IRS Clarifies Role in Obama Healthcare Overhaul

For skeptical Republicans and wary taxpayers, the Internal Revenue clarified the role of its agents in enforcing the controversial aspect of the new Obama Healthcare law that would require Americans to purchase insurance policies.

According to IRS Deputy Commissioner Steve Miller, IRS revenue officers will not be involved in enforcing the law through the auditing of taxpayers for this purpose.

Although the new law–which was upheld by the United States Supreme Court earlier this year after being passed in 2010—is an expansive Obama healthcare overhaul, opponents of its passing have fixated on the role that the IRS will have in its enforcement. There are Republicans who worry that expanding the IRS’ enforcement area into healthcare will result in the harassment of taxpayers who do not buy insurance. Those who refuse to buy insurance will already be levied a tax of $95, or an amount that is equal to one percent of taxable household income, beginning in the year 2014. The amount will increase to $695 per person by the year 2016.

Deputy Commissioner Miller fielded questions regarding how many new officers would be needed to apply the law from Republicans from a subcommittee of the Ways and Means Committee, the committee assigned to write tax laws. The Republicans also asked whether the new duties would be stretching the IRS too thin, leading to an inability to accomplish its main duty as the nation’s tax collecting entity.

Many questions remain in regards to the healthcare overhaul. Hearings regarding the new law continue to be held on Capitol Hill, as the law’s provisions are explored.

miller

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

 

What is an IRS Tax Attorney?

Introduction

Definition of an IRS Tax Attorney

For hundreds of years, the United States government has attempted to develop a taxation system that is both fair and reasonable. In order to do this, however, the IRS has had to develop several complicated tax laws. This results in a system in which citizens must constantly refer to updated regulations regarding taxes. Therefore, sometimes individuals require assistance in filing taxes. Those who do not take care to properly file their taxes must fix their mistake to avoid further penalty. An IRS tax attorney can assist those who are in these situations. In other words, whatever the case, it has been consistently proven that having a good IRS tax attorney is both important and useful.

An IRS tax attorney is someone who has been educated for several years regarding taxes and related topics. They are experts in dealing with tax law and can help those who are struggling to understand the requirements of the IRS. A good IRS tax attorney has acquired several years of experience in several different fields related to taxes. Therefore, they have experience that not many other individuals have. It goes without saying that all inquiries regarding taxes should be directed to an IRS tax attorney.

Reasons for Consultation with an IRS Tax Attorney

There are several circumstances in which it would be incredibly important to consult with an IRS tax attorney. Basically, if one has any questions whatsoever regarding their taxes, they can almost think of an IRS tax attorney as a good advisor, as the goal of an IRS tax attorney is to provide maximum benefit to his or her clients. Early consultation with an IRS tax attorney can prevent consequences from the IRS.

An IRS tax attorney is especially useful to those individuals who have found themselves unable to pay for taxes that are due. There are various stages in the process of IRS tax penalty, and it is extremely beneficial to have an ally such as an IRS tax attorney to help with important decisions. An IRS tax attorney can give important advice to individuals who are dealing with back taxes so that the IRS will not seek further penalty.

This article will review several negative actions that the IRS can take on an individual. Some of these consequences are quite severe. However, they can be prevented, even if an individual does not believe they are financially stable. An IRS tax attorney is perfect for those individuals who believe they are “stuck” in terms of paying for taxes. Such individuals may discover that they are not as stuck as they originally thought.

Unfair Taxation

One important thing to remember about dealing with taxes is that the government can make mistakes. Sometimes, an individual must present a case to the IRS that proves that they were improperly taxed. In order to have the most success in such a circumstance, one must find a qualified IRS tax attorney to assist them. They know which documents must be filed to make an appeal to the government. They also knows the best ways to prove to the IRS that there was a mistake in taxation.

If an individual is unfairly taxed, taking care of it as soon as possible will save them from a lot of grief. It is better to take care of discrepancies immediately so that there is not any confusion. An IRS tax attorney can review records and determine whether an individual was illegitimately taxed. Although this is a rare circumstance, it does happen occasionally.

For those who find themselves in a situation that prevents them from being able to pay for taxes, an IRS tax attorney is the perfect aide. For example, occasionally, someone who was properly taxed winds up in a situation in which they are no longer able to pay for their taxes. This may be due to an emergency or unexpected event. Sometimes, the IRS will adjust taxes to account for the unexpected event. Occasionally, the IRS may even determine that part of the tax should be “forgiven”. However, such an adjustment only results from a convincing and thorough appeal document. An IRS tax attorney can help those who must submit such a document. An IRS tax attorney can be as convincing and thorough as necessary to achieve his or her goals.

Tax Returns

An IRS tax attorney can be consulted when filing a tax return to make sure there are no mistakes or discrepancies. There are several different considerations that must be made when filing taxes. An IRS tax attorney can clarify these considerations and make sure that they are being dealt with properly. Ultimately, this is the best kind of preventative measure to take when it comes to taxes. Consulting with an IRS tax attorney during the filing stage can prevent things from going wrong later. It is very frustrating to realize later that penalties could have been avoided if an individual had merely taken a second look at their tax return and related documentation.

Sometimes an individual files a tax return and later received notification that they owe more taxes than originally anticipated. Such notification is usually the result of an audit. An audit is a randomly performed test on a tax return that determines whether or not it was filed properly. An IRS tax attorney is a great resource when it comes to adjustments that are proposed by audits. An IRS tax attorney can go back and evaluate whether or not the individual owes the amount prompted by the audit. If there is any kind of problem, an IRS tax attorney can help file an appeal to prove that the audit was incorrect. An IRS tax attorney may also explain the government’s reasoning behind the total amount due. This assistance from an IRS tax attorney is incredibly valuable.

Usually audits deal with minor discrepancies that are significant enough to garner attention. The real concerns come when an individual has stopped paying for their taxes. Whenever an individual owes taxes for a previous year, the taxes are referred to as “back taxes”. Back taxes are one of the many specialties of an IRS tax attorney. Most problems with the IRS are the result of back taxes. Therefore, an IRS tax attorney knows about every aspect of back taxes and how to deal with them to avoid penalty. Back taxes can quickly become a very significant burden. This is why they must be taken care of before any serious action is taken.

If an individual who has back taxes wishes to go back and review previous tax returns, they may consult with an IRS tax attorney to determine the cause of any discrepancy. Consultation with an IRS tax attorney can lead to clarification of any mistakes made on a previous tax return. In many cases, issues found on previous tax returns may be the only problem. As long as the individual is able to fix the mistakes made on the tax return and pay for all back taxes, they will be safe from all further penalties. This can all be done with the help of an IRS tax attorney.

Other Items

These are just a few examples of the many functions of an IRS tax attorney. If there is any other kind of question regarding taxes, it is best to consult with an IRS tax attorney. Gaining knowledge on the Internet can only go so far. Consultation with a good IRS tax attorney ensures clear understanding. Anyone who has a doubt regarding his or her status with the IRS needs to contact an IRS tax attorney immediately. It is simply not worth it to ignore the situation and risk severe consequences from the IRS. Some consequences are so severe that they get in the way of basic living functions and necessities.

The rest of this essay will discuss the specific benefits of having a qualified IRS tax attorney to assist those dealing with taxes. As mentioned before, the goal of any good IRS tax attorney is to provide maximum benefit to clients. An IRS tax attorney is trained to evaluate each individual situation and add value by providing professional legal advice. Therefore, it is strongly advised to make contact with an IRS tax attorney as soon as possible. Only then can an individual be confident with approaching the IRS.

Fees, Penalties, and Other Minor Consequences

The Basics

If an individual chooses to neglect their back taxes, consequences will quickly take place. These consequences range from small fines and penalties to collective actions to compensate for back taxes. An IRS tax attorney can walk an individual through the basic process so that they know what they are getting themselves into if they choose not to pay taxes. Talking to an IRS tax attorney is important for those who do not know the entire process of how the government deals with back taxes. In the same manner, an IRS tax attorney can give legal advice to those who are dealing with the more severe consequences.

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More IRS Tax Troubles for R. Kelly

As an update regarding an R&B star familiar with back tax issues, R. Kelly is once again in trouble with the IRS.

After being assessed a total tax liability of $4.8 million for the years 2009 and 2010, R. Kelly was recently informed that he owes an additional $1.4 million for the 2011 tax year. According to sources close to the singer, R. Kelly is working to get his delinquent tax issue resolved with the IRS.

Although your back tax amount that you owe the IRS may not number in the millions, you still need to settle the issue as soon as possible, as penalties and interests accrue with each day the issue remains unresolved.

If you need a refresher course on back taxes and what you can do to resolve them, here is a quick summary:

Back taxes can be the result of a few different actions, which includes failing to file returns for several years, being unable to pay a tax assessed when returns are filed or receiving back tax notification after an audit. To resolve back taxes issues, seek the counsel of a competent IRS tax attorney. He can guide you to the mode of resolution that fits your particular case, whether it is an installment agreement, an offer in compromise or other IRS resolution tools.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Received an IRS Summons? Don’t Panic Yet

The important thing to remember when seeing the dreaded envelope with the Internal Revenue Service insignia in the corner is not to panic, and certainly don’t ignore the IRS Summons. Although you may choose to ignore other unwanted mail or solicitations, it is essential that you open this particular correspondence. Ignoring it could cost you a substantial amount of money and stress.

When asking for information, the IRS will typically send a memo in the form of an Information Document Request, Form 4564. Known as an “IDR,” this document does not legally obligate you to respond. Responding is a good idea though, as ignoring it will only cause the issue to become increasingly more difficult to resolve.

A summons is another form of communication from the IRS. With a summons, the IRS may be requesting books, records or other information. This particular form, with its promise that the courts will be enforcing it, is more potent than the Information Document Request. When you receive such a summons, you can take several actions: comply with the request, refuse, ignore the communication, or go to court. If you elect to go to court, it would be in an attempt to prove that you have legal reasons, with legitimacy behind them, not to hand over the information the IRS is requesting.

According to IRS tax attorneys, when the IRS sends a summons to a taxpayer, it is not “messing around.” The IRS is sending a stern message in the mailing of such a document, they say. The promise that the IRS is ready to take the matter to the courts should be, as the IRS hopes, enough to move the taxpayer to action.

Receiving a summons from the IRS is not uncommon, and the practice continues to grow in frequency. If you don’t comply, the standards are high in proving you were justified in refusing the summons. Court fights are also becoming more common, as are the rulings in favor of the IRS. According to the IRS watchdog, the Taxpayer Advocate Service, the IRS won over 90% of such cases.

When receiving a summons, it is a good idea to seek legal advice. A competent tax attorney can advise you of your rights, making clear what it is that you should do in the face of such a request from the IRS. The IRS is experienced in dealing with summons issues. You should have representation that is just as experienced.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Individuals Convicted of Tax Fraud

William Scott Dion was sentenced to 84 months in prison for conspiring to defraud the United States. He was also convicted of obstructing the efforts of the Internal Revenue Service. A press release from the Department of Justice announced the outcome, also noting that Dion was ordered to pay $3 million dollars as restitution for his tax fraud.

Dion was one of three people convicted of fraudulent actions against the United States. The individuals promoted and used multiple tax fraud schemes in their attempts to defraud the federal government by the use of a payroll tax scheme.

It came to light in the trial of the three individuals—Mr. Dion, Catherine Floyd, and Charles Adams—that they had worked together to create a scheme in which their employees were paid “under the table’” or off the IRS’ radar. They marketed the scheme to employers and individuals in which employers paid the employees in this manner as a way to bypass payroll taxes without appropriately withholding the amounts required. Contract America, Talent Management and New Way Enterprises were the three names under which the schemers ran the payroll fraud. Their scheme was lucrative, with 150 individuals signing up for it and with more than $2.5 million in wages and compensation that were being appropriately reported to the IRS coming through the system.

The trio also came up with a different tax fraud scheme that involved helping clients conceal their income and assets from the Internal Revenue Service. This particular scheme also had three names under which it operated—Your Virtual Office, Calico Management, and Office Services. The defendants in the case used various bank accounts that worked to hide the true identity of the individuals who owned the accounts. A reported $28 million dollars came through the accounts solely from this aspect of the elaborate tax fraud scheme.

It is essential to note that despite the elaborate schemes the individuals undertook, they were still investigated by the IRS and convicted. The IRS will flag suspicious activity, and the Department of Justice will not hesitate to prosecute when it comes to fraud.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

IRS Fails to Act on Tax Strategy of Private Equity Firms

Despite engaging in a five year probe into the tax strategy utilized by managers of private equity firms, the IRS chose not to pursue any actions. This leaves private equity tax practices in a “legal gray area” that an article in Reuters today said New York’s attorney general was now exploring.

Private equity firms have found themselves under increased scrutiny, particularly in an economically and politically turbulent era. The article in Reuters, using a source familiar with the matter, stated that New York Attorney General Eric Schneiderman has subpoenaed documents from more than twelve private equity firms on how they handle the tax bills of their managers.

Bain Capital LLC, a private equity firm that Republican candidate Mitt Romney founded and once led, was among the firms being looked at by the Internal Revenue Service. Bain, KKR & Co LP, TG Capital, and other firms were under scrutiny in regards to a practice known as “management fee waivers.”

With a “management fee waivers,” those in management positions at the private equity firms would convert a chosen part of their pay into investment income. The practice of converting a portion of their pay into investment income would reduce the tax rate, leaving it around 15 percent. This percentage can be equated with the amount that managers would pay for “carried interest,” another investment gain that the individuals would receive when they buy, manage, or sell a company.

There are those though—particularly Democrats in Congress—who adamantly believe that the tax status of carried income should be revised, making it ordinary income instead of its current status as investment income.

The IRS announced in November of 2007 that it was investigating such practices by private equity firms. Nothing has transpired on their end at this point. It is not known whether any auditing of private equity firms occurred during the period, or why no actions were publically undertaken in regards to this issue.

As states by a tax lawyer employed by the IRS when the probe was initially announced, IRS auditors faced an uphill battle when it came to investigating private equity firms. Their structures, he said, are highly complex and do not led themselves easily to scrutiny.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

IRS Extends Deadlines for Isaac Victims

For those who have been affected by the devastating floods and other issue brought upon by Hurricane Isaac, the IRS extends deadlines to provide relief.

The IRS, taking note of the state of disaster declared as a result of the hurricane issued by the Federal Emergency Management Agency (FEMA), announced that those taxpayers who were affected by the storm in Louisiana and Mississippi will be the recipients of tax relief. Although those states are the only one announced as of yet, there may be more areas included as the situation is assessed further by FEMA.

The tax relief encompasses a postponement on filing and payment deadlines that occurred on or after August 26th. The new deadline date for those individuals and businesses who felt the effects of the hurricane is January 11, 2013. Corporations and businesses who already filed extensions for their 2011 returns that would expire on September 17, 2012, and individuals and businesses who received an Oct. 15 extension, are also included in the disaster extension issued by the Internal Revenue Service.

In accordance with the deadline extension, the IRS will abate any interest, late-payment, or late filing penalty that would otherwise apply to those who miss the deadlines set forth.

For those who are seeking more information about the tax relief provided by the IRS, please visit the website. If you have any other questions in regards to tax issues, please contact your competent tax professional.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

IRS Tax Liens and their Effect on Short Sale

A recent featured article from the Chicago Tribune highlighted the effect that IRS tax liens can have on the sale of a house. A man wrote in asking what would happen if the bank had approved a short sale on his house but he also had a remaining IRS tax lien from an issue with back taxes in the 20078 and 2009. He asked whether he can continue paying off the amount due to the IRS, through the payment plan that he had established, and still sell the house.

According to tax experts, it is essential to note that although the bank may have agreed to a short sale, the individual is only halfway to selling his home if the individual has an IRS tax lien. The lien will stop the individual from selling his home until the lien is either paid off or released by the Internal Revenue Service.

The experts also note that if there is no equity available in the property being sold, there is effectively no reason for the IRS to maintain the tax lien placed against the residence in question, as the aim of the lien is to secure the government’s interest in a property in the event of an accrued tax debt. Regardless of whether or not there is a point to the IR S having an interest in the property, it is still the taxpayer’s responsibility to come to a payment agreement with the IRS. It is possible for the taxpayer to sell the house and move.

The next step a taxpayer must take after receiving an offer for the home is to contact the lender in order to begin the short sale process. The taxpayer must also contact the IRS at the same time so that appropriate documentation can be filed. Both the IRS and the lender may ask to receive duplicate documentation from the taxpayer on both ends.

If the IRS approves the release of the tax lien, it will provide documentation to the taxpayer at this point regarding the conditions on which the release is predicated. A common condition is that the taxpayer doesn’t receive any money from the short sale, with the money going directly to the IRS to pay off the tax debt. The IRS may also be entitled to any money the individual may receive from the lender in order to move out of the property quickly.

The best thing an individual can do to ensure a short sell with the least amount of complications is to make sure the IRS has a part in the process. The Internal Revenue Service must be contacted; the proper documentation must be filed,

If you are in the midst of a difficult tax situation while trying to sell your house, contact a competent IRS tax attorney who can assist you in the process.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

IRS Reviews Implementation of Obama Care

Several IRS tax lawyers were asked the following question about Obama Care:

What should President Obama do now that he’s gotten his healthcare reform legislation written, passed, and defended in the Supreme Court, even though the new law itself won’t work and President Obama no longer has the votes in Congress to make any changes to fix it?

The overwhelming response from the IRS tax lawyers questioned was that President Obama should let the Internal Revenue Service rewrite Obama Care through the rule making process, and pray the words used by the “IRS rule making process” caused eyes to glaze over before too many people start paying closer attention.

According to many IRS tax lawyers, this is what they claimed occurred when the IRS wrote the rule that governed subsidies for exchanges that were run by the federal government.  Significantly however, the IRS tax lawyers claim that in the only discussion of that provision in the Congressional record, Democratic Senator Max Baucus noted clearly that conditions for subsidization were designed with the aim of encouraging states to independently configure their own exchanges. Even though the language and the intent was clear, IRS tax lawyers content that a rule was written by the IRS to allow subsidies in exchanges run by the federal government. Some tax lawyers say this is a classic example of how the IRS rule-making process can be improperly manipulated to repair/replace defective legislation and/or advance changes in a political agenda.

Many IRS tax lawyers and other well-informed tax professionals claim the Agency’s use of the rule making process to fix obviously defective legislation is just plain wrong.  Michael Cannon and Jonathan Adler, of the Cato Institute and Case Western, go so far as to say this makes the rule illegal in an article they wrote together for Health Affairs, a scholarly journal. Many IRS tax lawyers think these experts are correct in their assessment.

IRS tax lawyers maintain that if Cannon and Adler are correct and the rule is illegal, it could be a fatal blow to the Obama healthcare law. According to some IRS tax lawyers, it now appears as if about half (1/2) of states will not set up their own exchanges, leaving the federal government to step in. As noted in The New York Times this past weekend, a number of IRS tax lawyers agree with the newspaper’s ominous editorial remarks- that preparations for implementation of the Obama healthcare law are being secretly undertaken for the most part, which some would argue is a result of the challenges with federal exchanges, a challenge which includes an absence of substantial funds for its operation.

IRS tax lawyers and others have expressed concerns that if the IRS rule is found to be illegal, that it will further complicate the federal exchange implementation process, perhaps to the point of permanent delay. Several IRS tax lawyers note that Representative Scott DesJarlais (R-Tennessee) appropriately framed the issue during his recent testimony at a Congressional hearing on the IRS provision, when he suggested the argument over legality of the IRS rule is “about whether Obama Care can continue to exist.”  Most IRS tax lawyers agree that without the IRS being given a lawful way to fix how Obama Care will work, it will be virtually impossible to implement the new law in any sustainable way.

IRS tax lawyers also point out this is not the only instance in which the IRS has engaged itself in an attempt to rewrite a part of Obama Care that may not be workable. The IRS has also worked on an adjustment to a provision regarding employee mandates- another section in the law, as Mr. Robert Book, of The Heritage Foundation, recently wrote in an article to Forbes.

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IRS Tax Attorneys Claim No Good-Deed Goes Unpunished

IRS tax attorneys warn that good-deed and loaning and/or borrowing money to/from a relative may create unexpected tax consequences.  That’s right, the next time Uncle Toothless hits you up for a loan to buy that set of new dentures, or your kid needs money for those method acting lessons from an Ashton Kutcher want-to-be, IRS tax attorneys suggest you pay closer attention to a frequently overlooked corollary to loaning/borrowing money – taxes.

Most IRS tax attorneys will tell you that it’s hard to say precisely how many Americans loan/borrow money to/from their families, particularly during these difficult economic times.  However, a few of these IRS tax attorneys point to a recent Australian study which suggests the average Aussie loans/borrows approximately $2,400 per year to/from family members.

According to these same IRS tax attorneys, the Australian study claims the most common reasons for borrowing money are unforeseen “emergency situations” (49%) or “running out of money” before payday (26%).  Further, the IRS tax attorneys who’ve reviewed this study’s findings say that when it comes to hitting-up family members for dough, women appear to be roughly twice as likely as men to ask a family member for a loan.  According to these same IRS tax attorneys, young adults, ages 18 to 24 years-old are the group most likely to need to borrow money from family members; and city dwellers are more likely than suburban or rural residents to ask for a loan, according to the study.

In the United States some IRS tax attorneys think baby-boomers are the most likely family members to be hit-up for loans.  These same IRS tax attorneys say that when it happens, most boomers are woefully ignorant of the tax effects of providing such financial support to their families.  In fact, several of these IRS tax attorneys rely on a report from the National Family Mortgage (a Boston-based service provider for inter-family home loans) to support their assertion.  National Family Mortgage (NFM) claims it has funded $42 million in mortgage loans between family members, and the number of loans is growing.

Also significant, IRS tax attorneys report that NFM conducted a survey, in collaboration with Harris Interactive, which tracked the tax implications of family loans.  These IRS tax attorneys claim there are several other recent, highly publicized surveys which “have reported that U.S. baby boomers are providing significant financial support to both their adult children and aging parents.” In fact, several IRS tax attorneys claim the report appropriately asserts that “while financial experts have expressed concern over boomers sacrificing their own retirement in order to help relatives, unsuspecting boomers may also be inviting IRS tax troubles as a result of this goodwill.”

IRS tax attorneys observe that often family members make loans to other members of the family without charging interest (or will charge an interest rate which is well below-market).  These same IRS tax attorneys say when this happens you can be walking a virtual tightrope of tax related issues.  As such, these IRS tax attorneys recommend that you consider upfront planning before deciding to make the loan to a family member.

Specifically, IRS tax attorneys claim it is critical you engage in advanced tax planning to avoid unexpected tax consequences when making loans to relatives. These IRS tax attorneys also say a key factor in how you structure the loan is the amount of interest you charge.  IRS tax attorneys maintain that loans between family members where the interest charged will be below-market rates (in other words, you charge your relative no interest or at a rate below the Applicable Federal Rate (AFR)).

For those of you who might be interested in checking the current AFR, IRS tax attorneys direct you to www.irs.gov where the IRS publishes AFRs monthly on its website.  IRS tax attorneys invite you to type “AFR” into the search window, and then click on “Index of Applicable Federal Rates.”  IRS tax attorneys point out the relevant AFR for a particular loan is the one in effect for loans of that duration for the month the loan is made or for any of the three preceding months.

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