IRS Tax Law
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IRS Installment Agreements
Difference Between IRS Liens & Levies
I’m Tax Attorney Steve Klitzner. My practice is limited solely to
representing individuals and businesses with IRS problems. Here’s a common
question that people have: What’s the difference between a lien and a levy?
A lien is when the IRS goes down to the courthouse in your county, files
paperwork saying you owe them money. What happens there is if you have any
property that you sell, the IRS is going to get it at the time of sale. A
lien also destroys your credit; it can hurt it by 75 to 100 points. A levy
is when the IRS actually takes something, like your bank account or your
wages. This obviously can be very devastating.
We deal with the IRS all the time, on both liens and levies. If you have
any problems in these areas, call me. Contact Tax Attorney Steve Klitzner below:
Click HereFree Consultation With Tax Attorney Steve Klitzner
Tax Attorney Steve Klitzner here. My practice is limited solely
representing individuals and businesses with IRS problems. Everybody that
calls my office gets a free consultation with me; not with a salesperson,
not with a member of my staff. I like to do the consultations in-person. If
you’re too far away from me and you can’t come see me, we can talk on the
telephone. I’ll spend a half-hour with you, maybe an hour with you, telling
you what your options are and how I can help you.
If I can’t help you, if I think that the problem is such that you can just
make a phone call or fill out a simple form, I’ll tell you, I’ll send you
on your way, an you’ll call me and, hopefully, and let me know that
everything worked out good. The reason that I offer the free consultation
is because frankly, if I had a similar situation myself, I’d want a little
advice on an area that I don’t know much about and I’d want somebody to sit
down with me and give me some advice before I make my decision. I offer
that to you.
Contact Tax Attorney Steve Klitzner below:
Quarterly Estimated Taxes Deadlines
I’m tax attorney Steve Klitzner. My practice is limited solely to representing individuals and businesses with IRS problems.
One misconception that people have is that the April 15th deadline is for filing and paying your taxes. But it’s not. April 15th is the deadline for filing your taxes, but you have to pay your taxes during the calendar year when you’re making the money. In 2012, you really can’t wait until 2013 to pay your taxes. You must pay it during the year. People who work for someone, W-2 wage earners, they have taxes withheld. But independent contractors need to pay estimated quarterly taxes throughout the year. And if you have an IRS problem, and you’re not making those estimated payments, the IRS won’t make a deal with you. They’ll continue to levy your wages, and they’ll levy your bank account.
One of the first things we do, after we make sure all the returns are filed, is that our clients are paying in during the current calendar year. Then we’re in a position to make a deal with the IRS.
I’m attorney Steve Klitzner. If you have any other questions, please contact me below:
Paying Unfiled Tax Returns – IRS Tax Problems
I’m tax attorney Steve Klitzner. My practice is limited solely to representing individuals and businesses with IRS problems. I estimate about 85% of the people that see me for the first time have at least one unfiled tax return, and this is a big problem, because the IRS won’t make a deal with you if you don’t have all your tax returns filed. In fact, they will continue to levy your bank account and levy your wages until all your returns are filed. So that’s the very first thing we do when someone comes in to see us. We make sure all the tax returns are filed. Then we’re in a position to make a deal with the IRS.
I’m tax attorney Steve Klitzner. If you have any other questions, please contact me below:
Understanding Audit Representation And The IRS
Some people would rather face root canal surgery than an IRS audit. According to ABC News, the IRS audited 1.6 million Americans in 2011 alone. This means that about 1% of all Americans get audited. If you are audited, rest assured you are in good company. Three-quarters of IRS audits are handled without having to meet face to face with an IRS employee. The rest are usually handled by mail.
60% of individuals who get audited choose to hire a tax attorney for audit representation or audit defense service, notes ABC News. Some tax preparers will also perform audit representation services, including the popular tax software TurboTax. It is generally best to hire a tax attorney rather than an accountant or tax preparer because tax lawyers focus on federal and state tax laws for individuals and businesses. They can also help you answer questions from the IRS without putting your foot in your mouth.
Audit Triggers
There is tremendous pressure on the IRS to collect every penny that they are owed. Taxes owed but left unreported are estimated by the IRS to be $345 billion. There are specific things the IRS looks for. These include:
- Not filing taxes on time
- Filing without including all pertinent documents like bank account statements, W-2s, 1099s, receipts, cancelled checks from charities, etc.
- Taxpayers who present a long list of deductions, including a home office, medical services and high-ticket electronics
- People who do not sign their returns
- Small businesses that are not incorporated
- People who deduct legal expenses without any explanation as to why the legal expenses were necessary for the taxpayer’s ability to make money
- People who file a Form 5213 “Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit.” Although individuals may avoid an audit for few years, the audit will inevitably occur.
Types of Audits
There are two main types of audits – paper and in-person. Paper audits, also called correspondence audits, are the most common. These are sent out for minor errors such as:
- Forgetting to sign your tax returns
- Entering the wrong number for your income which does match your W-2
- If figures from banks do not exactly match up with your tax return.
These can often be settled through the mail and without hiring a tax attorney or meeting with an IRS employee.
In-person or field audits are more dreaded because they indicate that there is a serious discrepancy between what you filed and what information the IRS has on you. The IRS employee may have to come to your office or where the taxes were prepared in order to go over all of your financial records for the year or years in question.
Make an Appointment
You will receive notice by regular mail that you are being audited. If it’s to be a field audit, you will need to call the IRS office number provided. There is a strict deadline for making an appointment. Even if you do not have all of your financial information available, make an appointment before the deadline.
Usually the IRS gives you at least four weeks to gather your financial records together. This is more than enough time to get in contact with a tax attorney, who will then make a list of items you need to find before the audit. They should be grouped together by category first and then by date. Paperwork you need includes:
- Receipts
- Automobile log if you use a car for work
- Cancelled checks
- Proof for every business-related expense
- Bank statements
- Information about your stock portfolio
- Records about loans and how much has been paid off
- Mortgage records
- Proof of payments such as W2s or 1099s
If you can’t find the document, be honest and admit this to your tax attorney. Sloppy record keeping is as bad in the eyes of the IRS as willfully trying to cheat on your taxes.
The Audit
You may need to meet with the IRS more than once during the course of your audit. If you have a home or small business, the IRS may need to look at the set up. You do have the right to have the meetings recorded. However, you need to submit this request in writing to the IRS at least 10 days before your appointment. Ask your tax lawyer if recording the appointment is necessary.
The audit itself is like a trial only it’s held in an office with far fewer people and no robes. Treat the audit like a trial. Be polite. Wear business attire and be well-groomed. Do not wear your worst clothes in the hopes that the IRS will think that you are too poor to buy good clothes. It will make you look as if you are not taking the process seriously and will be considered a mark of disrespect.
You do have the right to complain about overly aggressive IRS workers. This is another advantage of having a tax attorney. He or she can point out whenever an IRS worker is out of line. You do have the right to complain to that IRS worker’s supervisor.
The Final Report
The audit process is not over during the audit appointment. It’s only over when the IRS mails you its final audit report. It lists any extra taxes or fees you must pay, if necessary. If you like the report, be sure to sign it.
You have the right to an audit appeal, but you have a short time to lodge an appeal. Let your tax attorney know right away if you want to appeal.
The Basics of IRS Liens and Levies
Without question, one thing every American dreads is confronting the IRS. The best way to deal with the IRS, though, is by not incurring their disfavor–in other words, pay your taxes. Unfortunately, this does not guarantee that you will never have to confront the IRS.
Is It Only Troublemakers That Run Afoul of the IRS?
Of course, people who deliberately fail to pay their taxes have sealed their fate. Many Americans, however, run into trouble for more “innocent” reasons. Sometimes the government makes mistakes and irresponsibly harasses victims thereof. It can also be a matter of a taxpayers mistakenly failing to file returns or applying for exemptions the IRS ultimately questions. It can also be a financial disaster affecting a taxpayer’s ability to meet his/her responsibilities.
Whatever the reason, once a taxpayer runs into trouble with the IRS, the matter becomes serious. If the IRS determines that you owe them money, they can then issue a “lien,” or “intent” to seize property you own. The good news about liens is that they are not actual seizure but the beginning of a procedure to seize your property in order to pay for past-due taxes
A more serious approach the IRS can take is the “levy,” an actual seizure of property. “Property” may include real estate, bank accounts, wages, etc. In other words, most types of property.
Do Taxpayers Have Recourse against Liens and Levies?
In fact, taxpayers have much recourse against IRS liens and levies. Above all, though, you must act fast, address notices, and, if at all possible, hire an experienced IRS-tax-law attorney to represent you, especially if you are being victimized.
What Are some of the Things You Can Use to Defend Yourself?
Unfortunately, tax laws and IRS regulations are very complex, which is why you need to hire an attorney to represent you. The IRS is compelled to deal with your attorney; additionally, being represented reduces chances of saying wrong things (which can be held against you) or forgetting to exercise a right you may be unaware of. Here are just a few of the “rights” an attorney may use to help fight your case:
- Did the IRS follow proper procedures? The IRS, for example, must notify you in writing and must give you a chance to address their findings before filing a lien or levy.
- You have the right to appeal their findings.
- You can stop a lien or levy—i.e., because of economic hardship, by arranging for a payment plan, etc.
- Appealed cases usually fare better than un-appealed ones.
- There is much legal precedence on behalf of taxpayers wrongly/illegally assessed by the IRS.
- Several not-well-known laws/statutes protect taxpayers—e.g., Social Security benefits being excluded; having 9 months to file suit in federal court against levies; continuing wage levies may not exceed 15% of salary; etc.
Unless you are well-versed in tax law, you need legal representation when taking on the IRS. Only then can you protect your reputation, your property, and your good credit.
Summary of 2012 in Taxes
2012 has proven to be a tumultuous year when it comes to taxes. While there have been many changes during 2012, most were overshadowed by the flurry of changes prompted by the fiscal cliff crisis. Overall, the majority of 2012’s tax changes were aimed at higher income groups while bringing some measure of relief to low and middle income earners.
Assessing the Impact of the Fiscal Cliff
Although the fiscal cliff crisis was amicably resolved by Congress in early 2013, the effects of legislation will continue to reverberate throughout 2013. Taxpayers with incomes over $400,000 took the brunt of the impact stemming from the fiscal cliff crisis, as their tax rates went up to 39.6 percent. Other last-minute tax changes also had a sizable impact on taxpayers in lower income brackets.
Another major impact of the fiscal cliff felt by almost all taxpayers was the resultant delay of tax return filing for 2013. As the IRS worked to implement changes in their computer systems to properly reflect late changes in the tax code, taxpayers saw the start of tax return processing pushed back from January 22 to January 30. From a taxation perspective, the following changes go a ways to relieve pressure from lower income brackets while encouraging higher incomes to pay their fair share.
Major Tax Changes During 2012
- Increase in Maximum Marginal Tax Rate – The maximum federal income tax rate was raised from 35 percent to 39.6 percent. Capital gains taxes on long-term investments also rose from 15 percent to 20 percent. Qualified dividends, once taxed at the same rate as long-term capital gains, were also increased at the end of 2012. Qualified dividends are now treated as other ordinary income and taxed at the maximum income rate of 39.6 percent.
- Expiration of Payroll Tax Cuts – In 2010, Congress passed a reduction in payroll taxes as a temporary measure to jump-start the economy, lowering payroll taxes from 6.2 percent to 4.2 percent. As a consequence of the fiscal cliff, Congress allowed that reduction to expire, causing the payroll tax to revert to its original rate.
- Alternative Minimum Tax Patch – At the end of 2012, the Alternative Minimum Tax was permanently indexed to inflation, reducing the number of people who would normally become subject to the tax as their incomes grew.
- 10-Percent Tax Bracket Extension – At the end of 2012, the lowest marginal tax rate would have increased from 10 percent to 15 percent. As a result of legislation stemming from the fiscal cliff crisis, the 10-percent tax bracket was extended for taxable years beyond 2012.
- Changes in Standard Deductions – Those filing as “Single” and “Married Filing Separately” received a $150 increase in their standard deduction amounts. Those filing as “Head of Household” received an increase of $200 while joint tax filers and widows received a $300 increase.
- Increases in Retirement Account Contributions – Contribution limits for 401(k) and 403(b) plans rose by $500, with catch-up contributions remaining at current levels. Roth IRA income phase-out thresholds rose to $173,000 for joint filers and $110,000 for single and “Head of Household” filers.
- Vehicle Mileage Deductions – Mileage reimbursement rates for business travel rose to 55.5 cents per mile. Starting in 2013, mileage rates will increase an extra cent for business travel and medical/moving travel.
- Medicare Tax on Investment Income – Starting in 2013, taxpayers who earn income from investments, including interest, dividends and royalties, are now subject to a 3.8-percent Medicare tax. The rate will be applied to the lesser of a taxpayer’s net investment income or the excess of their modified adjusted gross income. This tax comes as part of the tax changes precipitated by the fiscal cliff crisis.
Solving Tax Problems – Offer In Compromise
If you are struggling with a tax debt that you cannot realistically repay, an offer in compromise may provide a workable solution, and a tax attorney can help you file this application. An offer in compromise allows you ask the IRS to accept settlement for less than the full amount that you owe. In certain circumstances, this is a better solution for the IRS because they will get at least a partial payment, so they are willing to agree to the offer.
Who Qualifies for an Offer in Compromise
The IRS will look at many factors when considering your application, including your ability to pay, your current expenses and income and any assets you have that could be liquidated to pay the bill. If, in light of these facts, it is obvious that you cannot pay what is required, then an offer in compromise may be accepted. The IRS does require you to explore other payment options first.
How You Pay with Offer in Compromise
With an offer in compromise, you will have to make a payment. This can either be a lump sum cash payment or a periodic payment. With a lump sum cash payment, you will submit a payment for 20 percent of the amount that you owe along with the offer in compromise application. If your offer is accepted, you will pay off the remainder of your offer balance in up to five payments.
If you choose periodic payment, you will determine how much you can afford to pay monthly, and send that amount along with your application. Continue making this monthly payment until you hear about the approval of your application. If approved, continue making the monthly payment until your offer balance is paid off.
How an Attorney Can Help
The paperwork to file an offer in compromise is quite complicated, and a mistake could cost you the ability to file. Working with a tax attorney can minimize this risk. A tax attorney can look at your overall income, expenses and assets to determine if this is the right option for you. If it is, your attorney will help you file the necessary paperwork. If you don’t qualify, an attorney can help you determine what other programs or solutions are available to help you deal with that looming tax bill. To protect your assets and improve your chances of approval, contact a tax attorney before starting an offer in compromise.