Solving IRS Problems

Transcription

1 Solving IRS Problems Jae K. Shim

2 Table of Contents About the Author... vii Preface... viii Chapter 1 IRS Overview and Taxpayer Rights... 1 Learning Objectives... 1 Introduction... 1 The Mission of the IRS... 1 IRS Operating Divisions... 1 Areas and Territories... 2 Appeals... 2 The Office of Chief Counsel... 2 Criminal Investigation Division... 2 Taxpayer Advocate... 2 The Taxpayer Advocate... 2 Taxpayer Assistance Orders... 3 Taxpayer Rights... 3 Original Taxpayer Bill of Rights... 3 Taxpayer Bill of Rights II... 3 Taxpayer Bill of Rights III... 4 When Is the Confidentiality Privilege Extended to Taxpayer Communications?... 4 IRS Employee Contacts... 4 Listing of Local IRS Telephone Numbers and Addresses... 4 Ten Deadly Sins... 4 The Practitioner Priority Service... 5 Freedom of Information Requests... 5 Working With the IRS To Resolve the Taxpayer s Problem... 5 Review Questions... 7 Review Answers... 8 Chapter 2 Which Option is Best? Alternatives to an Offer in Compromise... 9 Learning Objectives... 9 Introduction... 9 Full Pay the Tax Owed... 9 Filing Unfiled Tax Returns and Replacing Substitute for Returns... 9 Dispute the Tax on Technical Grounds Currently Not Collectible Status Installment Agreements Offers in Compromise Penalty Abatement Discharging Taxes in Bankruptcy Innocent Spouse Expiration of the Collection Statute Review Questions Review Answers Chapter 3 How to Determine When a Taxpayer Needs Professional Help Learning Objectives Can the Taxpayers Handle Their Own Case? i

3 How To Select the Best Tax Consulting Firm Areas of concern How to Save on Professional Fees Tax Professionals To Consider Attorneys Certified Public Accountants Enrolled Agents Full-Service Tax Resolution Specialists How To Find a Tax Professional Review Questions Review Answers Chapter 4 Statutes of Limitations Learning Objectives Two Perspectives of the Statute of Limitations Three-Year Statute of Limitations Timely Mailing of a Return Is There a Bright Line Test for Assessment Purposes? Special Statute of Limitations Rules Six-Year Statute of Limitations No Statute of Limitations Statute of Limitations on Collection The Date of Assessment The IRS Can Use Administrative or Judicial Methods to Collect Delinquent Taxes When is the Statute of Limitations on Collections Suspended for an Installment Agreement? When is the Statute of Limitations on Collections Suspended for an Offer in Compromise? When is the Statute of Limitations on Collections Suspended for Bankruptcy? What is the Authority for Appeals Officers to Resolve the Tax Issue? Collection Appeals Program Assessments Summary Assessment and Deficiency Assessment Review Questions Review Answers Chapter 5 Liens and Levies Learning Objectives Liens and Levies IRS Bank Levies Federal Tax Liens Certificate of Release of Paid or Unenforceable Lien Levying the Taxpayer s Property Effect of a Levy Notice of Intent to Levy Notice of Seizure Bank Account 21-Day Waiting Period Seizure of a Taxpayer s Residence or Business Wage Garnishments Fair Debt Collection Practices The Collection Information Statement Analysis of Taxpayer s Financial Condition Review Questions Review Answers ii

4 Chapter 6 Filing Unfiled Returns and Replacing Substitute for Returns Learning Objectives Introduction Review Questions Review Answers Chapter 7 Installment Agreements Learning Objectives IRS Payment Plans Installment Agreements User Fees for Installment Agreements Interest Does Not Stop With an Installment Agreement How Best to Make Timely Installment Payments Fees to Set-up an Installment Agreement How to Set-up an Installment Agreement What Information Do I Need to Use the Online Payment Agreement (OPA)? Enforced Collection Actions Payments Should Be Made Timely Annual Statements of Balance Due Meeting the Terms of an Installment Agreement Why an Installment Agreement Will Cost You More Review Questions Review Answers Chapter 8 Delayed Collection and Currently Not Collectible Status Learning Objectives Delayed Collection Accounts Currently Not Collectible Stop Collection By Becoming Uncollectible Collection Due Process Hearing (CDP) Review Questions Review Answers Chapter 9 Offers in Compromise Learning Objectives Introduction Why the Taxpayer Needs An Expert in Their Corner The Importance of the Firm s Track Record Can I File an Offer in Compromise to Delay Collection Action? What is an Offer in Compromise User or Application fee? Processing Your Offer in Compromise Offer in Compromise Determinations Financial Analysis Verification Internal Sources Taxpayer Submitted Documents Equity in Assets Net Realizable Equity Jointly Held Assets Income-Producing Assets Assets Held By Others as Transferees, Nominees or Alter Egos Cash Securities iii

5 Life Insurance Retirement or Profit Sharing Plans Furniture, Fixtures, and Personal Effects Motor Vehicles, Airplanes and Boats Real Estate Accounts and Notes Receivable Inventory, Machinery and Equipment Business as a Going Concern Dissipation of Assets Future Income Allowable Expenses Conditional Expenses Shared Expenses Calculation of Future Income Payment Terms Collateral Agreements Co-Obligor Agreements Other Collateral Agreements Future Income Adjusted Basis of Specific Assets Waiver of Losses Net Operating Loss Capital Loss Passive Loss Multiple Agreements Waiver of Refunds Possible Actions on Accepted Offers Rescission of Accepted Offers Rescission Procedures Potential Default Cases Compromise of a Compromise Authority to Compromise Under a Compromise Contract Receipt and Processing Consideration of Proposal Processing Completed Investigations Overlooked Periods Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) Section Review Questions Review Answers Chapter 10 How to Complete Form 656 (Offer in Compromise) Learning Objectives Introduction What is an OIC offer? Three Types of OICs Offer in Compromise Payment Options Payments and Application Fees Other Important Facts Are You Eligible? Paying for Your Offer Application fee Payment Options Future tax obligations iv

6 How To Apply Application Process Completing the Application Package Important Information Review Questions Review Answers Chapter 11 Innocent Spouse Defense Learning Objectives Introduction Innocent Spouse Rules Factors for Determining Whether To Grant Equitable Relief Relevant Factors Factors Weighing in Favor of Equitable Relief Refunds Proof Required Refunds Under Equitable Relief Limit on Amount of Refund Relief Review Questions Review Answers Chapter 12 Other Options Learning Objectives Bankruptcy Will Bankruptcy End Your Tax Worries? Payroll Tax Problems IRS Audits Penalty Abatement How to Abate Your Penalties or Interest Collection Appeals IRS Appeals Review Questions Review Answers Chapter 13 Frequently Asked Questions (FAQs) Learning Objectives Introduction Review Questions Review Answers Chapter 14 Recent IRS Tax Cases Learning Objectives Cases Tax Lien Filed Against Actor Nicholas Cage for $6 Million Tax Debt Owed to the IRS An Illinois Woman Faces Up To 16 years for Evasion and Embezzlement Louisiana Doctor Guilty of Not Filing Return Mayor Guilty of Tax Evasion and Corruption Massachusetts Businessman Receives 15 Months Computech President Receives 15 Months New Hampshire Man Sentenced To Probation for $57,000 in Tax Evasion Texas Lawyer Guilty of Not Filing Tax Returns v

7 Former Minnesota State Senator Found Guilty Plumbers Indicted for Tax Charges Former Massachusetts Resident Charged with Filing False Tax Returns Denver Man Sentenced for Tax Fraud Massachusetts Man Pleads Guilty to Tax Evasion Georgia Woman Receives 16 Months for Tax Fraud Connecticut Businessman Pleads Guilty to Tax Fraud Massachusetts Man Charged with Filing False Tax Returns Delaware Man Charged with Tax Evasion Baseball Great Pete Rose Owes $1 Million Sales Executive Gets Prison for Evasion New York Racing Official Sentenced for Tax Evasion Washington, DC, Man Sentenced for Making False Claims to IRS New Jersey Lawyer Charged with Tax Evasion Former Mayor in Arizona Pleads Guilty to Tax Evasion Charges North Carolina Women Sentenced for Roles in Tax Refund Scheme Bookie Pleads Guilty to Gambling, Tax Evasion Charges Tribal Chair Sentenced on Tax Charges Florida Man Gets Jail Time for Evasion Connecticut Executive Punished for Tax Fraud Baltimore Police Commissioner Sentenced for Tax Fraud Alabama Fast-Food Manager Gets Prison for False Returns North Carolina Man Convicted of Two Felony Counts Connecticut Man Receives Probation for Failing to Pay Income Taxes Delaware Man Indicted for Not Reporting $500, Tucson Man Receives 189 Days in the Can for Filing False Tax Form Inventor Convicted of Tax Fraud INS Agent Sentenced on Tax Charges Dallas Man Gets 15 Months in Jail Village Official Indicted for Tax Charge Delaware Man Pleads Guilty to Tax Evasion Phoenix Man Indicted for False Returns Ohio Man Tried to Conceal More Than $4 Million in Income Arizona Man Pleads Guilty to Not Filing Returns Review Questions Review Answers Appendix A Declaration of Taxpayer Rights I. Protection of Your Rights II. Privacy and Confidentiality III. Professional and Courteous Service IV. Representation V. Payment of Only the Correct Amount of Tax VI. Help With Unresolved Tax Problems VII. Appeals and Judicial Review VIII. Relief From Certain Penalties and Interest Examinations, Appeals, Collections, and Refunds Examinations (Audits) Appeals Refunds Appendix B Record of Account Transaction Codes Glossary Index vi