbers.

877-ASK-TAS1 (established in 2004)
877-777-4778 (NTA toll-free line, established in 1998)

The NTA toll-free line is the more prominent number on the TAS website. It is the number found under the “contact us” link. And this is the same number listed on the IRS website. However, the primary difference between these two numbers may surprise you. ASK-TAS1 is staffed by TAS personnel, but the NTA toll-free line is actually staffed by IRS customer service personnel! See the latest TIGTA report for more information. These representatives are charged with vetting out the cases that they believe will “qualify” for TAS help.

TAS describes itself as an “independent organization within the IRS” — really an oxymoron, don’t you think? Tax professionals have long questioned their independence. When you call TAS, you are literally talking with the IRS (unless you dial the right number). I do not recommend calling TAS for help with your tax problems. For high-quality tax relief, it is important to select an experienced tax attorney that can give objective, unbiased attention to your tax matter.

The Supreme Court’s recent decision to characterize the ObamaCare individual mandate as a tax will have significant repurcussions on efforts to simplify the tax code and the tax collection “business.” In other words, it’s just going to complicate things. That’s what happens when domestic policy initiatives are enacted through this nation’s tax laws. And just as the tax code tends to be the “catch all” for implementing new policy, the IRS has consequently become that agency we constantly turn to for help with enforcing it. It must be like achieving a new position at work with new responsibilities, but no pay raise!

Under Obama’s health care reform initiative, if you do not purchase health insurance, you will be charged a “tax” that will be enforced by none other than the Internal Revenue Service. Besides adding complexity to the tax code, this new tax will be adding work to an already overburdened federal agency. The IRS has been asked to take on new responsibilities before, so there should be no question as to whether or not it will be up for the task. However, the costs will be staggering. The IRS will have to implement new procedures, hire new staff, train old staff, and otherwise do what is necessary to enforce the new health care tax.

With more and more people piling up tax debts that they can’t afford to pay, the private tax relief firms may be the only ones that stand to benefit from all this.

The Tax Battalion - IRS Tax Relief Attorney Blog