How Much Help is your Tax Preparer?

Can your tax preparer help you if you run into trouble with the IRS? It depends on what kind of trouble, but generally your everyday, average tax preparer cannot do everything necessary to resolve your tax issues.

If your tax preparer is either an enrolled agent, certified public accountant, or tax attorney, then you will likely have all the authority you need in your corner to address whatever the problem might be. Although attorneys are often better suited for assisting with collection, litigation, and tax court matters. The IRS sees these three categories of tax professionals as having “unlimited representation rights.”

But if your tax preparer does not possess one of these three credentials, then the amount of help he can provide is very limited. Tax preparers who are not EAs, CPAs, or attorneys (also known as “unenrolled preparers”) may only represent taxpayers on issues having to do with returns that they personally prepared. And even then, if the issues escalate to the level of the IRS Collections Department, IRS Appeals, or beyond, they must turn it over to an EA, CPA, or attorney (or the taxpayer may try to handle it on his own). If the dispute cannot be resolved administratively and makes its way up to US Tax Court, then it should certainly be handled by an experienced tax attorney, but it can also be handled by an EA or CPA who has been admitted to practice before the Tax Court. And, of course, the taxpayer still has the option to go at it alone as a “pro se” litigant in Tax Court.

It is one thing to say that someone has the authority to help you, but it is quite another thing to say that they have the skills, experience, and desire to help you. I have met a number of Enrolled Agents that are qualified to represent their clients in audits and IRS disputes, but who simply do not choose to do that as part of their business.  And those who make the decision to pass on those types of cases, never gain the necessary experience and skills to represent a taxpayer competently in such matters. Unenrolled preparers are even less likely to include IRS representation as part of their repertoire.

Although nobody anticipates getting into trouble with the IRS, and it can’t really be predicted, these are a few things to keep in mind when selecting a tax preparer. And according to the IRS, November is a good time to make that decision.

Best IRS phone scam – 844-271-8465

I recently received an email from a tax client with a very serious tax problem that my tax law firm has been handling. My tax client was very concerned that the Internal Revenue Service left him a threating message on his home telephone number. The telephone number that my client was to call back to speak with the IRS was 844-271-8465. Since my client actually has a serious tax problem, and since he was smart enough to hire a tax attorney to fight for IRS tax relief, he rightfully contacted me. Based on the stage of his tax problem, he wouldn’t be receiving any calls from IRS collections.

I told him that it was likely a scam. He was adamant that it was not. He said that he called the number and it was definitely IRS collections and he hung up immediately. Out of curiosity I called the number. When calling, the number did sound like the IRS collection line to the untrained ear. The call started with a “welcome to the IRS” prompt. “Push one for a business issue, two for a personal issue” or something of the like. The recording sounded like it was actually recorded from a phone calling the Internal Revenue Service. Then, the phone went immediately to a person without me needing to push a button. Because I didn’t have to wait an hour or two to speak with anyone, this was a huge red flag that this was not an IRS number.

The person who answered my call had a very thick accent, didn’t introduce themselves or provide me with a federal identification number. The person who answered the phone instantly raised his voice and told me that I owed the IRS and I had to pay him. I found this laughable because I was calling from a blocked telephone number and I didn’t tell him who I was. I asked him for his name, identification number and what Internal Revenue Service collection unit he was in. He fumbled a bit and said, “um … you can call me ‘Jack’”. He also told me that he didn’t have to provide me with his identification number and again demanded a payment.

Based on the absurdity of this joker, I’m surprised that anyone would be duped by this scam. But, apparently some people are indeed being scammed. According to the Treasury Inspector General for Tax Administration, they are aware of nearly 3,000 victims who have collectively paid over $14 million as a result of this type of IRS scam.

The IRS has been warning of such scams for the past couple years now. I think I have had a call or two myself, between other scams to update my computer, or lend money to a Nigerian prince. But this is the first scam that I’ve experienced where the voice prompts for the number imitates the actual Internal Revenue Service collection number voice prompt. I’m sure it’s been going on for a while as the IRS reports that the caller identification for these numbers also reveal that the number belongs to the Internal Revenue Service or other law enforcement.

These scammers may be scary and persuasive if you, like my tax client, actually have a legitimate IRS tax matter you are trying to resolve. However, if you know that you don’t have tax issues you should not be swayed by these scammer’s tactics. If you’re not sure if you have tax problems, this may be the time to confirm whether you have any lingering tax issues. Our tax attorneys are located in Modesto, California and Sacramento, California. We can help you determine if you have a real tax issue or help you get the tax relief appropriate for your situation. Please call us at (800) 454-7043 for your free consultation.

Would you rob the IRS to fund your “before I die” fund?

Reading between the lines, it appears that Frank F. Frink of Washington lost his gamble that the government wouldn’t catch up with his tax crimes until after he left this world on a high note and a pocket full of cash.

Although the IRS is usually slow to pick up on tax evasion and other tax crimes, they do eventually usually catch up to criminal and civil tax shenanigans … it’s just a matter of time. Mr. Frink doesn’t have to report to prison until September for his tax crimes, allowing him time to seek treatment for undisclosed medical issues. If he’s still around in September, he will have to serve a one year prison term for his tax crimes.

My assumption that he wanted to leave this world with a pocket full of cash is based on the referenced medical problems and absurdly bold manner in which he robbed the IRS. Frink plead guilty to filing a false, fictitious and fraudulent tax claim on his 2008 tax return and was sentenced earlier this week. According to the U.S. Attorney’s Office, Frink hired a tax preparer to prepare his 2008 return and calculated he was owed a refund of $7,413. This is a pretty substantial refund for most households these days. However, for Frink, it was not enough. So he sought the help of a witless tax preparer to fund his final days; he went to H&R Block.

After his first tax preparer determine that he was owed a federal tax refund of $7,413, Frink went to an H & R Block branch with bogus tax forms showing that more than $1 million had been withheld in taxes. H & R Block then calculated he was therefore owed a tax refund of $827,117. The IRS issued Frink this windfall and didn’t catch the fraud for some time as he wasn’t criminally charged until September 2012, approximately three years later. Even when the IRS began to investigate Frink’s tax crimes, he continued to spend his generous tax refund.

While Frink may be living on borrowed time and took advantage of the IRS, most taxpayers want to resolve their tax headache without the specter of prison time. If you’re fighting the IRS, and don’t have Frink’s exit strategy, our tax law firm offers a free consultation so you may determine if we’re the right tax attorneys to fight the IRS for you.

Fighting the IRS Alone? You May Have a Fool For a Client

Nancy Cicero had a fool for a client in her fight with the Internal Revenue Service (IRS); she represented herself. Rather than seeking the advice of a tax attorney with the tools and experience needed to successfully fight the IRS; she went it alone, saved a few bucks, and is now a felon awaiting sentencing.

Cicero was found guilty on four counts for illegally claiming more than $3 million in tax refunds on her tax returns for tax years 2005 – 2008. Each count of filing false claims with the IRS carries a maximum penalty of five years in prison and/or fines up to $250,000.

According to the St. Louis Post-Dispatch, while self-represented, Cicero made no real opening statement or closing argument, and asked no questions of witnesses. When the judge would ask her if she wanted to object to the admission of evidence against her, she provided indecisive answers, such as, “I object. It is not my wish. Let the record show it is my wish.”

She should have wished for sound legal advice from her tax attorney. While saving a buck by representing yourself in a fight with the government is a legal right, common sense and Cicero’s predicament is proof positive that not all rights should be exercised. If you find yourself having to fight the IRS, don’t fight them alone, the tax attorneys at Montgomery & Wetenkamp are available to take your call and offer a free consultation.

Tax Day is Around the Corner; Are You Prepared?

Happy Tax Day! Come Monday April 15, 2013, your tax returns are due. Have you prepared? While many people filed their tax returns well before the April 15 deadline because they gave the government an interest free loan and are due a refund; many other people delay filing their tax return or never file a tax return. These people dread Tax Day because they know that they’re going to owe a tax debt once they actually do file their tax return. So they believe it’s better to not even file. This is not the correct approach.

If you are in the group of people who procrastinate filing their return or do not file your tax returns in fear of a tax debt, given the present Internal Revenue Service (IRS) collection regulations, this needs to be the year you fix your tax problem. If you have a filing requirement, you need to either file a tax return or an extension to file by April 15. Simply ignoring your filing requirement will likely cost you more money in the long-run as failure to file monetary penalties are severe.

Eventually, the IRS is likely to catch up with your shenanigans. If you had sufficient income requiring you to file a tax return, such income was likely reported to the IRS. Once your income is reported, even if you don’t file a tax return, the IRS may eventually file a return on your behalf by using the reported income and minimum deductions to assess a liability against you.  Even if your income isn’t reported, taxing entities have been known to use other means to estimate your income to assess a liability against you.

You’re legally allowed to file an extension to file, so use it if you’re not ready to file your tax return. This is a simple procedure. Many taxpayers fail to file a timely tax return. Or, alternatively, they elect to pay undue taxes by claiming the standard deduction simply for the purpose of meeting the tax day deadline because they don’t think they have the time to itemize and calculate the deductions and credits they are entitled to claim. While an extension to file is not an extension to pay, filing an extension and properly preparing your tax return will likely save you money.  You must file your extension by April 15. If needed, filing an extension will generally allow you until October 15, 2013, to properly prepare your tax return.

So you filed your tax return or you are about to file your tax return, and you owe a non-disputed tax debt… what do you do now? Can you pay the debt? If you can afford to pay the debt owed, paying the debt is usually the least costly option after penalties and interest are factored into the equation. But if you’re like most people who end up owing a tax debt, you likely were not expecting to owe a tax debt and it’s simply another debt you cannot afford to pay.

If this is the case, there is one thing to keep in mind: the IRS is not your friend when you owe a tax debt, they are like any other creditor, they need as much money from you as they can get, as quickly as they can get it. Even with the public relations blitz over the past couple years of a kinder, gentler IRS, keep this in mind as your financial situation needs to control the final resolution of the tax debt. Too often I hear from people owing tax debts who agreed to some outrageous payment plan because the IRS required such payment based on their liability owed and disregarded their actual financial situation.

Therefore, it’s important to know your financial limitations. If you truly cannot pay your tax debt, there are options available to you. However, you need to have an organized and systemic presentation of your circumstances to get the appropriate resolution to your tax headache. While the IRS will likely pressure you to pay your debt in full within 90 – 120 days or make payments including penalties and interest over the next five to six years, there are other options available which include petitioning for non-payment of the debt, to settling the debt for less than the amount owed. The point is that there are options available to you and the key is to file your return, and then address the debt within your financial limits, do not ignore it. And, if you need professional assistance, call the tax relief attorneys at Montgomery & Wetenkamp toll free at (800) 454-7043 for your free consultation. We can help you resolve your tax debt.

Court Shoots Down IRS Return Preparer Certification Program

If you follow current events in the world of tax relief and tax preparation, you probably heard about the federal district court decision permanently enjoining the IRS from enforcing its 2011 tax return preparer regulations.  The U.S. District Court for the District of Columbia ruled that the IRS lacked authority to regulate tax return preparer certification programs — 
such authority would have to be granted by Congress.

The IRS Return Preparer Initiative would have required thousands of non-professional return preparers across the country to pass minimum competency exams, pay a fee, and complete minimum education requirements.  In fact, many return preparers did take the exam and pay the fee, all for naught apparently.  The initiative did not seek to regulate the CPA, tax attorney, or enrolled agent.

Large tax prep companies like Intuit (TurboTax), Jackson Hewitt, and H&R Block disapprove of the decision; you can probably guess why.  They will tell you that it hurts taxpayers who unwarily hire incompetent return preparers, but we know their only concern is the bottom line and weeding out as much competition as possible.  Of course, the “mom & pop” tax prep firms see this court decision as a big victory.

Some believe that voluntary certification is a better solution.  Voluntary certification would still raise the bar for tax preparers and the industry in general, but in a more “free market” sort of way.  Tax preparers would decide on their own to certify, or not to certify.  And individuals seeking tax help would decide on their own to hire a certified preparer, or take their chances with someone else.

At this point it is not clear whether the IRS will appeal the decision.  Read the IRS official statement here.

Right to Representation Threatened by IRS Carelessness

Didn’t I just write about taxpayer rights?  Didn’t I say something about how the IRS is not interested in protecting taxpayer rights?  The Treasury Inspector General for Tax Administration (TIGTA) released a report today that exposes IRS’ disgregard for taxpayers’ right to representation.  I usually like being right, but not when it’s something like this that threatens access to tax relief.

There are procedures in place that are supposed to ensure that the tax attorney, or other representative, is kept in the loop with regard to certain key actions.  For example, an IRS Revenue Officer is not supposed to contact the taxpayer directly when there is a Power of Attorney on file, and a Revenue Officer is supposed to send copies of correspondence to the authorized representative.  However, the procedures are not being followed by some revenue officers and the procedures are not being enforced by some key management personnel.

I realize this is not a direct denial of the right to representation, but any action (or inaction) that would weaken the benefits associated with this right is troubling and should be viewed as a significant threat.  TIGTA’s report mentions that nobody complained about the infringements on their right to representation in any of the sample cases in it’s study, and I find this equally troubling.

Know Your Taxpayer Rights

Taxpayer rights are listed in Publication 1 as follows:

  1. Privacy and Confidentiality
  2. Professional and Courteous Service
  3. Representation
  4. Payment of Only the Correct Amount of Tax
  5. Help with Unresolved Tax Problems
  6. Appeals and Judicial Review
  7. Relief from Certain Penalties and Interest

There are actually 8 taxpayer rights, but the first one is a complete farce.  The first is entitled “Protection of Your Rights” in Pub 1, and it is described as follows:

IRS employees will explain and protect your rights as a taxpayer throughout your contact with us.

If that were really true then you would not need right #3 — you would never need a tax attorney — because the IRS would have your back every step of the way.  You wouldn’t need right #5 because there would be no unresolved tax problems.  And you wouldn’t need rights #6 or #7 because the IRS would always get it right the first time.

The truth is the IRS’ top priority is to collect 100% of the tax due, not protect your rights.   And they will make this abundantly clear throughout your contact with them.  That’s why the most important right is to have professional representation — just as tax relief is not automatic, your taxpayer rights are not self-enforcing.

Your 2012 and 2013 Federal Tax Returns Are At Risk!

Today, National Taxpayer Advocate Nina E. Olson reported to Congress the issues that the Taxpayer Advocate Service (TAS) will focus on during the upcoming fiscal year. Olson, expressed particular concern, among other issues, about the taxpayer impact of expired and expiring tax provisions.

“The continual enactment of significant tax law and extender provisions late in the year has led to IRS delays in handling millions of taxpayers’ returns and caused many taxpayers to underclaim benefits because they did not know what the law was … Because of the magnitude of these challenges and the uncertainty about such a large number of important provisions, the 2013 filing season is already at risk. The 2013 filing season is likely to pose problems for many (if not most) taxpayers and the IRS if Congress does not address the many provisions that have already expired or soon will.” Wrote Olson.

You may be asking, “How does this affect me?” Well, if Congress doesn’t act soon you may need to hire an experienced tax attorney to fight for tax relief. As my Federal Income Tax professor repeatedly ordered in law school: “Read on, read on, read on…”.

The following provisions are among the tax provisions that expired at the end of 2011:

  • The so-called “Alternative Minimum Tax patch.” As result, an estimated 27 million more taxpayers are subject to the Alternative Minimum Tax this year.
  • The deduction for state and local sales taxes.  About 11 million taxpayers claimed this deduction last year.
  • The deduction for mortgage insurance premiums.  About four million taxpayers recently claimed this deduction.
  • A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.

According to the IRS website, Congress is likely to extend many of these and other expired provisions retroactive to January 1, 2012, but neither taxpayers nor the IRS know for sure what will happen and taxpayers, therefore, cannot make educated tax planning decisions now.

In addition to the provisions that expired at the end of tax year 2011, an even larger number of provisions are set to expire at the end of 2012. Such rules include the Bush-era cuts in marginal tax rates, reduced tax rates on dividends and long-term capital gains, various marriage penalty relief provisions, certain components of the child tax credit, the earned income tax credit, and the adoption credit, and the moratoria on the phase-outs of itemized deductions and personal exemptions.

IRS Thinks Levy Power Needs More Teeth

One of the methods the IRS uses to collect past-due taxes is the levy. It has the authority to work with third-party financial institutions to seize cash from your bank account (bank levy) or with employers to intercept your paycheck (wage garnishment or wage levy).

Not all levies work the same. The levy on wages is “continuous.” In other words, once the levy is issued, the employer is instructed to submit payments to the IRS each pay period until the tax liability is paid in full or until the IRS otherwise releases the levy.  But the bank levy doesn’t work this way.  A bank levy affects only the funds that are in a specified account when the levy is issued.  If the IRS wishes to levy the account at a later date, it must submit another bank levy.  A levy on self-employment income works much like a bank levy in the sense that it is not continuous.  The levy on self-employment income is submitted to the third-party payor, and that person or company has a one-time obligation to turn over everything that is owed to the delinquent taxpayer.

The non-continuous nature of some levies is seen as an impediment to collections.  However, the IRS is trying to get this changed legislatively.

The Small Business/Self-Employed Division recognized the barriers the ROs [Revenue Officers] face when taking levy action and has taken some corrective action.  The Small Business/Self-Employed Division is preparing a legislative change proposal to expand continuous levies on additional income sources.  I.R.C. § 6331(e)  and § 6331(h) permit the continuous levy of salary and wages and certain other payments from the time of issuance until the levy is released.  The IRS has identified four additional categories of non-wage income that could be levied in a manner similar to wages and salary: non-employee compensation, rental income, royalties, and fishing boat proceeds.  These income sources totaled approximately $1.4 trillion for Tax Year 2009.  The proposal would expand the continuous levy authority to these additional categories of income and may increase revenue and assist taxpayers in becoming compliant through the use of additional collection options.

~ TIGTA Report #2012-30-007

It is beyond me how this change would “assist taxpayers.”  Taxpayers don’t need any “additional collection options”!  If this becomes law, it would be a major victory for the IRS.

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