REASONS THE IRS MAY AUDIT YOU

Do you think you might be the target of an IRS audit? Know the red flags the IRS looks for that could set you up for an unexpected tax audit.

 

Are you in need of tax services for IRS audit help?

 

A tax audit is when the IRS double-checks your numbers to make sure you didn’t leave anything out of — or add anything in to — your tax return. If you told the truth, the whole truth, and nothing but the truth in your tax return, then you should have nothing to worry about. Even though the IRS often has terrifying connotations, there’s nothing inherently scary or evil about a tax audit.

 

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However, if you consciously cheated the system or have tax debt, you would have reason to be concerned.

 

The IRS uses tax audits to minimize the tax gap. That is, the difference between what the IRS is owed in taxes and what they actually receive. Tax audits may be conducted at random, but generally the IRS chooses taxpayers to audit based on suspicious activity. If the IRS asks to levy your bank account, your funds will be put on hold for 21 days until they deduct the amount of money owed to them.

 

If you find yourself the target of an audit, you will want IRS audit help from a tax professional or an IRS tax attorney. The following are some of the biggest red flags the IRS looks out for that could set you up for an unexpected tax audit.

 

Math Errors

Unfortunately, when the IRS starts investigating your taxes, saying “oops” isn’t going to help you any. The plain fact is, you can’t make mistakes on your tax return, and this applies to everyone who files taxes.

 

That means you can’t accidentally write in a four instead of a nine. Don’t get distracted and forget to add that last zero. While mistakes do happen, you’ve got to double- and triple-check your papers if you’re doing your own taxes.

 

To play it safe, it’s best if you don’t. Hire skilled tax pros to help you and you might not need IRS audit help later.

 

Missing Some Income

One of the easiest ways to end up with a tax audit is to leave out part of your income when you report it on your taxes.

 

Even if you think you’re doing work “under the table” — such as freelance or contract work — the business you’re doing that work for probably submits all of their information to the IRS, which means they already know about that extra hundred dollars you made on the side.

 

Don’t try and trick the system by only reporting the income you think is obvious.

 

Claiming Too Many Deductions

Technically speaking, you can’t claim too many deductions as long as they’re all actually necessary for your business and only for your business.

 

Often people try to write off office space and equipment that they would be using anyway — such as a personal computer — even if they weren’t doing business for themselves. Before you can deduct something from your tax return, you must be able to honestly affirm that you only need that item for your business, and you do not use it for personal applications.

 

Reporting Too Many Losses

If you’re self-employed and filing taxes with a Schedule C, you might be tempted to hide some income by filing personal expenses as business expenses. However, finding too many reported losses on your tax return always arouses suspicion, as the IRS may begin to wonder how your business even stays afloat. Be honest the first time and you may not need IRS audit help later.

 

Claiming Too Many Charitable Donations

If you’ve made significant donations to charitable organizations, then you’re eligible for some well-earned deductions on your tax return. However, make sure your tax report is honest about exactly how generous you’ve been. This should be obvious, but you should not report donations you didn’t actually make. If you don’t have the right documents to back up your claims, don’t claim it.

 

When it comes down to it, all you have to do to stay out of trouble with the IRS is be honest and keep track of your documents. But if you ever do need help with an IRS tax audit, get in touch with Advance Tax Relief in Houston.

 

Contact Advance Tax Relief to Help Deal with Back Taxes

If you have a tax levy on your paycheck or the IRS is threatening you with one, you need a tax professional who specializes in tax debt relief on your side.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

 

Advance Tax Relief is rated one of the best tax relief companies nationwide.

 

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SETTLING IRS TRUST FUND RECOVERY PENALTIES (TAX DEBT)

Small Business Tax Debt 

Fixing Trust Fund Recovery Penalties

 

The public may not be fully cognizant of this, but, the IRS is in the business of processing information and making decisions.

 

It accomplishes this by siloing work on tax returns and accounts. The siloed work is intended to allow the IRS to process and make consistent decisions based on a very large volume of information.

 

The silo works something like this. The IRS has functions it has to complete, such as processing returns, assessing tax, and collecting tax. These functions are divided among operating divisions. The operating divisions are divided up by job functions and positions. The job functions and positions have a hierarchy much as the military does.

 

The job functions and positions require employees to perform specific tasks, with management being tasked with reviewing decisions by lower-level workers and passing information up the hierarchy and lower-level workers performing the actual tasks on cases. The instructions as to how to complete the tasks are set out in job descriptions, performance evaluation materials, and the IRS’s policy manual.

 

NEED HELP WITH OFFER IN COMPROMISE, TAX SETTLEMENTS, TAX PREPARATION, AUDIT REPRESENTATION OR STOP WAGE GARNISHMENTS?

 

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This siloing of the work allows a tax return or account to be handled by several different functions and several different IRS employees. Why is that important? The short answer is that this process dictates how a tax return or account is handled. The shorter answer is that it is how the IRS determines that you owe more taxes, penalties, etc. and whether and how it is going to collect the taxes, penalties, etc. from you.

 

By understanding the workflow, one can also understand how to go about fixing IRS problems. The recent Lambert v. Commissioner, T.C. Memo. 2020-53, court case provides an example of how cases are handled and how the procedural aspects present opportunities for resolving disputes. This court case involves a trust fund recovery penalty and how the IRS determines that the penalty should be imposed.

 

Facts & Procedural History

The facts are simple in this case. The petitioner was the vice president and secretary of a corporation. The corporation had employees and it withheld payroll taxes from its employees’ wages. The corporation failed to remit the withholdings to the IRS timely.

 

The IRS eventually sent a revenue officer to investigate and to collect the unpaid employment taxes. The revenue officer determined that the trust fund recovery penalty should be imposed on the petitioner for his failure to have the corporation remit the withholdings to the IRS (trust fund penalties are imposed by revenue officers in the IRS collections function, not IRS auditors).

 

The IRS eventually issued a lien notice when the trust fund penalty was not paid. The petitioner appealed the lien, which resulted in the present case. It does not appear that the petitioner challenged whether he was subject to the trust fund penalty. Rather, he challenged whether the IRS had followed the law while assessing the trust fund penalty.

 

Manager Approval for Penalties

The petitioner questioned whether the IRS revenue officer obtained IRS manager approval prior to assessing the trust fund penalty.

 

This is a Graev challenge. The term “Graev” refers to the court case wherein the court found that the failure to obtain manager approval for penalties invalidated the penalty assessment. The case involved a penalty that required the IRS to obtain manager approval before assessing the penalty. There have been several court cases for similar penalties that build upon and frame the Graev challenge (here is an example of a Graev challenge that provides further explanation).

 

In the present case, the court summarizes the law for a Graev challenge as follows:

 

Section 6751(b)(1) requires that the  “initial determination” of a penalty be approved in writing by the immediate supervisor of the individual making that determination; the approval must occur before the first time the “proposed adjustments are communicated to the taxpayer formally as part of a communication that advises the taxpayer that penalties will be proposed”.  Clay v. Commissioner, 152 T.C. 223, 249 (2019), appeal filed (11th Cir. Nov. 6, 2019); see also Belair Woods, LLC v. Commissioner, 154 T.C. ___, ___ (slip op. at 15-16) (Jan. 6, 2020) (“[T]he `initial determination’ of a penalty assessment will be embodied in a formal written communication to the taxpayer, notifying him that the Examination Division has completed its work and has made a definite decision to assert penalties.”).

 

In Chadwick v. Commissioner, 154 T.C. ___, ___ (slip op. at 11-17) (Jan. 21, 2020), we held that a TFRP assessed pursuant to section 6672(a) is a “penalty” imposed by the Code to which the requirements of section 6751(b)(1) are applicable.

 

As described in the court case, the Form 4183 is the document the IRS uses to record its decision to assess the trust fund recovery penalty.

 

In this case, the Form 4183 indicated that the revenue officer’s manager had approved the penalty one day before the revenue officer mailed the Letter 1153 to the petitioner to notify the petitioner of the penalty. The court concluded that this notation on the Form 4183 one day in advance of mailing the letter to the petitioner was sufficient to uphold the assessment.

 

In a prior case, Chadwick v. Commissioner, 154 T.C. 5, the court had even concluded that the signature on the Form 4183 on the same date as the Letter 1153 was issued was sufficient.

 

Working Trust Fund Recovery Penalty Cases

As tax attorneys in Houston, we work a lot of trust fund penalty cases. The procedural history of this case provides an outline of how to fix trust fund recovery penalties.

 

The easiest fix is often the best fix. Trying to convince the revenue officer to not recommend the penalty is often the first step. This may include appealing the recommendation with the revenue officer’s manager.

 

If the revenue officer does not agree, one has to try to obtain a copy of the Form 4183 an any case activity record. The Form 4183 and case activity record provides evidence that the penalty should not be imposed.

 

There could be several arguments that could be made based on these records. One would be if there is a Graev challenge, as in the present case. The petitioner in the present case could have saved a significant amount of time and effort by obtaining a copy of the Form 4183 in advance of court.

 

Several other possible arguments for not imposing the penalty are found in the IRS’s policy manual. IRM 5.7.4.5 sets out several factors that are to be considered by the revenue officer in recommending the penalty. These categories address most of the case law that has developed that explains when the trust fund recovery penalty applies. If any of these items are not provided in or supported by what is included in the Form 4183, these items can be raised as an argument.

 

These arguments may be made to the revenue officer, the revenue officer’s manager, on appeal with the appeals officer or manager from the IRS Office of Appeals, or in tax litigation with the IRS attorney or district attorney, or the judge.

 

If the case is assessed and then an IRS lien issued and there was no prior opportunity to make the arguments (for cases where there was no prior appeal), the collection due process hearing can allow the taxpayer to make the arguments to the settlement officer and possibly their appeals team manager. If the collection case ends up being litigated, then the taxpayer can work with the IRS attorney and their district counsel and/or the judge.

 

Separate from this, if there is a hardship, the taxpayer can also enlist the Taxpayer Advocate Service (“TAS”). The TAS caseworker or their manager can get involved in the case.

 

Each of these IRS employees has a hand in, either directly or indirectly, whether the trust fund penalty is assessed, upheld, or collectible. Each employee works in their own silo. As the trust fund recovery penalty passes from one worker to another across these silos, the taxpayer can typically raise these arguments again.

 

It only takes one IRS employee along the way to make a decision in the taxpayer’s favor. Finding and persuading that IRS employee to take action is the key to fixing trust fund recovery penalties.

 

Contact Advance Tax Relief to Help Deal with Back Taxes

If you have a tax levy on your paycheck or the IRS is threatening you with one, you need a tax professional who specializes in tax debt relief on your side.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

 

Advance Tax Relief is rated one of the best tax relief companies nationwide.

 

#FreshStartInitiative

#OfferInCompromise

#TaxPreparation 

#TaxAttorneys

#TaxDebtRelief

#TaxHelp 

#TaxRelief

#BestTaxReliefCompanies

HOW TO REMOVE AN IRS TAX LIEN WHEN SELLING YOUR HOME

You are in the process of selling your house, and your bank alerts you that they found an IRS tax lien, and it needs to be removed for your buyer.

It is not financially feasible for you to pay the IRS lien in full to have it immediately removed.

However, you can still successfully clear the title and sell your house.  

The IRS has a lien removal process that allows us to clear the lien, and the title, and close your sale even if you are only able to pay some, or none, of what you owe.

 

NEED HELP WITH OFFER IN COMPROMISE, TAX SETTLEMENTS, TAX PREPARATION, AUDIT REPRESENTATION OR STOP WAGE GARNISHMENTS?

 

ADVANCE TAX RELIEF LLC

Call (713)300-3965

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The lien removal process begins with IRS calculations based on the amount you will receive from selling your house.

 

The IRS formula includes the following:

 

Sale price of your house.

The amount you owe on your home mortgage.

Closing costs (like real estate commissions).

From the sale price, the IRS deducts the amount you owe on your mortgage along with the closing costs.  After the deductions, the amount you are left with is your home equity.   

 

If your home equity is less than what you owe the IRS, you will be able to pay some but not all of your taxes.  That is not a barrier to lien removal.  The IRS can agree to remove the tax lien even if you have no home equity and cannot pay at all. 

 

Here are two examples, one demonstrating the lien removal process if you have some leftover home equity, the other if you do not:

 

Example #1 – Equity

You owe the IRS $70,000 and have your house under contract at a sale price of $190,000.  Your mortgage balance is currently $150,000, and closing costs will be $10,000.  Your home equity is $30,000 ($190,000 sale price – $150,000 mortgage – $10,000 closing costs).   

 

The IRS will accept $30,000 (home equity) of the $70,000 you owe them and remove their tax lien from the house.  

 

Example #2 – No Equity

You owe the IRS $70,000, and your sale price is $190,000, but you owe $180,000 rather than $150,000 on your mortgage.  Closing costs are still $10,000.  In this case, your home equity is $0 ($190,000 sale price – $180,000 mortgage – $10,000 closing costs)

The IRS will remove their tax lien from your house without any payment to them as you have no home equity.

 

If your home equity is less than the amount you owe the IRS, will accept the equity in exchange for removing the lien.  As the examples demonstrate, the IRS can approve the removal of your tax lien so you can sell your house even if there is not enough home equity to pay them.  IRS just gets what you would have received from the sale.  

 

The IRS does have a formal application process we need to follow for acceptance of your payment amount on the lien.  

 

The process for lien removal requires the following:

 

Proof that your house’s value is not worth more than your sale price.  The IRS wants to make sure that you receive full market value for selling your house to ensure they get as much from their lien as possible. To show your sale price is correct, the IRS will require two appraisals of your house, consisting of

 

An independent appraisal by a professional appraiser, and

Your county tax assessor’s valuation of the property, or an informal valuation of property by disinterested third party.

The two valuations should be equal to or less than your sale price.  If they are greater than your sale price, the IRS can reject the lien removal and want you to get more for the house (and for them).

Copy of your sales contract/purchase agreement.

Copy of a title report on your house, listing all mortgages and liens (including the IRS’).

Closing/settlement statement for the sale, showing your real estate commissions and closing fees that will be deducted.

Copy of the deed/title to your house.

Copy of your Federal tax liens.

Filing of IRS Form 14135, Application for Discharge of Property from Federal Tax Lien.  The IRS calls your lien removal a “discharge,” the legal terminology under Internal Revenue Code Section 6325.  Section 6325 of the tax code grants the IRS the power to remove your tax lien in return for payment of any equity.  The discharge application is designed to satisfy the requirements of Section 6325.

It is important for us to get the application for lien discharge and supporting records filed with the IRS as soon as your house is under contract.  It can take the IRS 45-60 days to approve the application, so prompt action is best to manage delays in your closing.  

 

A discharge application is not required if your home equity is more than your IRS debt, resulting in your receipt at closing of enough money to pay your tax debt in full.  The IRS will require payment in full and will file a lien release showing you no longer owe the taxes. 

 

An IRS lien removal on your home requires a formal application process and must comply with Internal Revenue Code 6325.   Your application requires that the IRS receive your equity to remove the lien.  If you have no equity to pay the IRS, that’s okay too.  IRS can approve lien removal for as little as nothing.  News of an IRS tax lien should not change your plans of selling your house.

 

Contact Advance Tax Relief to Help Deal with Back Taxes

If you have a tax levy on your paycheck or the IRS is threatening you with one, you need a tax professional who specializes in tax debt relief on your side.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

 

Advance Tax Relief is rated one of the best tax relief companies nationwide.

 

#FreshStartInitiative

#OfferInCompromise

#TaxPreparation 

#TaxAttorneys

#TaxDebtRelief

#TaxHelp 

#TaxRelief

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IRS TAX LIEN Vs TAX LEVY - THE DIFFERENCE

 The IRS has two ways to collect back taxes:  a Federal tax lien and a tax levy.  A tax lien is different from an IRS levy – the lien does not result in the IRS taking your property from you.  That is done by levy.

You have the right to defend the filing of a lien and prevent the issuance of a levy.  To be able to assert your rights and protect your property, it is important to understand and recognize the tools the IRS uses.

NEED HELP WITH OFFER IN COMPROMISE, TAX SETTLEMENTS, TAX PREPARATION, AUDIT REPRESENTATION OR STOP WAGE GARNISHMENTS?

 

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Here is what you need to know about the IRS tax lien and IRS tax levy:

 

IRS TAX LIEN

 

An IRS tax lien protects and secures the IRS’s rights to your property.  The lien attaches to the property you own when it is filed, and the property you purchase later.  A Federal tax lien most commonly impacts real estate.

 

If you own a house, and the IRS files a tax lien against you, the lien would give the IRS an interest in your home similar to that of your mortgage company.

 

Example:  Your house is worth $90,000, and you have a mortgage of $65,000 on it.   There is $25,000 of equity in your house.  Before the IRS filed its tax lien, that equity would be yours.  Now that the lien has been filed, the equity belongs to the IRS.   If you want to sell your house, the IRS gets your equity at closing, not you.

 

The IRS usually files its Federal tax lien with county recorder or clerk of courts in the county where you reside and property is located.   For the tax lien to affect real estate, it must be filed in the county where the property is located.  It would then encumber all of your real estate in that county.  A federal tax lien does not name the property it attaches to – it automatically encumbers all your real estate in the county it is filed and all of your other personal property.

 

If the IRS files a lien against you, you have a 30-day window to file an administrative appeal to request reconsideration of the filing.  This is called a collection due process appeal.

 

The lien expires when the IRS statute of limitations on collection expires – in most cases, 10 years.

 

IRS TAX LEVY

 

The purpose of an IRS levy is to take your property.  An IRS levy is the same as a seizure, or garnishment.  The IRS can levy on your wages, bank accounts, subcontractor pay, accounts receivable, and even retirement accounts.  The IRS can seize your house, car or your business equipment (although those are rare).   For most people, it is the levy, not the lien, that hurts.

 

There are only a few things the IRS cannot levy  – these “exemptions” are listed in Internal Revenue Code 6334.   The exemptions you can claim include the right to keep unemployment benefits, workers compensation, most household goods and some tools of your trade from the IRS.

 

Before the IRS can levy on your property, they must first send you a Final Notice of Intent to Levy.  This is your notice of that the IRS intends to start enforcement against you.  After you receive the Final Notice of Intent to Levy, you have 30 days to file an appeal of the proposed IRS collection action. If you file the appeal, the IRS is prevented from taking action until your hearing is completed.  The purpose of the hearing is to reach a resolution to levy action before it occurs – offer in compromise, installment agreement, uncollectible, for example.

 

The IRS does not need to file a Federal tax lien as a prerequisite to levying your wages, bank accounts, etc. – just the Final Notice of Intent to Levy.

 

In the rare cases of seizure of a house, the IRS must get court approval first.  To do this, the Department of Justice will usually file a lawsuit against you in Federal District Court seeking approval to foreclose and take your house.  Again, this is not a preference of the government.

 

The Federal tax lien and tax levy give the IRS different rights against you – the lien as to security in your property, the levy to take it.  Together or apart, the lien and levy are powerful tools for the IRS.

Contact Advance Tax Relief to Help Deal with Back Taxes

If you have a tax levy on your paycheck or the IRS is threatening you with one, you need a tax professional who specializes in tax debt relief on your side.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today at (713)300-3965 for back tax filing and tax relief services.

 

Advance Tax Relief is rated one of the best tax relief companies nationwide.

 

#FreshStartInitiative

#OfferInCompromise

#TaxPreparation 

#TaxAttorneys

#TaxDebtRelief

#TaxHelp 

#TaxRelief

#BestTaxReliefCompanies