Randolph Law Firm, P.C.

Las Vegas Tax Law Blog

Bankruptcy and discharge of tax debt: a brief look at some basics, P.1

In recent posts, we’ve looked at a couple options taxpayers have for resolving unpaid tax debt when they are unable to pay off the debt immediately. While installment plans and Offer in Compromise arrangements can be a good way for taxpayers to resolve tax debt, this debt rarely stands alone.

Very often, those with serious tax debt are also carrying other significant debts as well. When this is the case, it may be worth considering the possibility of filing for bankruptcy protection. Individual debtors most often pursue either Chapter 7 or Chapter 13 bankruptcy, the difference being that the latter puts the debtor on a manageable repayment plan while the former involves liquidation of nonexempt assets in order to pay off creditors. 

Work with experienced attorney to secure installment plan, Offer in Compromise for tax debt, P.2

In our last post we began looking at some of the possible options taxpayers may have to obtain relief from burdensome tax debt. One of the options we mentioned was to apply for an installment agreement. Another potential option is to make an Offer in Compromise, which allows the taxpayers to settle with the IRS for less than the full amount owed.

The requirements to qualify for an Offer in Compromise are rather strict, which will exclude many taxpayers. The IRS makes a decision on an offer based on various factors—including ability to pay, income, expenses and the taxpayer’s asset equity—but the general principle is that an offer is usually accepted the IRS believes it is the most the agency will be able to receive from the taxpayer in a reasonable period of time. 

Work with experienced attorney to secure installment plan, Offer in Compromise for tax debt, P.1

Last month, the IRS began a new program in which the agency is using private debt collection agencies to help collect on tax debts. The new program is, for now, targeted at taxpayers who are considered difficult cases—particularly those who have been contacted by the IRS multiple times in previous years but have not cooperated.

Taxpayers will be able to recognize when their debt is assigned to a private debt collector when they receive a notification letter from the IRS that their debt has been assigned to one of four private firms and the private firm subsequently sends their own collection letter. All money is supposed to be paid to the IRS rather than the debt collection agency. There is a certain amount of concern about taxpayers falling for scams, so taxpayers should be aware of this. 

The letter from the IRS that you dreaded appeared in your mailbox

You opened your mailbox and you see a letter. The return address indicates it's from the IRS. As you nervously open the letter, your anxiety increases when you realize that the IRS wants to audit you. You immediately begin to wonder where all the receipts and paperwork are that you used to do your taxes.

Once the anxiety calms down to a reasonable level, you may wonder why the IRS decided that you needed an audit. Many Americans, including many here in Nevada, randomly appear on the IRS's radar. Other people receive a notice of an audit because the IRS suspects suspicious activity.

Worker classification and its effect on employment tax obligations, P.2

Previously, we began looking at the issue of worker classification and its implications for employment tax obligations. As we noted last time, when the IRS finds that a business does not have a reasonable basis for classifying an employee a particular way, the business may be held responsible for employment taxes. In such cases, businesses may be able to settle with the IRS for a reduced tax rate or to obtain partial relief in exchange for reclassifying workers as employees for future tax periods.

Federal tax law does allow businesses to avoid having to pay employment taxes for misclassified workers when they are able to show that the worker already paid those taxes, but proving this can be difficult. For one thing, it can be hard to get in touch with workers who are no longer with the company. Also, workers still with the company may not be willing to sign the forms necessary for the IRS to grant the business relief. 

Worker classification and its effect on employment tax obligations

For businesses, keeping up on tax obligations is a critical aspect of keeping afloat. Failure to remain in compliance with tax law can threaten a business’ solvency, while careful tax planning and payment of obligations can help a business increase its success.

There are a handful of types of taxes businesses need to deal with on a regular basis. Among these is employment taxes, which include withholding for federal income tax, Social Security and Medicare tax, and federal unemployment tax. Those who work for themselves pay a self-employment tax to cover social security and Medicare obligations.  

Work with experienced attorney to navigate IRS investigation, P.3

In recent posts, we’ve been commenting on the importance of working with an experienced attorney to navigate the tax audit process. One of the reasons for this, we’ve pointed out, is smooth handling of an audit on the taxpayer’s part can help ensure that the IRS does not impose penalties that aren’t warranted by the facts of the case.

In addition, a skilled attorney can work to ensure that the IRS, after evaluating the evidence in the case, properly applies penalties. For one thing, this means that any penalties applied should have a legal basis in the Internal Revenue Code or other authority. The IRS is not supposed to impose penalties as part of an effort to solicit a taxpayer’s cooperation or because the taxpayer was uncooperative in the investigation. 

Work with experienced attorney to navigate IRS investigation, P.2

Last time, we commented briefly on the topic of tax fraud, and the kind of evidence IRS investigators look out for when there is suspected tax fraud. As we noted last time, tax fraud is different from tax negligence, and it is important for those under investigation to ensure they know how to navigate the audit process to avoid any appearances of fraud.

Tax examiners, in the audit process, will ask a variety of question to attempt to gauge the taxpayer’s  knowledge of any errors in tax returns. Questions will be asked about the taxpayer’s background and knowledge, familiarity with business operations, including the way books and records are kept, and whether the taxpayer is aware of any errors in the return. Tax examiners are also able to request information from third parties in their investigations. 

You have reached the tipping point with a tax lien

The Internal Revenue Service does not mess around. They want their money, and if they say you owe them money, they will do what they have to in order to claim that amount. Similarly, local and state tax bureaus often take drastic steps if you have not paid the money you owe.

One method the IRS and other tax agencies use is placing a lien on your property. A lien lets the public know that you have not paid your taxes and that the tax agency has a claim on the property you own to satisfy the amount you owe. In addition, a lien negatively affects your credit score.

Work with experienced attorney to navigate IRS investigation

Previously, we began looking at the tax troubles of Mike “The Situation” Sorrentino, and his recent not guilty plea in charges of tax fraud. As we noted last time, there is a difference between tax fraud and tax negligence, and it is important for taxpayers who come under investigation to work with an experienced attorney to ensure their interests are protected in the process.

For one thing, what appears to be tax fraud is not necessarily always so. Whereas tax negligence involves mistakes on a tax filing attributable to failure to take reasonable care to fill out an accurate return, tax fraud involves intentionally attempting to deceive the IRS. The intention of the taxpayer is, therefore, critical in distinguishing between fraud and negligence. 

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