When the IRS "invites" you to come on down to their office, it can be very intimidating because you don't know what to expect and what documents the IRS wants from you. But now, the TaxHelpLaw program relieves you of fear by showing you exactly what to do and say.
Every line of every common IRS form & schedule is explained. You will see, read and listen to detailed, step-by-step instructions that are easy-to-follow. You'll learn what to gather for the IRS and how to present it to them with the tactics of a Tax Attorney!
When you are dealing with the IRS you must be very patient. TaxHelplaw teaches you how to overcome your fear by being well-prepared!
These programs are unique. They are the only available sources for video, audio & text preparation for an audit. Sure, accountants and attorneys will represent you in an audit (for a fee) but you still must gather and arrange your evidence. Your accountant or attorney doesn't know your business or your records so you will pay extra for them to become familiar. Even then, you still will be responsible for getting the documents.
TaxHelpLaw.com shows you exactly what to gather and how to arrange it for the IRS or for your representative. You will save a pile of money by following the TaxHelpLaw Action Steps!
J. David Hopkins
TaxHelp articles, news & tactics to fight IRS Audits, Collections & Return Errors
Tuesday, December 13, 2016
What is a Return? What proof do I need of deductions?
Technically, a return is any taxpayer verification of income and deductions and an agreement with the IRS, or at least no contest from the IRS. So, a "return" that everyone files every year is one definition of a return, but it is not the only one.
Since the attestation clause is a sworn statement, the taxpayer verifies the truthfulness of the return under penalty of perjury. If a taxpayer has no records of income they are required to reasonably estimate the amount. Similarly, a taxpayer must also reasonably estimate all deductions to which they are entitled. So, it would be erroneous to require a taxpayer to honestly reveal his or her income to the best of their knowledge without simultaneously allowing reasonable deductions off that income, despite a lack of hard evidence.
Since the attestation clause is a sworn statement, the taxpayer verifies the truthfulness of the return under penalty of perjury. If a taxpayer has no records of income they are required to reasonably estimate the amount. Similarly, a taxpayer must also reasonably estimate all deductions to which they are entitled. So, it would be erroneous to require a taxpayer to honestly reveal his or her income to the best of their knowledge without simultaneously allowing reasonable deductions off that income, despite a lack of hard evidence.
The Problem of Cooperating with the IRS!
When approached by the IRS for an audit or collections many people believe that if they cooperate with the IRS then it shows their good faith and the IRS will leave them alone.
However, IRS agents who conduct audits are trained to keep digging into your affairs to find fault. They take one-sided notes of conversations so they can be witnesses against the taxpayer in any hearing. It is nearly impossible to rebut IRS agent testimony.
For collections, Revenue Officers are constrained in what they can allow and they are trained to look for all sources for collection. Everything you reveal to a Revenue Officer or Agent can and will, be used against you!
Therefore, in either circumstance, it is better to have an attorney represent the taxpayer with the IRS so they can be a barrier against improper IRS inquiry and to advance the taxpayer's interests.
J David Hopkins, JD, LLM - TaxHelpLaw.com has 3 easy steps to IRS victory!
However, IRS agents who conduct audits are trained to keep digging into your affairs to find fault. They take one-sided notes of conversations so they can be witnesses against the taxpayer in any hearing. It is nearly impossible to rebut IRS agent testimony.
For collections, Revenue Officers are constrained in what they can allow and they are trained to look for all sources for collection. Everything you reveal to a Revenue Officer or Agent can and will, be used against you!
Therefore, in either circumstance, it is better to have an attorney represent the taxpayer with the IRS so they can be a barrier against improper IRS inquiry and to advance the taxpayer's interests.
J David Hopkins, JD, LLM - TaxHelpLaw.com has 3 easy steps to IRS victory!
Dangers of making an Offer in Compromise to the IRS
You have undoubtedly heard TV advertisements promising to "settle" or "negotiate" your IRS debt & you are given the impression that the result is guaranteed to be in your favor. If you will notice, these ads rarely come from Attorneys because Attorneys have a duty of honesty and advocacy for your interests. Many of these promoters have fought criminal charges & declared bankruptcy because of fraudulent practices.
You won't learn this from the TV ads but the procedure proposed to be used against the IRS is called an "Offer in Compromise". This procedure has been vastly over-abused as a supposed method of reducing or eliminating your tax debt. Mainly because these promoters are not Attorneys and cannot pursue your rights fully with the IRS and the Courts. They only have one method of resolving your problem but Attorneys have many solutions.
But, in fact, the IRS is also pushing debtors to submit offers in compromise. See What If & Letter 278C. So, why are fraudulent promoters and our enemy, the IRS, asking you to submit an Offer? The reasons may range from absolute ignorance to sinister opportunism against unsuspecting debtors in their most fragile time of life.
Before you are induced to make an Offer consider these facts: Rejection Rates: Although it varies from year to year, the average acceptance rate for an Offer in Compromise hovers around 30-35%, meaning the chance of rejection is 65-70%.
Cost: The IRS inquiry and process is very time-consuming (if done correctly) and requires a lot of financial planning and shifting. Thus, the fees to hire a representative are easily above $5,000.00 in most cases. Plus, the IRS requires you to put down (non-refundable) 20% of a lump-sum offer or begin making (non-refundable) payments for a 6-24 month Offer.
Unfairness in the Process: The amount of information you are required to reveal to the IRS about your personal life and finances is vast. The IRS literature suggests that when using their calculator, that your offer will be accepted. In fact, the IRS will review the Form 433 you are required to submit along with all the immense supporting documentation and deny you legitimate expenses while trying to raise your current income and the following 5 years of income.
The IRS will not allow expenses beyond the "National Standards" for the various items: Food, clothing, housing, auto, insurance, etc. So, therefore, your income is artificially inflated and your expenses are unfairly decreased. So, it appears you can pay substantially more than your submitted amount and your Offer will be denied.
Extension of Statute of Limitations for Collection: When you submit an Offer to the IRS, regardless of whether they accept it or not, you give them additional time to collect from you. So, the obvious trick is to solicit an Offer from you, gather all your financial information, plus the down-payment and then reject your offer to gain time onto the limitations period and know your financial ability to pay. Promoters of making Offers simply want to take your money.
Appeals: It is almost certain that your initial Offer will be denied and you will have to Appeal. But, this adds to the cost and continues to extend the Statute of Limitations.
It is easy to see that the only acceptable Offers come from people who happen to have a little money or equity in an asset and will not work again for the next 5 years. So, basically Offers are only good for retired, disabled or homeless people, not for everyone. Whatever you do, don't take money out of your retirement plan or sell an asset to pay for the taxes without getting legal advice. There's no sense in creating a new tax debt to satisfy the old one.
So, what the solution? First, see if amendments or filings may reduce the tax. Second, see if a Penalty Abatement Request will reduce the penalties (without extending the statute). Third, look at transforming the non-deductible tax debt into a deductible debt, such as mortgage. Fourth, see if a payment agreement or uncollectible status will allow the statute to expire. Fifth, see if Bankruptcy is a better solution. Mush of the IRS collection process mirrors Chapter 13 bankruptcy so it might be best to file.
There are numerous other strategies and tactics against the IRS, depending on the process and your situation. It is best to review ALL your options with a tax attorney who represents your best interests.
J. David Hopkins
You won't learn this from the TV ads but the procedure proposed to be used against the IRS is called an "Offer in Compromise". This procedure has been vastly over-abused as a supposed method of reducing or eliminating your tax debt. Mainly because these promoters are not Attorneys and cannot pursue your rights fully with the IRS and the Courts. They only have one method of resolving your problem but Attorneys have many solutions.
But, in fact, the IRS is also pushing debtors to submit offers in compromise. See What If & Letter 278C. So, why are fraudulent promoters and our enemy, the IRS, asking you to submit an Offer? The reasons may range from absolute ignorance to sinister opportunism against unsuspecting debtors in their most fragile time of life.
Before you are induced to make an Offer consider these facts: Rejection Rates: Although it varies from year to year, the average acceptance rate for an Offer in Compromise hovers around 30-35%, meaning the chance of rejection is 65-70%.
Cost: The IRS inquiry and process is very time-consuming (if done correctly) and requires a lot of financial planning and shifting. Thus, the fees to hire a representative are easily above $5,000.00 in most cases. Plus, the IRS requires you to put down (non-refundable) 20% of a lump-sum offer or begin making (non-refundable) payments for a 6-24 month Offer.
Unfairness in the Process: The amount of information you are required to reveal to the IRS about your personal life and finances is vast. The IRS literature suggests that when using their calculator, that your offer will be accepted. In fact, the IRS will review the Form 433 you are required to submit along with all the immense supporting documentation and deny you legitimate expenses while trying to raise your current income and the following 5 years of income.
The IRS will not allow expenses beyond the "National Standards" for the various items: Food, clothing, housing, auto, insurance, etc. So, therefore, your income is artificially inflated and your expenses are unfairly decreased. So, it appears you can pay substantially more than your submitted amount and your Offer will be denied.
Extension of Statute of Limitations for Collection: When you submit an Offer to the IRS, regardless of whether they accept it or not, you give them additional time to collect from you. So, the obvious trick is to solicit an Offer from you, gather all your financial information, plus the down-payment and then reject your offer to gain time onto the limitations period and know your financial ability to pay. Promoters of making Offers simply want to take your money.
Appeals: It is almost certain that your initial Offer will be denied and you will have to Appeal. But, this adds to the cost and continues to extend the Statute of Limitations.
It is easy to see that the only acceptable Offers come from people who happen to have a little money or equity in an asset and will not work again for the next 5 years. So, basically Offers are only good for retired, disabled or homeless people, not for everyone. Whatever you do, don't take money out of your retirement plan or sell an asset to pay for the taxes without getting legal advice. There's no sense in creating a new tax debt to satisfy the old one.
So, what the solution? First, see if amendments or filings may reduce the tax. Second, see if a Penalty Abatement Request will reduce the penalties (without extending the statute). Third, look at transforming the non-deductible tax debt into a deductible debt, such as mortgage. Fourth, see if a payment agreement or uncollectible status will allow the statute to expire. Fifth, see if Bankruptcy is a better solution. Mush of the IRS collection process mirrors Chapter 13 bankruptcy so it might be best to file.
There are numerous other strategies and tactics against the IRS, depending on the process and your situation. It is best to review ALL your options with a tax attorney who represents your best interests.
J. David Hopkins
What is the Definition of an Assessment?
It has been asked in the queries how to define an assessment. To put it plainly, an assessment is the formal recording of a taxpayer's tax liability. However, this simple definition fails to alert you to the vast division between not owing and owing the IRS, which will bring a myriad of procedural rules to follow.
Once the IRS places your debt into their system it is an "assessment" and they can collect. Prior to that, they cannot collect. You can "self-assess" this debt by filing a return. If you fail to file a return, the IRS can gather all the evidence they can about you and file the return for you.
So, prior to an assessment are the procedures towards assessment: Filing returns, Return Errors, Audits, Unfiled Returns, Appeals, & Tax Court each of which carries its own strategies and tactics.
After assessment are the procedures of Collection, Appeals, Offer in Compromise, Bankruptcy, US District Court, Penalty Abatement, among other things.
Each of these assessments and procedures are also found in the area of Business Tax, with the huge added wrinkle of the Trust Fund Recovery Penalty.
Then, all of this is repeated with the Colorado Department of Revenue.
Click on the links above for advice on each of these topics!
J. David Hopkins, JD, LLM
Once the IRS places your debt into their system it is an "assessment" and they can collect. Prior to that, they cannot collect. You can "self-assess" this debt by filing a return. If you fail to file a return, the IRS can gather all the evidence they can about you and file the return for you.
So, prior to an assessment are the procedures towards assessment: Filing returns, Return Errors, Audits, Unfiled Returns, Appeals, & Tax Court each of which carries its own strategies and tactics.
After assessment are the procedures of Collection, Appeals, Offer in Compromise, Bankruptcy, US District Court, Penalty Abatement, among other things.
Each of these assessments and procedures are also found in the area of Business Tax, with the huge added wrinkle of the Trust Fund Recovery Penalty.
Then, all of this is repeated with the Colorado Department of Revenue.
Click on the links above for advice on each of these topics!
J. David Hopkins, JD, LLM
How to prove to the IRS that you are uncollectible
The proof required to show you can't pay and the IRS should cease active collection will be revealed with the Form 433F or Form 433A (& the supporting documentation). This takes a lot of work. Essentially, the IRS subtracts your allowable expenses from your net income and asks you to pay the difference.
Here are the various Forms used by the IRS to ascertain if you can pay:
INCOME ISSUES: With wage earners the income is easily ascertainable from recent pay stubs. Self-employed taxpayers will have to reveal their business income and expenses to arrive at Net Business Income, which can be more difficult.
For self-employed taxpayers, you can use Quickbooks or whatever program you are using to compute your current year tax obligation (Form 1040X). Also, TaxHelp has a series of Webinars to help you properly construct these forms so you are not rejected.
EXPENSE ISSUES: The IRS only allows you certain expenses so you will have to build your case with solid evidence. Get the actual invoices or billings for all the expenses and divide them into the proper categories. Then, place them in chronological order. Next, get copies of all the payments and match them with the billings with a total tape on top so the IRS can easily trace your expenditures.
It helps if you can present any medical or physical ailments to show the IRS your difficulties. Gather all the medical reports from your doctors and get any recent medical billings as expenses on the Form 433. The medical reports can also be used to make a Penalty Abatement Request.
If you are meticulous and determined you can win the case. But, you don't want to invite disaster by rashly giving the IRS personal documents which will cause more trouble. It's best to complete the Form 433 in pencil and come see Mr. Hopkins for advice prior to submitting your information to the IRS.
Use a TaxHelp Webinar to complete the appropriate Form:
After you've completed the Forms contact this office for further instructions. Thanks!
J. David Hopkins
Here are the various Forms used by the IRS to ascertain if you can pay:
-
Form 433F - Collection Information Statement Individuals (short form)
Form 433A - Collection Information Statement Individuals (long form)
Form 433B - Collection Information Statement Businesses
INCOME ISSUES: With wage earners the income is easily ascertainable from recent pay stubs. Self-employed taxpayers will have to reveal their business income and expenses to arrive at Net Business Income, which can be more difficult.
For self-employed taxpayers, you can use Quickbooks or whatever program you are using to compute your current year tax obligation (Form 1040X). Also, TaxHelp has a series of Webinars to help you properly construct these forms so you are not rejected.
EXPENSE ISSUES: The IRS only allows you certain expenses so you will have to build your case with solid evidence. Get the actual invoices or billings for all the expenses and divide them into the proper categories. Then, place them in chronological order. Next, get copies of all the payments and match them with the billings with a total tape on top so the IRS can easily trace your expenditures.
It helps if you can present any medical or physical ailments to show the IRS your difficulties. Gather all the medical reports from your doctors and get any recent medical billings as expenses on the Form 433. The medical reports can also be used to make a Penalty Abatement Request.
If you are meticulous and determined you can win the case. But, you don't want to invite disaster by rashly giving the IRS personal documents which will cause more trouble. It's best to complete the Form 433 in pencil and come see Mr. Hopkins for advice prior to submitting your information to the IRS.
Use a TaxHelp Webinar to complete the appropriate Form:
After you've completed the Forms contact this office for further instructions. Thanks!
J. David Hopkins
Process of an Offer in Compromise
There are 2 reasons you can make an Offer in Compromise: Doubt as to Collectibility & Doubt as to Liability, or both. To start the process of an Offer in Compromise for Doubt as to Collectibility you must complete Form 656, which is included in the Form 656-B booklet.
To start the process of an Offer in Compromise for Doubt as to Liability use Form 656L, included in the Form 656L booklet.
To see if you can "pre-qualify" use the IRS OIC Prequalifier tool. You must not be in a bankruptcy, have filed all tax returns, made any estimated payments required & made all required employee tax deposits, including the supplement.
However, in order to complete the Pre-Qualifier you have to complete Form 433(OIC), which is essentially the same as the Form 433A, used in general IRS collections.
You can make a lump-sum offer (preferred) or a payment plan which will extend for 5 years, based on the bankruptcy rules.
During the offer the IRS may file a lien but they will suspend collection activities. However, just by making an offer (regardless of whether it is accepted or not) all applicable statutes of limitations will be extended by the time period the offer is being considered plus 1 year.
Given the IRS rate of rejection, it should be anticipated that you will have to Appeal an unfavorable ruling. (See Form 13711).
For Offers based on Doubt as to Collectibility you goal is to show you can't pay and won't be able to pay in the foreseeable future. For offers based on Doubt as to Liability you must show you don't owe it, much like an Audit Reconsideration. Please take our Webinar for Form 433A to prepare you to make an Offer in Compromise.
Every case requires different levels of proof & different qualifications. For Doubt as to Collectibility in general, be prepared to show you have a lot of on-going bills or support obligations. It helps if you have some kind of medical or physical malady. So, please obtain any doctor or medical reports you have on yourself or family member to give to the IRS.
For Doubt as to Liability you may have to dig deep into your old records to get the evidence. Fortunately our online Audit Defense Program shows you how to get your evidence and present it to the IRS to win!
In either event it is helpful to have legal advice PRIOR to making an Offer with the IRS. An offer is only 1 tool to be used to reduce or erase your IRS debt. ALL options should be explored before making a decision. So, you need to obtain your Account Transcripts from the IRS, gather your tax returns, your credit report, any divorce or bankruptcy papers & all IRS notices you have received. Call our office so we can sit down & create an Action Plan to fight the IRS!
J. David Hopkins
To start the process of an Offer in Compromise for Doubt as to Liability use Form 656L, included in the Form 656L booklet.
To see if you can "pre-qualify" use the IRS OIC Prequalifier tool. You must not be in a bankruptcy, have filed all tax returns, made any estimated payments required & made all required employee tax deposits, including the supplement.
However, in order to complete the Pre-Qualifier you have to complete Form 433(OIC), which is essentially the same as the Form 433A, used in general IRS collections.
You can make a lump-sum offer (preferred) or a payment plan which will extend for 5 years, based on the bankruptcy rules.
During the offer the IRS may file a lien but they will suspend collection activities. However, just by making an offer (regardless of whether it is accepted or not) all applicable statutes of limitations will be extended by the time period the offer is being considered plus 1 year.
Given the IRS rate of rejection, it should be anticipated that you will have to Appeal an unfavorable ruling. (See Form 13711).
For Offers based on Doubt as to Collectibility you goal is to show you can't pay and won't be able to pay in the foreseeable future. For offers based on Doubt as to Liability you must show you don't owe it, much like an Audit Reconsideration. Please take our Webinar for Form 433A to prepare you to make an Offer in Compromise.
Every case requires different levels of proof & different qualifications. For Doubt as to Collectibility in general, be prepared to show you have a lot of on-going bills or support obligations. It helps if you have some kind of medical or physical malady. So, please obtain any doctor or medical reports you have on yourself or family member to give to the IRS.
For Doubt as to Liability you may have to dig deep into your old records to get the evidence. Fortunately our online Audit Defense Program shows you how to get your evidence and present it to the IRS to win!
In either event it is helpful to have legal advice PRIOR to making an Offer with the IRS. An offer is only 1 tool to be used to reduce or erase your IRS debt. ALL options should be explored before making a decision. So, you need to obtain your Account Transcripts from the IRS, gather your tax returns, your credit report, any divorce or bankruptcy papers & all IRS notices you have received. Call our office so we can sit down & create an Action Plan to fight the IRS!
J. David Hopkins
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