Is an LLC right for you? Many clients are telling us they have be advised by other firms to create an LLC and it has not achieve the tax advantages they desired. When a LLC only has one member, the IRS ignores the LLC for the purpose of filing the tax return. This only impacts the tax return not the legally structure of the business. Single member LLC’s income and expense are reported on Form 1040, Schedule C, E, or F. If you would prefer to file as corporation intead of the “disregarded entity, Form 8832 must be submitted.

On January 9, 2007 the Taxpayer Advocate office called on Congress to repeal the authority it gave the IRS to hire private debt collections.  When we first wrote on this subject we expected that paying these firms 25% of every dollar they collected would create “collection abuse” problems.  The firms began in September of 2006 and problems began soon after.  This effort is failing and should be ended ASAP.   

Beginning January 1, 2007 the IRS has increased the “user fees” for setting up Installment Agreements.  Taxpayers who pay by non-debit will have to pay a onetime fee of $105 to set-up an the Installment Agreement with IRS and a onetime fee of $52 for those who set up the agreement with direct debit.

How can you tell if a firm is on the level about their claims? Ask for a copy of a firm’s recent Offer acceptance letters from the IRS, taxpayer name, SS, & case # has to be blacked out for obvious reasons. The date of the filing and acceptance is on it, that way you will at least know they have gotten one done (they better have more than one). If they will not show you they probably don’t have any or you’re talking to phony sales shyster. Also ask for references, with good questions you should be able to tell a real person from these firm’s fake reference actors.
A new client the other day called after they worked with a firm famous for their huge TV advertising budget, pseudo offices in every city populated by “ex-siding” salespeople who promise the world to get their commission (never, never, pay full fees in advance), and their ability to collect fees and do very little for the client.
This caller had paid 4k to this firm and after a year and half the firm couldn’t even prepare four simple 1040 returns correctly. This firm is famous to telling client’s it is their fault, changing contacts, and losing the file, and somehow can still charge their account without a problem. Why do these firms usually advertise their great BBB rating and why doesn’t’ the BBB rating reflect the real type of firm they are?
So they hired our company and within six months the Offer was filed and accepted. Why do people keep hiring these turkeys we will never know. It is sad that so many people are wasting their money on empty promises.

Most of us have read about Wesley Snipes 12 million tax problem with the IRS, unfortunately this happens to thousands of taxpayers each year. I actually feel sorry for him because despite his apparent bad judgment, he did hire a “professional” to do his taxes; they broke the trust by taking advantage of him. Charging a percentage was unethical and now illegal by IRS circular 230.

The story usually goes like this, the taxpayer meets an accountant or CPA through a friend or co-worker that performs miracles on tax returns, giving the client huge refunds or explains why you don’t have to pay taxes through their unique brand of voodoo. Next, the IRS audits a return prepared by this magical accountant/CPA, and then you guessed it, the outcome is nasty for the taxpayer and then IRS audits everyone the accountant/CPA prepared returns for. The taxpayer then has to return of the refund for one or more years with the penalties and interested charged by the IRS, this creates a huge problem for the taxpayer, hence, the reason they contact us seeking help. Most of our clients tax debts are obviously much smaller than Wesley Snipes, but the problem is just a big in their world.

If it sounds too be good…it usually is.

This should be an interesting mess. The IRS has selected three firms to assist the IRS in collection delinquent taxes beginning the summer of 2006. The firms the IRS has contracted with are CBE Group Inc, Linebarger Goggan Blair & Sampson, LLP, and Pioneer Credit Recovery, Inc. The IRS has contracted with these firms to collect from taxpayer where the tax liability is not disputed. These firms will contact the taxpayer to make payment arrangements. In the second phase of this program the IRS will contract up to 10 firms by 2008.
The whole concept is should be frightening to taxpayers who will be contacted by these firms. Who decides if the tax liability is not disputable? The IRS, the collection firms, a Seeing Eye dog? If history can be used to predict the future “this is faulty logic” to begin with, the IRS frequently is incorrect about taxpayers tax liabilities due to return or income/expense errors from the taxpayer, IRS, or both. It is even worse when taxpayer has not filed a return, then the IRS will file an SFR, this tax liability amount is almost always incorrect. The IRS assumes their information is accurate and places the responsibility on the taxpayer to prove otherwise. No doubt these collection companies will adhere to this stance also.
These third-party Collection companies, who have a vested financial interest (reward, commission $$) in collecting from taxpayers may very likely collect from taxpayers who don’t’ owe or shouldn’t be paying the amount demanded from these collection agents. A process that is already full of errors and misinformation will many only get worse.
It is rumored the last time the IRS contracted a firm to help with deposits the problems were immense.

Recently we have had a number of calls from taxpayers who have been audited by the IRS after using tax preparation services that charge based upon the size of the refund.   Larger the refund=the larger the fee to that firm. These firms often increase the size of the refund by including phony business expenses or charitable contributions.  The IRS audits one unlucky client either at random or because the return looked questionable, then IRS discovers that virtually all the client’s tax returns have been prepared the same way.  You guessed it, all returns prepared by that firm are audited now instead of good news the client has an unexpected tax debt.  These firms tend to pop up at this time of year and the “good news” about the size of refund is spread by word of mouth inside families, the work place, or even churches.   The tax return is prepared by an individual who typical vague about how they prepare the return for the client and use the emotion about the “tax refund” as tool to get clients to not question their practices.   Be careful.

What is an Offer-In-Compromise?
The Offer-In-Compromise program of the Internal Revenue Service allows a taxpayer who owes federal taxes, penalties, and/or interest to pay only a fraction of the total amount owed. It is designed for taxpayers who either: 1) can not afford to pay the taxes, penalties, and interest owed within a reasonable time, or 2) can afford to pay what is owed within a reasonable time, but believe that they either do not owe what the Internal Revenue Service claims or believe that it would be unfair or inequitable to have to pay the taxes, penalties, and interest in full. (more…)

Do not speak to the collection agents of IRS or State before you know your rights! Also do not sign up with a firm that can’t provide you with a clear plan on how to solve your problem.

It is understandable to be afraid when after receiving Levy notice. But don’t let fear be the driving force in deciding how to help solve the problem. The collection agents of IRS and State love it when the taxpayer who has just received the Levy notice calls, they can hear the fear in their voice and they know the taxpayer will tell them more than they should and agree to terms that are to their detriment. The tax collection agent doesn’t care about your financial problems or the reason why you have them! It is their job to collect from you and get onto the next taxpayer.

At the same time, “fast talking sales people from boiler room firms” will tell the caller what they want to hear as long as the agreement is signed and check has clears the bank and often the tax problem isn’t resolved.

Levies can be released quickly provided the taxpayer is in compliance with tax returns. What information is needed to get the Levy Released is dependent on the amount and type of tax liability. Most taxpayers tax liabilities can placed in an affordable Installment Agreement or in Non-Collectable status as a precursor to filing an Offer-In-Compromise. It is important that the taxpayer understand why a tax solution is being negotiated on their behalf and what is the up and downside of the solution.

A common trick by the “boiler room firms” is to file an Offer-In-Compromise or place a taxpayer in an Installment Agreement knowing the taxpayer will be either default or be rejected because the coming year tax liability. These firms do this in order to charge their client’s more for the same service down the road.

When you call us we will provide you a plan on how we will get the Levy Released and put into motion a plan to resolve your tax liability that is in your best interest that is based upon your unique financial circumstances.

Hire a firm that has their representation work and fees clearly stated in writing. These “boiler room firms” have murky agreements that are written so they can increase charges based upon hard to understand criteria so you pay more or they will threaten to stop working on your case. It is an effective threat when a client has the IRS or State breathing down their neck. The goal of the “boiler room firms” is get you in the door and agree in writing to your tax liability amount, so later they can charge you more based upon on a higher tax liability. Most clients are confused about the amount of their tax liability. It is very common that their actual tax debt is higher, because they don’t understand penalties and interest or have only received a portion of the paper work from the tax authority.