Author Archives: c11718906

Filing Late IRS Income Tax Returns

Compliance

It is our job to educate the taxpayer on their rights and how their specific current situation fits into the available IRS resolutions.  It is not always pretty. It is many times not what they expected. It may take different “tools” in your toolbox to get the job done. We know the IRS can collect; this fact alone is why you are here today. The client has an unpaid IRS debt which they  cannot pay. We must also look at what returns are unfiled as well as current tax obligations. Compliance has two elements: unfiled returns and estimated payments. No matter what else happens, there can be no resolution if the taxpayer does not identify the reason for the non-compliance and fix the problem. Without current taxes being paid for the current year or quarter, any payment plan or Offer in Compromise will in fact default. The client will blame you for this result, unless you educate them on this cycle.

For the non-filer client, regardless of the number of years, secure the last six years of 1040’s. Additionally, you will want to prepare the 1040’s that have been prepared as SFR’s by the IRS. Please understand, I feel it is my job to inform the taxpayer of the IRS Policy Statement which I cite below, with the additional information to the taxpayer that if they wish to file all the missing periods, I will gladly prepare those 1040’s for a fee. The law is they must file (we just so happen to know the “insider” IRS guidance to their staff). The IRS can always ask for any missing return. I feel this six-year policy relates back to the fact that Congress allows an audit six year look back if the taxpayer has not declared 25% of their income. The IRS just runs with it.

Client Experience: I had a tow truck driver, non-filer client. When I interviewed him, he had not filed for 19 years, but the IRS had only filed 2008 and 2009 as SFR’s, using the 1099 IRP, allowing no Schedule C expenses. He owed $388,540 for those two years alone. We filed 2008, 2009 and 2011-2016 (the last 6 years). His current assessments were reduced to $89,057 and he owed various amounts for 2011 through 2016 (another $110,000). We then got him making monthly 1040ES payments and submitted an IRS OIC for the eight years of tax liabilities.

How does the IRS make up a Return for You?

How does the IRS “know” that a taxpayer “should” file a return? By law, many entities must report the income they pay to individuals. A 1099 MISC/DIV/INT/B or a K-1 are just some of the income reporting documents that are filed directly with the IRS. This IRP (Income Reporting Program) Database also is enhanced in early Spring each year when the Social Security Administration downloads their W-2 database to the IRS. The IRP Database then begins the process of matching all these hundreds of millions of tax documents against the hundreds of millions of Social Security numbers. Just think about this function alone: billions of cross-referenced numbers and documents. This is why the failure to file penalty is so strict for Corporations and Partnerships, as the IRS has found people fraudulently “hide” from the income reporting laws in these business entities. It usually takes at least eighteen months for a missed tax document to be reported back to the taxpayer in a CP2000. However, as of April 2017 we have been receiving 2015 CP2000 Proposed Assessments. With technology, the IRS is only going to get more efficient.

What to do when you owe the IRS Back taxes

Client Experience: A client was referred from a larger NYC Law Firm. The firm had prepared and filed the client’s 1040’s prior to contacting me. The doctor handed me copies of the filed 1040’s, Married Filing Joint, owing $900,000 in tax alone for the last 8 years. The spouse did not work. Their house was titled in both their names. The spouse also had a large inheritance coming. The doctor was retiring and his income would be greatly reduced. The first thing they wanted was an Innocent Spouse claim to be filed. Just think how many more options they would have had if the client came to me before the eight years were filed jointly! I probably would have filed the last six years as MFS.

How many Returns will you file back (on a unfiler)?

Obviously, those potential clients that are “Constitutionally Challenged” (formerly known as Tax Protestors) will argue with you all day as to the compliance component of the resolution. I only take about 10% of these type clients and only after they have openly admitted they were duped by some fast talker scheme salesman. It is your practice and do as you may.

For 941’s, 940’s, 1120’s and 1065’s, the IRS usually demands that all missing taxes are filed. This brings up many issues which must be dealt with.

You will prepare all the old taxes. But before you file them, we need to take a brief step back and look at the big picture before moving on. Is it wise to file the returns as Married Filing Jointly if the taxes, penalty and interest cannot be paid in full? Are you not wiser to do your own “Innocent Spouse” by never filing a joint return in the first place? If, indeed, one of the taxpayers cannot pay, does it matter if they owe $80,000 MFJ versus $120,000 as MFS (and then the other spouse has little or no liability)?

 

Link to this for Offer In Compromise

IRS Back taxes tax Help

Compliance

It is our job to educate the taxpayer on their rights and how their specific current situation fits into the available IRS resolutions.  It is not always pretty. It is many times not what they expected. It may take different “tools” in your toolbox to get the job done. We know the IRS can collect; this fact alone is why you are here today. The client has an unpaid IRS debt which they  cannot pay. We must also look at what returns are unfiled as well as current tax obligations. Compliance has two elements: unfiled returns and estimated payments. No matter what else happens, there can be no resolution if the taxpayer does not identify the reason for the non-compliance and fix the problem. Without current taxes being paid for the current year or quarter, any payment plan or Offer in Compromise will in fact default. The client will blame you for this result, unless you educate them on this cycle.

For the non-filer client, regardless of the number of years, secure the last six years of 1040’s. Additionally, you will want to prepare the 1040’s that have been prepared as SFR’s by the IRS. Please understand, I feel it is my job to inform the taxpayer of the IRS Policy Statement which I cite below, with the additional information to the taxpayer that if they wish to file all the missing periods, I will gladly prepare those 1040’s for a fee. The law is they must file (we just so happen to know the “insider” IRS guidance to their staff). The IRS can always ask for any missing return. I feel this six-year policy relates back to the fact that Congress allows an audit six year look back if the taxpayer has not declared 25% of their income. The IRS just runs with it.

Client Experience: I had a tow truck driver, non-filer client. When I interviewed him, he had not filed for 19 years, but the IRS had only filed 2008 and 2009 as SFR’s, using the 1099 IRP, allowing no Schedule C expenses. He owed $388,540 for those two years alone. We filed 2008, 2009 and 2011-2016 (the last 6 years). His current assessments were reduced to $89,057 and he owed various amounts for 2011 through 2016 (another $110,000). We then got him making monthly 1040ES payments and submitted an IRS OIC for the eight years of tax liabilities.

 

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

Therefore, the IRS has the power to collect its debt almost immediately and, most importantly, push other creditors (like the state) out of their way. The statutory lien (and later when a Notice of Federal Tax Lien (NFTL) is publicly filed) has a vast amount of law behind it to enforce collection action.

Client Experience: I had a client in Tampa, Florida who owed the IRS $100,000 but did not have a NFTL filed. He passed away suddenly and I learned about the power of the statutory lien. By Law, the IRS is not required to file a Claim to the estate, the Claim is automatic upon the death of the taxpayer.

 

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

The Liability

10 days after an assessment is made and the debt is unpaid, a statutory lien comes into existence via IRC §6321. This is a very powerful part of collections tax law. Congress wrote themselves out of many laws by the creation of this “Silent Lien”. This is an important IRM Cite:

5.12.1.2  (10-14-2013)
Introduction to Liens

  1. Congress, through the Internal Revenue Code (IRC), has provided the IRS a powerful tool allowing the Government to protect the American taxpaying public’s interest in collecting the proper amount of tax revenues. This tool is the Federal tax lien (FTL) which is sometimes called the “statutory lien” or “assessment lien” . At times the lien has been referred to as the “silent” lien because, while the Service makes the taxpayer aware of the existence of the lien, it does not make the lien’s existence public unless a notice of the lien has been filed. Because the lien arises by operation of law, it is referred to throughout this IRM Chapter as the statutory lien or simply “lien” .
  2. A federal tax lien is a claim against property including current and future rights to property. It represents the tax or tax related debt of an individual or business.
  3. This IRM Section provides a broad outline or road map introducing liens, indicating where lien information can be found in the IRM 5.12 chapter, where lien information can be found in other IRM chapters, and providing contact points.
  4. Title 26 of the United States Code is called the Internal Revenue Code (IRC). The legal cite might be seen referenced in a variety of ways including: 26 USC § 6321, IRC § 6321, IRC 6321, section 6321, and I.R.C. 6321 with or without the section symbol. The associated Treasury Regulation are found in the Code of Federal Regulations (CFR) and would be cited as Treas. Reg. § 301.6321-1 or as 26 CFR § 301.6321-1.
  5. Both the Code and the Regulations have on-line research availability. Use the web pageUnited States Code on the US House of Representatives site or the web page Electronic Code of Federal Regulations on the National Archives and Records Administration site.
  6. Though it may seem obvious, it is important to understand that a lien is not a levy. Information about levies can be found in IRM 5.11 and IRM 5.10.

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

The AUR (Automated Under Reporter) Unit handles filed returns that miss a 1099 or W-2. The ASFR (Automated Substitute for Return) Units in Holtsville (Small Business/Self Employed) and Fresno (Individuals) handle the IRP documents which do not match any filed 1040’s. The computer is programed to create a return, using the last filed filing status, taking the only legal (involuntary) filing status available to the government: either Single or Married, Filing Separately. The Service is not allowed by law to join two people, regardless of how many previous years that they filed MFJ. They do not produce a HH status. They do not produce a refund return (although I have seen one in my career). The computer stops the SFR process for any period where a refund is predicted and moves on. It does not assume dependents. It does not allow for Schedule C expenses. My guess is that the IRS figures Harry Potter has moved my trucking client’s loads from Chicago to L.A. It usually takes the IRS about 24 months to produce an SFR.

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

The AUR (Automated Under Reporter) Unit handles filed returns that miss a 1099 or W-2. The ASFR (Automated Substitute for Return) Units in Holtsville (Small Business/Self Employed) and Fresno (Individuals) handle the IRP documents which do not match any filed 1040’s. The computer is programed to create a return, using the last filed filing status, taking the only legal (involuntary) filing status available to the government: either Single or Married, Filing Separately. The Service is not allowed by law to join two people, regardless of how many previous years that they filed MFJ. They do not produce a HH status. They do not produce a refund return (although I have seen one in my career). The computer stops the SFR process for any period where a refund is predicted and moves on. It does not assume dependents. It does not allow for Schedule C expenses. My guess is that the IRS figures Harry Potter has moved my trucking client’s loads from Chicago to L.A. It usually takes the IRS about 24 months to produce an SFR.

IRS Liens. IRS Levy. Tax Consultant. Offer in Compromise Tax Help

Reviews from my 12/7 webinar on “IRS Correspondence”

Reviews from my Webinar on Thursday:

   I thought the webinar went great – and I even did the first 45 minutes or so on my phone coming back from LaGuardia airport on the M60 bus (not highly recommended for stress-free viewing, but it worked).  It seemed like the technology worked well

Excellent presentation by Marc last evening on GoToWebinar – and I recommend more presentations in this format (which can be accessed from anywhere, even when traveling, from cellphone, iPad, laptop, etc.).
I’m assuming Marc’s presentation has been archived and can be reviewed by paid participants for a period of time.  Archiving (for later review or re-review) a key advantage of this format.
More time and flexibility for viewer questions is advised.  I know Marc was looking at a chat box but would also be helpful to un-mute the lines so viewers could hear the NYSSEA member vocalizing their own question – and perhaps some give and take with the presenter.
Not sure how frequently you plan these electronic meetings.  You could double the price and it would still be a bargain to hear NAEA/NYSSEA specialists who can not travel to a chapter meeting downstate.
Might also be helpful to “tape” an actual monthly chapter meeting for re-play on GoToWebinar – for those unable to attend and/or want to replay chapter meeting at a later date.
I did not get any handouts from last night’s webinar

I really enjoyed the NYSSEA’s first webinar. Marc did a great job putting it together. And of course, Marc’s presentation of the information was stellar. It was very helpful to me that the webinar took place in the evening. I have trouble attending any webinars when they are during business hours. The platform was easy to navigate once I had the correct links. I have attended Webinars that did not show the presenter, just the material along with audio. Having Marc included, made it feel more like we were all connected. Well done !

Thanks Ken, it was an excellent webinar. As always the primary benefit is convenience, no travel for participants nor speakers, and valuable information sharing. I prefer this median of training. Thks Marc

Great job.I was privileged to view Marc throughout the two hours!

I have to say, it was very good!  It was as good as any NATP online webinar I’ve taken and those webinars you don’t get to see the speaker.
Thank you, John and Marc for providing the webinar as a last minute alternative to the weather cancellation of the dinner.
1. Liked the speaker and have done some of his webinars before so I was looking forward to it. He freshens sometimes boring subject matter and ties in his personal experiences and humor. The subject matter was fresh and different from usual presentations. The copious (!) amount of slides were direct and informative.
2. Didn’t like… no Chicken Parm dinner!
3. Would love a two person webinar with John and Marc!
Webinar was very informative. Even though he answered some throughout, would have liked an open floor at the end for questions.
Overall it was a good presentation
I have always like to use webinars to earn CE credits because I don’t have to travel especially when the weather gets bad.  Mark is a good speaker.  I will attend more if NYSSEA can do more this type of webinar.
Ken,  Good webinar… Marc always does a great job.    Only recommendation I could make is.. to have a summary handout of all of the notices presented so the attendees could make notes on them as Marc presents.
The subject matter was interesting.
the presenter’s style wqs different but interesting too.
The presenter’s knowledge is vast and sprinkled with anecdote, it was superb.
Keep them coming.