IA Set-Up Fees

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The IRS charges a one-time processing fee for setting up an installment agreement (IA). The fee is $105 for most people. However, if you agree to a “direct debit” IA — meaning that you allow the IRS to automatically debit your bank account each month — then the IRS charges only $52. This option is attractive, but some taxpayers are reluctant to give the IRS their bank information and would rather just send them a check. The IA set-up fee is even lower ($43) if your income is below the IRS’ poverty threshhold.

The IRS is usually willing to take the set-up fee out of your first payment as long as the payment amount is sufficient to cover the fee. For example, if your set-up fee is $105 and your monthly payment is $200, then the IRS will take $105 out of your first month’s payment and apply $95 to your back tax debt.

If you can afford to pay your entire tax debt in 3 months or sooner, then the best option is to obtain a “120 day extension to full pay.” You only have 3 months to pay, but you completely avoid having to pay any kind of set-up fee.

2013 IRS Tax Calendar Now Available

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image via azteccalendar.com

You may pre-order your 2013 Tax Calendar for Small Businesses and Self-Employed (Publication 1518) by following this link to the IRS website or by calling (800) 829-3676.  My experience with IRS customer service personnel on the tax relief line leads me to believe that it would save you a lot of time by just ordering online.  It took me a whole 2 minutes.  You can order up to 5 copies for free and they will be shipped out in December.  The tax calendar is full of useful information, tips, and deadlines.

Don’t like poking holes in your wall?  Publication 1518 is also available in almost every other format imaginable besides a circular stone tablet (I don’t recall this being the case last year):

  1. Online Calendar
  2. “CalendarConnector” Desktop Tool
  3. PDF version
  4. Calendar subscription that will sync up with Outlook (for PC) or iCal (for Mac)

Steven Miller to Serve as Acting IRS Commissioner After November 9th

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We had heard this was coming: the Commish is officially stepping down on November 9th.

Doug Shulman, Commissioner of the Internal Revenue Service, the grand overseer and bestower of tax relief, tax policy, and tax programs good and bad, has served in this post ever since March 2008 when he was appointed by President George W. Bush.  He will be replaced by a “acting commissioner,” Steven Miller until a permanent replacement is named.

Since the position of commissioner is a presidential appointment, we won’t know who the permanent replacement is until after we know the outcome of the presidential election.  Experts agree that whoever it is that fills this position will be coming in at a critical and difficult time.  But there is also agreement among those that know him, that Mr. Miller will do a fine job in the interim.  In fact, one writer believes that Steven Miller will do a much better job with the Whistleblower Program than Shulman ever did.

IRS to Sell Drug Cartel Horses at Auction

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photo via regardinghorses.com

The Zeta drug cartel has a little IRS problem, and it’s no ordinary tax debt.

Zeta had been laundering drug money under the cover of a race horse ranch run by one Miguel Angel Treviño Morales near Oklahoma City.  The Criminal Investigation division of the IRS (CI) went in with other law enforcement to seize the property and arrest the suspects back in May, and now a judge has decided that the property will be sold.  Hopefully CI did not have to brandish any weapons in the raid.  Probably not, since it appears the bust went smoothly and without incident.  The IRS plans to sell 379 horses at auction November 1-3.

CI is a special division of the IRS responsible for investigating financial crimes and criminal violations of the Internal Revenue Code.  CI targets both “legal source” and “illegal source” financial crimes, including narcotics related financial crimes.  That’s why CI would be involved in the activities of drug cartels that occur on US soil.

These Mexican cartel families are so arrogant; they think they are invincible.  They just couldn’t resist using drug references in the names of some of their prominent horses.  Also, they do not appear to have been trying to keep a low profile since their horses were winning major races (and prize money) left and right.

Ironically, the last time I blogged about CI, I quipped (in reference to the fact that they don’t have many opportunities to use their weapons) that they aren’t chasing down drug dealers.  Well, I stand corrected.

Maryland Man gets 10 Months Prison Sentence in IRS Tax Fraud Case

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Who got busted:    Patrick McLaughlin, age 43, of Ocean City, Maryland

Who busted him:

  • Rick A. Raven, Special Agent in Charge, IRS, Criminal Investigation
  • Rod J. Rosenstein, United States Attorney for the District of Maryland
  • Mark W. Crooks and Harry M. Gruber, Assistant United States Attorneys
  • Catherine C. Blake, U.S. District Judge

What did he do:

  • Failure to file corporate tax returns for tax years 2003-2009
  • Failure to pay corporate taxes from 2007-2009
  • Failure to pay employment taxes from 2006-2008 (total $135,348)
  • Failure to file and pay individual income taxes from 2005-2009
  • Grand total: $296,701

What are the consequences:

  • 10 months in prison
  • 12 months of supervised release

Mr. McLaughlin did plead guilty to the above charges in the tax evasion case. I find it interesting that the prison sentence was not also accompanied by some kind of restitution.  Usually the tax evader is also ordered to pay back what is owed. Maybe this part of the tax evasion court case was just left out of the press release.

These are difficult times that we live in, especially for business owners who experience the same cash-flow problems as others, but company tax evasion cases are often on a bigger scale. Some are tempted to cut corners on their taxes, but taking tax relief into their own hands often has tragic results.

Fresh Start Tax Relief Deadline Looms

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The Tax Penalty Relief provisions of the Internal Revenue Service’s (IRS) Fresh Start Tax Relief programs announced earlier this year, have a crucial deadline of October 15, 2012, next Monday. The IRS announced earlier in the year new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest penalties a financially distressed taxpayer faces on an IRS tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties was made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by October 15, 2012.

The penalty relief is available to two categories of taxpayers:

  • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return earlier this year.
  • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

This specific penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until next Monday, October 15, 2012. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Sunday's Political Sermons Will Likely Go Unchallenged

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As part of the growing movement called “Pulpit Freedom Sunday,” approximately 1,400 pastors, preachers, and evangelists across the country will address their congregations this Sunday and talk very candidly about which presidential candidate they endorse.  This is something that could theoretically result in revocation of their churches’ tax-exempt status.  Theoretically.

The religious leaders who participate in “Pulpit Freedom Sunday” on October 7th are hoping the IRS will strike back . . . or at least do something.  They really would like to see a lawsuit, which they see as a necessary step in eventually putting the controversy to rest.  But they won’t need their tax attorney standing by because chances are the IRS will not have any kind of response at all.

The IRS simply does not have the manpower to police these sorts of violations.  Yes, the IRS has their hands full with collections and tax relief cases, but that’s not the problem.  The personnel who used to be responsible for investigating churches no longer have the authority to do so.  New regulations have been pending since 2009, but until they are approved, the IRS is absolutely powerless.

Lots of Whistles Being Blown in Wake of Birkenfeld Payout

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IRS paid fat stacks to Bradley Birkenfeld for blowing the whistle on UBS. Image courtesy of checkngold.com.

As predicted, the recent $104 million IRS whistleblower payout awarded to Bradley Birkenfeld has resulted in an uptick in new whistleblower claims.  So say the tax attorneys who handle these sorts of cases.

And why would you need an attorney to help you “blow the whistle”?  That’s a very good question.  Often times the whistleblower is not 100% fault free himself, as was the case for Mr. Birkenfeld, who spent time in prison for his misdeeds before the IRS made him rich.  Also there’s the fact that the IRS has a reputation for not making good on its promises of remuneration, or taking an inordinate amount of time to do so.  A whistleblower attorney can help cut through red tape almost as effectively as a tax relief attorney can help you resolve tax debt.  The IRS is trying to change its image, however, and the Birkenfeld case has been a public relations “grand slam.”

Apparently these new whistleblower inquiries are not garbage either.  According to one lawyer, people are coming forward with some high-quality information.

IRS Whistleblower Form 3949-A: Reporting Tax Fraud and Filing a Complaint to the IRS

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Maybe it’s because of the recent unprecedented IRS whistleblower payout, but people seem to be eager to turn others in for tax law violations these days.  Nevermind their own tax problems.  Of course most of the inquiries I see come from the estranged spouse or the “friend” seeking revenge.

The best way to report IRS problems involving fraud and other tax law violations is by completing and filing IRS Whistleblower Form 3949-A.  But according to TIGTA, Form 3949-A is too complicated for most taxpayers to be able to complete thoroughly and accurately.  And many are also using the form for something other than its intended purpose.

TIGTA studied a sampling of 530 whistleblower forms 3949-A and identified some serious problems:

  • 27 percent could not be processed because they didn’t provide sufficient details (not surprising since the form asks for things like the social security number and birth date of the person you are reporting)
  • 21 percent were incorrectly used to report identity theft (some IRS service centers were actually instructing taxpayers to use this form for ID theft when, in fact, they should be filing Form14039, the ID Theft Affidavit)
  • Forms that reported “other issues” not covered by F3949-A were often shredded by IRS personnel instead of being forwarded to the appropriate IRS function

 

Can We Trust the IRS with Guns?

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"desk pop" from the movie The Other Guys

TIGTA recently audited and reported on the firearm policies of the Criminal Investigation (CI) division of the IRS and found them to be somewhat lacking.  Usually I like to focus on tax relief, but this has got to be the strangest TIGTA report I have ever seen.  I couldn’t pass it up.

CI special agents are a unique breed, to say the least.  They are like the offspring of two completely opposite carreers: one’s tools are a pocket protector and calculator, and the other’s are a bullet proof vest and concealed handgun.  These are probably guys who really wanted to be FBI or CIA but ended up at the IRS instead.  And, let’s face it, a tax attorney probably sees as much action as they do.  They aren’t chasing down drug dealers; they are apprehending people who cheated on their taxes or who are running from a massive tax debt.  They definitely aren’t firing their weapons on a regular basis, so it’s no huge surprise to me that the firearm policies are subpar.

Their firearms qualification passage rate is pretty high; that’s not the problem.  TIGTA’s report has more to do with CI putting in place consistent policies and consequences.  The scenario that really stood out to me was what to do when a CI special agent accidentally discharges his firearm!  The report states that this is not a common occurence, but according to the report, there are more accidental discharges than intentional discharges!

During fiscal years 2009-2011, there were a total of 19 reported discharge incidents in all of CI; 8 intentional and 11 accidental.  Is is just me or does this report make CI agents look like a bunch of clowns?