A recent article was published in the NY Times about IRS Auditors being pressured by management to rush and close out audits on medium to large corporations was interesting. Purportedly these auditors were forced to end the audit before they could complete a meaningful audit, leaving huge sums of uncollected taxes in the pockets of the corporations.

The IRS is understaffed and is often accused of not being efficient, but I can tell you the business owners of the small to medium businesses that are calling our firm for help would strongly disagree with that article. These owners feel just the opposite, they feel like they are under siege by the auditor and are treated like they are guilty unless they can prove their innocence.

Because of this article some business owners and CPA’s may be thinking that they have nothing to worry about because the IRS doesn’t have time for a complete audit. Imagine basing your company tax decisions on a NY Times article and some disgruntled IRS employees, scary!

I agree with the article in that the new political regime will demand more complete audits for all sized businesses. It is reasonable to expect more audits in 2007 on small to medium businesses because the IRS knows that small to medium sized companies don’t have the experienced audit defense teams that the large corporations do, it is simply easier to get the audit done with people who look like deer in caught in headlights.

If your CPA firm is telling you they none of their clients get audited, watch out, not only are they not prepared to represent your company in an audit, but you are probably paying more taxes than you should because of their timidity. Don’t wait until the audit, change firms before anything happens

It is time again for the annual semi-clever tax refund phishing schemes to appear in email inboxes. These emails are targeted at taxpayers who are trusting enough to respond. The email appears to come from the IRS.gov site, has official sounding language, and contact information. The email states that the recipient can get their refund by providing credit card or bank account information. The IRS will never send taxpayer information by email.

Forward any phishing attempt to:

phishing@irs.gov

Here is a link to the IRS website to learn more.

http://www.irs.gov/individuals/article/0,,id=155344,00.html

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.

In 2001, I made a carreer change that also changed my tax filing status from a company employee (W-2) to an independant contractor (1099). This means that I was now responsible for saving part of my income in order to make quarterly payments to the IRS. Well, I was enjoying this new income that wasn’t being taxed (yet), and all along , I had every entention of making my tax obligations. It just seemed that something would always come up that I would rather spend the money on. “I will start next month,” I would say to myself, and “next month” never got here. This went on for about five years without a word from the IRS. Then, I finally decided to do something about it, and quickly learned that I was so far into deabt to the government that I might not ever recover (penalties and interest add up FAST!). I filed my returns and tried dealing with it on my own, but I was no match for my debtors. They wanted ALL of their money, RIGHT AWAY…..and if I didn’t have it, they were going to take everything I brought in until it was paid for.

Then I surfed the web to learn more about my rights, and in doing so, I came across numerous sites were companies claiming to have the solution. I responded to a few of them and soon found myself speaking to several “used car salesman” like personalities who were promising to reduce my liabilities to “PENNIES ON THE DOLLAR”. They immediately made me uncomfortable and I was quick to end the conversations (thank god). Then I got a call from Jeff, at IRS & State Tax relief Associates. I knew instantly that he was different from the ones previous. He answered only the questions that he could respond to honestly, saving the rest for when he was familiar with my case. I decided to move foward by obtaining his services and I know now it was one of the best decisions that I have ever made. I left it all up to him and his associates and they really came through. Not only did they get the levy lifted, but they negotiated a monthly installment plan that is easy for me to pay. It was honestly like a breath of fresh air. I can once again sleep through the night and focus on what it is that I do best, rather than constantly worrying about what might happen to me and my family.

If there is anyone in a similar situation, I would certainly give Jeff a call. These guys are professional, respectful, they follow up, they take pride in what they do, and best of all…..they care.

Jamie
Corpus Christi, Texas

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.