Author Archives: c11718906

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

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

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.

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

  1. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.
  2. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
  3. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

IRS Liens IRS Levy. Tax Consultant. Offer in Compromise

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

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

Tax Consultant. IRS Taxes Offer in Compromise. IRS Lien. IRS Levy

Failure to File or Pay Penalties: Eight Facts

IRS Tax Tip 2012-74, April 17, 2012

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

  1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
  2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.
  3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
  4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
  5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

IRS Levy. IRS Lien. IRS tax debt. Tax Consultant. IRS Compromise

I used to joke that since interest is calculated daily, wouldn’t the IRS computer burn out at 12:01 am…just based on attempting to calculate the client’s new balances? The concept of the assessed balance avoids this potential daily burn-out. All the IRS computer needs to remember is the benchmark of the assessed balance on each period. To calculate the “current balance”, a user accesses the database at any particular time and requests a balance. The computer pulls up the assessed balance, adds penalty and interest, subtracts payments and refunds and spits out the new current balance. These “new” calculations of added penalty and interest are called accrued penalty and accrued interest. In summary, the accrued balance or current balance is comprised of the assessed balance and the accrued P&I, less any credits.

Tax Consultant. IRS Levy. IRS Lien. Offer in Compromise. Garnish

Looking back to our $10,000 tax assessment, the interest is 4% or $1.10/day and the penalty is $50/month. If it logically takes the IRS computer time to process and mail out a bill, easily fifty days has passed. Let’s not forget the failure to estimate penalty (call it $820 for this example). The first bill the taxpayer gets is $10,929.56. This first bill, first combined assessment, is forever ingrained in the IRS’s computer as the “assessed balance”. This is an important Collections concept as a huge part of the Collection Process revolves around the assessed balance. We will come back to this several times. The assessed balance is comprised of the assessed tax ($10,000), the assessed penalty ($870) and assessed interest ($59.56).  This is not to be to confused with the unpaid balance assessed, which is comprised of tax assessed, interest assessed, penalty assessed minus any payments or credits on the account.

Tax Consultant. IRS Levy. IRS Lien. IRS wage garnishment. OIC

The assessment of tax is part of what we are told is the “assessed balance”. As we know, the IRS charges penalty and interest (P&I). Currently (and reviewed quarterly) the IRS interest rate for underpayments is 4%, compounded upon itself, accrued daily. That is not so bad, I wish that I had credit cards at 4%. The most common penalty is failure to pay. This is ½ of 1% per month, then 1% per month after Notice of Intent to Levy (between 6% to 12% annually). The penalty is only calculated on the unpaid tax, as of the end of the month. Combined, the P&I is between 10% to 16% annually.

IRS Assessment IRS Tax Lien, Levy IRS levy. Back Taxes.

This 23c date is the assessment date; the legal date that sets in motion the ten-year Collection Statute Expiration Date (CSED). This also starts the Collection Process. This notion of the assessment starting the CSED clock is important to teach you at this level as it sets the stage for later discussions. Congress did not intend to “judge” the nature of any assessment. Congress gives the IRS ten years to collect on any assessment. If Congress wanted to, it could change the law and make exceptions. When someone does not file a 1040 return and forces the IRS to create an assessment (a “Substitute for Return”-SFR) under IRC §6020(b), this assessment is not any different from the 1040-filed assessment you just created. There is a misconception in the tax pro world that an SFR has no CSED and this is not a fact. If you just think of the SFR as an assessment like any other, you recall “CSED is ten years from the date of assessment, plus any extensions to the CSED”.

IRS Settlement. IRS back Taxes. Penalty Abatement


  1. To understand the importance and definition of the Assessment of a tax liability and the

statutory periods of collection and expiration.

  1. To understand the differences between Assessment, Collection and Refund Statutory

Expiration Dates.

  1. To understand the relationship of penalties and interest with the assessment periods.
  2. To understand the relationship between Liens and Levies in the collection process of the

tax liability.

  1. To understand the impact of the Federal Tax Lien and the collection procedures used in

the enforcement process.

  1. To understand the enforcement periods when dealing with delinquent or non-filed tax


  1. To enhance the overall initial interview intelligence gathering techniques with new and

old clients.

  1. To properly prepare and process the Form 2848, Power of Attorney.
  2. To understand the communication processes with the Internal Revenue Service when

dealing with the Automated Collection System (ACS) or an RO on a case.

  1. To provide basic fundamentals of case resolution from the initial contact through the

Appeals process.

  1. To gain insight in to the various programs such as Fresh Start, Penalty Abatement

procedures, Streamlined Installment Agreements coupled with the IRS National

Standards, Offer in Compromise, currently not collectible classifications, and finally the

Appeals program.

IRS Offer In Compromise. IRS Lien. Tax Lien. IRS Levy.

Of course, there is no fun in only having clients that only have refunds, you would not be here, thirsty for knowledge. Let’s work through what happens when the best laid plans of mice and men do not equal a happy refund taxpayer. You produce a 1040 for a MFJ married couple that results in a balance due (“bal due” to the IRS) of an even $10,000. When the return is E-filed, it is received by the IRS and then goes through the assessment process by the IRS computer system. At some point over the next 45 days or so, a legal assessment is made. The “23c date” from the IRC: