Bank Levy: How to Stop a Bank Levy if You Live Paycheck to Paycheck

Suddenly Penniless! IRS Bank Levies strike without warning. Your money is here today, gone tomorrow. But what if you live paycheck to paycheck? Imagine the chaos if the IRS suddenly takes $2,000 out of your bank account? Suddenly the mortgage, car, and credit payments are due and you don't have a penny to pay it with. Don't fret. There is a way to fight back!

Bite the Bullet: The fastest and surest way to release the IRS Bank Levy is to pay the IRS what you owe. But what if you don't have the money? There's another way you can force the IRS to surrender your cash.

Getting Lucky: The IRS will release the Levy if they know it'll make you go without basic needs. Prove without a doubt that if they take the money you'll go without food, utilities, basic clothing, tools for work, or school supplies. But watch out, luxury costs like sports car or credit card payments don't count.

How to Fight it!: Roll up your sleeves and follow the 3 simple steps below

1. You need concrete proof that if they place a Bank Levy on your account you can't pay for your basic living expenses. Round up documents like your paychecks, groceries bills, and utility & rent payments.

2. Be prepared to release a detailed financial statement (Usually on Form 433-A) This statement proves the information the IRS needs to determine if you can pay or not.

3. Simply send a letter to the local office of the Taxpayer Advocate. Be specific and detailed and provide plenty of examples. But be careful, if you make a mistake you risk the IRS levy being enforced and losing your cash.

The Clock is Ticking: You're running out of time! When the IRS intends to Levy your bank account they only give you 21 days to appeal it. After that time has passed, all your money will be gone and there will be practically nothing you can do about it. Even I can't help you at that point.

Be on the Lookout: If you know you owe the IRS, look out for a notice entitled “Final Notice of Intent to Levy”. Like it says, that will be your last chance to act before the Levy is placed on you. So act fast and prevent this worst-case scenario from happening to you.

IRS Announces New Regulations for Tax Preparers

Breaking Tax News- IRS Commissioner Doug Shulman announced that he is starting a new plan to help the IRS better leverage the Tax Professional community by the end of 2009. This is supposed to help increase compliance and ensure high standards of conduct for tax preparers.

This should include:

-Enforcement related to return preparers misconduct
-Education and training for tax preparers

“Tax return preparers help Americans with one of their biggest financial transactions each year. We must ensure that all preparers are ethical, provide good service and are qualified,” Shulman said. “At the end the day, tax preparers and the associated industry must be part of our overall game plan to strengthen the integrity of the tax system.”

The Good News: This is good news that could prevent hundreds of taxpayers from being ripped off by shady tax debt resolution companies or tax preparers.

The Bad News: It's a massive undertaking to take on all of the fakers. I don't think even the big bad IRS has what it takes to rein them all in. This means it's still your job to pick out the Good from the Bad.

A Quick Checklist: Here's a quick way to know if you're working with a good, ethical Tax Resolution Company.

1. No Retainer Fee- A "Retainer Fee" is a way for companies to charge you more fees later. Work with a company with a fair price that doesn't change.

2. Excellent Refund Policy- Simply ask them if they offer a Refund Policy. Attorneys work as they're paid, so you can't expect a full refund, but you should expect partial or close to it if the service performed didn't suit your expectations.

3. No Hidden Fees- A lot of companies will tell you one price on the phone and send you a higher price when they mail you the contract. Ask them if the price they tell you on the phone is the set price, make sure they don't have hidden fees.

4. No Pressure Agreement- Some companies have a "Locked In" policy. Once you sign the contract, you're locked in for good. Work with a company that allows you a grace period to change your mind.

5. The Truth: If a company tells you that you can settle your tax debt for "Pennies on the Dollar," they're not telling the truth! True, a tiny sliver of the population may qualify for a settlement, this does not represent the majority of taxpayers.

Final Tip: A lot of companies will say that filing for "Power of Attorney" makes you untouchable by the IRS. This isn't true! It may put your case in a more negotiable state, but the IRS can still take action against you if they must.

IRS Audit Reconsideration: Tips and Tricks for Sucess

Audit Reconsideration is an informal process, it's designed to replace the need for a formal Amended US Tax Return. Use Audit Reconsideration if:

1) you disagree with an IRS assessment made because of an Audit
2) you disagree with a return the IRS filed FOR you

The IRS will only accept your Audit Reconsideration Request if:

1) You submit information that the IRS HAS NOT considered previously, which might change the amount owed.

2) You filed a return after the IRS completed one for you.

3) You think the IRS made a return processing the amount owed

And the IRS will NOT accept your Audit Reconsideration Request if:

1) You previously agreed to pay the amount of tax you owe by signing an agreement

2) The US Tax Court, or another court, has issues a final determination on your tax liability

3) The amount of tax you owe is a result of final partnership item adjustments under the Tax Equity Fiscal Responsibility Act of 1982 known as TEFRA.

In Short:
Most people have already submitted any information they had to the IRS before they think of Audit Reconsideration as an option. The first thing you should ask yourself when considering Audit Reconsideration is, "Do I have any new information I haven't submitted before?" If the answer is, "No," you're probably not a candidate, and you'll waste your time trying.

Although you can try it as a stalling tactic. (But you didn't hear that from me.)

Top Facts to Know before Filing an IRS Amended Tax Return

Can I amend my Tax Return to Save Money?
The IRS usually corrects math errors on Tax Returns. In addition to that, they usually request forms that are missing when they process original returns. If the IRS has done this bit of work on your behalf, it will not be necessary to file an Amended Tax Return. However, there are a few instances when filing an Amended Tax Return is necessary. If any of the following was reported incorrectly, you should file an Amended Return:

* Your filing status
* Your dependents
* Your total income
* Your deductions or credits

Steps to Take for Filing an Amended Tax Return:

Step 1. Use Form 1040X, "Amended U.S. Individual Income Tax Return." You can use this to correct previously filed Forms 1040, 1040A, and 1040 EZ

Step 2. Write the year of the Return you are Amending at the top of Form 1040X. You cannot use one Form 1040X to correct two tax returns. You must prepare a separate 1040X form for each Tax Return. You must also mail them in separate envelopes.

Step 3. Mail the envelope containing the Amended Tax Form to your area's IRS processing center. The Form 1040X instructions list the addresses for your area's IRS processing center.

As long as you act swiftly you can still receive your Tax Return. However, making sure you fill out all of the correct columns of Form 1040X can be a bit tricky. If you are not sure about the details of your Tax Situation or you're unsure of some specific Tax Laws, consider contacting a professional to help you with this step of the process.

IRS Tax Debt: Top 3 Ways To Pay Off Your IRS Tax Debt, Fast and Affordable

Harsh Reality: You want the easy way out. But with the IRS, there is none.You have to carefully weight the pros and cons of every IRS payment plan. If you make the wrong mistake, you could end up losing money instead of saving money.

Offer In Compromise: Settle your debt. The “Offer in Compromise” program allows you to settle your debt for a lower amount.

Pros:
-You can save thousands of dollars.
-You can pay off your debt faster

Cons:
-Extremely difficult to qualify for this program
-Applying extends the statute of limitations
-You have to include 20% of the offer and/or a $150 dollar application fee (with the initial offer). And it's nonrefundable.

Installment Agreement: Pay monthly. Prove to the IRS that you can pay off your debt in a given time period and they will allow you to make monthly payments on your Tax Debt. This required fully disclosing your financial situation.

Pros:
-A good option if you have disposable income but can't pay the debt in full

Cons:
-This Installment Agreement is a binding contract. You have to pay every month.
-If your income goes up, the IRS will want you to pay more.

Hardship Plan: Bitter poverty. Prove to the IRS that paying your debt will make you go without basic needs. They will give you time to get your finances in order.

Pros:
-You won't hear from the IRS for months.
-You now have time to get your finances back in order

Cons:
-Collections efforts will come back full force once your grace period runs out
-You'll be reviewed every few months to make sure you still qualify

Use Caution: Each case is different. The IRS is bad at handling cases on an individual basis. They are trained to do only one thing, and that's collect the balance in full. An IRS representative could recommend the wrong solution to you. Use caution, and research before you choose any of the above payment plans.

Tax Tips for Students with Summer Jobs. Avoid IRS Tax Debt

Summer Time is in full swing, and most students are working a summer job. The pay may be meager, but greedy Uncle Sam still wants his cut. Here's the top 7 things the IRS wants everyone to know about income earned while working a summer job:

1. Fill out a W-4: Form W-4 is used by employers to determine the amount of tax that will be withheld from your paycheck. This is a good thing, because if you were holding on to the money that should go to the IRS, you'd probably spend it.If you have multiple summer jobs, make sure you have a W-4 for each job.

2.About Tips: Sorry, tips are taxable income according to the federal government. You need to report all tips as income to the IRS.

3. Odd-Job Income: Students often perform odd jobs for extra cash over the summer (e.g., mowing lawns, babysitting.) You're probably not making much, but the IRS wants a cut of the income you make from these odd jobs. In case you're wondering, the IRS will find out how much income you've earned from your bank account. Your bank reports your earnings annually, and if it doesn't match with what you reported, you're busted. If you want to avoid that whole mess you could stimulate the economy and spend the money instead of saving it. (But you didn't hear this from me, kids.)

4. Self-Employment Tax: If you earn a net $400 or more from your business, the IRS wants you to pay self-employment tax. This tax pays for your benefits under the Social Security System. This is done on Form 1040, Schedule SE.

5. Military Training: According to the IRS, subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

6. Special rules apply to services you newspaper carriers or distributors. The IRS will consider you a direct seller if:

• You are in the business of delivering newspapers.
• All your pay received directly relates to sales, not the number of hours worked.
• You perform the delivery services under a written contract, which states that you will not be treated as an employee for federal tax purposes.

7. Finally, Some Good News: In most cases, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

Being Audited? Need Financial Documents for the IRS? Here's how to get them

If the IRS doubts an expense you list on your tax returns, they'll ask for supporting documents. Many taxpayers e-mail me asking how they can get documentation for expenses for the IRS. Here's a quick refrence list:

How to get Documents for Common Allowable Expenses:

Rent/Mortgage: Show your monthly statement to the IRS. You can call your mortgage company or contact your land lord for this information.

Electric, Water/Sewer, Gas: Call your respective providers to obtain the statements for these expenses.

Prescriptions and Medical Equipment: Go to your pharmacy and ask for a print out.

Health and Life Insurance: Go to your payroll deparment at work and ask for a paystub or a Health Insurance prinout. If you aren't insured through work, call your insurance company and ask for a statement.

Day Care and/or Elderly Care: A Bank Statement will work if you're paying through debit or credit. Otherwise, request a letter from the care provider.

Alimony and Child Support: You can use pay stubs or divorce documents. Check with your lawyer on this.

Allowable Expenses: The list above covers all of the expenses the IRS will allow. Remember that credit card debt does not count as an allowable expense. If you owe the IRS, expect your credit account to fall into disrepair.

Get Organized: Lets face it, if you were organized, all of this information would be at hand, and you wouldn't have to frantically search for it when the IRS comes calling. I'm in the process of working on a FREE detailed tax and financial organizer that will be downloadable from the blog. Does anyone have any suggestions for this project? Let me know. And as always, feel free to send me an e-mail if you have more questions.

Answering your Tax Debt Questions, Lawsuit Settlements and Taxes

I give lectures occasionally, which give me the opportunity to answer questions from taxpayers just like you. I've touched on most of the subjects on this blog, but this morning someone asked a question I don't think I've covered:

How are lawsuit settlements handled tax wise?

This can go several ways, and it all depends on why you're receiving the settlement.

Settlement for lost wages- This is usually due to termination. Either way, wages are taxable. Thus, this settlement is taxable.

Punitive Damages- These are also taxable

Reimbursement of Medical Expenses- Good news, the IRS will not tax Reimbursements for Medical Expenses. But cover your tracks, and make sure your Settlement is classified this way. Otherwise, the IRS might try to dip in.

More Questions? If you have any tax related questions, e-mail me or leave one in the comments, I'll be glad to answer it.

Take the Test- See if you Qualify to Claim the Child and Dependent Care Tax Credit

This year, Taxpayers can claim a credit for Child and Dependent Care. This includes babysitters, day care centers, and summer day camps. I wrote a brief report on what qualifies as Child Care, but you know the IRS won't make it that easy! Now you need to know if you qualify to claim the credit, and how to claim it.

Tests to Claim the Credit

Before you file, make sure you met the following criteria.

1. You must Earn Income: You, and your spouse if he/she is working, must have earned income during the year. There's an exception, though. This rule doesn't apply for the care of a student-spouse or a spouse that in unable to care for themselves.

2. For Work Only: The IRS won't let you have a discount babysitter on their behalf so you can ditch the kids and hit the bar! The Child Care expenses must have been paid so you and your spouse can work OR look for work. No exceptions.

3. Qualifying Person: The care must be for a Qualifying Person, who is identified on the form you claim the credit on. Identifying a Qualifying person can be a little tricky:

a.) Qualifying Child- Your child, who is your dependent and who was under age 13 when the care was provided.

b.) Qualifying Spouse- Your spouse who was not physical or mentally able to care for themselves. They must live with you for more than half the year as your dependent.

This all gets more complicated when it comes to children with divorced or separated parents. I recommend reading Publication 503, Child and Dependent Care Expenses, for details if you need them.

4. Know who counts: Don't pay your teenager to watch the young kids, it doesn't count. You must make payment for child and/or dependent care to someone you and your spouse CANNOT claim as a dependent. If you make payments to your child, they must be 19 or older by the end of the year. Additionally, you can't make payments to:

a.) Your spouse

b.) The parent of your qualifying person if your qualifying person is your child and under age 13.

5. Joint Returns. Generally, married couples must file a joint return to claim the Childcare Credit. You must be, and file, as one of the following:

-single
-head of household
-qualifying widow(er) with dependent child, or
-married filing jointly

Resource Box
You might want to take a peek at the following IRS Publications, Access them at IRS.gov.

Publications

- Publication 503, Child and Dependent Care Expenses
- Publication 501, Exemptions, Standard Deduction, and Filing Information
- Publication 926, Household Employer's Tax Guide

Forms (with Instructions)

- 2441 Child and Dependent Care Expenses
- Schedule 2 (Form 1040A) Child and Dependent Care Expenses for Form 1040A Filers
- Schedule H (Form 1040) Household Employment Taxes
- W-10 Dependent Care Provider's Identification and Certification

Qualify? In order to claim the Credit for Child and Dependent Care Expenses, file Form 1040, or Form 1040A. Do not file Form 1040EZ.

IRS Joint Accounts: Unraveling the Big Mess and Solving your Tax Debt Problem

Joint Tax Accounts equal Giant Tax Disaster: He said, she said- who's the real culprit? Who has to pay? Expect a disaster of epic proportions when two people owe tax jointly. With a little prior knowledge, you might be able to survive the IRS nightmare.

Same Household: live in the same household with your partner in crime? I have some bad news. If you share a mortgage and a debt with your spouse or girlfriend, you both owe the tax debt. The IRS will need complete income information from both people.

Different household: Joint accounts where a divorce is pending is even more difficult. As soon as a couple splits and starts maintaining two households, two different payment plans will be arranged. But it's still the same debt

Non Liable Spouse Issues: I get a lot of calls from Taxpayers that owe, when their spouse does not. They ask me how they can protect their innocent spouse. Their cause may be noble, but a lot of the time, there's nothing I can do to help them. If they live in the same household as their spouse, the spouse owes it too.

Innocent Spouse Relief: Trying to achieve Innocent Spouse Relief? Good luck to you, this is going to be difficult. There's a lot of rules that govern Innocent Spouse Relief, and most people won't qualify. For example, here's the biggest deal breaker:

If you signed the Tax Return, you do not qualify for Innocent Spouse Relief.

If you signed the Tax Return, you're guilty. Even if you didn't touch the finances, even if you simply did not know about the Tax Issue. It's your responsibility to investigate the Tax situation before you sign the Tax Return.

Equitable Relief: When you apply for Innocent Spouse Relief, you are automatically considered for Equitable Relief. Equitable Relief relies on many of the same qualifiers as Innocent Spouse Relief. But Equitable Relied considers issues like spousal abuse and other extreme situations.

Get Help: If you're facing a Joint Account issue, you're probably going to need professional help to rectify the complicated issue. Consider working with a Tax Resolution Professional or Qualified Tax Attorney if the task is too daunting to take on by yourself.

IRS Hitman Blog Catergories, and More Ways to Get Tax Debt Help

Finally: I've found the time to organize my posts into categories. This will let me see what I need to write more of, and help you access my posts better. Now it's even easier to get answers to your Tax Debt Questions! But in case you didn't know, here are more easy ways to get answers to your Tax Debt Questions:

- Categories: Look through the freshly added categories to the right. You should find answers to specific questions there. But if that isn't enough, there's more ways my blog offer Tax Debt Help.

- E-mail Me: Shoot me an e-mail at irs-hitman@taxdefensenetwork.com. I'm busy helping taxpayers here at the office, but since I'm usually in front of the computer I promptly reply to e-mails. Don't hesitate to drop me a line if you have a question or need help.

- Fill out the Form: If you fill out the form to the right, a Tax Debt Specialist will give you a call and discuss options for resolving your Tax Issue. This is a FREE consultative service.

-Call: You can access the same free Tax Debt Help service by calling 1-888-248-9058. You'll talk with a tax professional that will help you solve your tax debt issue.

Your Input matters to me. Would you like to see more categories? Specific questions? Leave a comment and let me know.

Newlywed Tax Tips, Avoid Common IRS Troubles

Don't Pay Your Spouse's Tax Debt Whether you're planning a wedding, or you're newly married, you have a lot to learn in this arena. I'm not qualified to give marriage counseling. But, if you've recently gotten married or plan to get married in the near future, here's some tips to help you avoid stress when tax time rolls around:

1. Name Change Drama: You're required to notify the Social Security Administration Report of your name change. Your name and your Social Security Number must match when you file your next Tax Return.

Here's what you do:
- File Form SS-5, Application for a Social Security card at your local SSA office. You can download the form from their website, www.socialsecurity.gov or you can call 800-722-1213.

2. Address Change: Moving in with the new spouse? You're required to notify the IRS when you change your address.

Here's what you do:
- Send Form 8822, Change or Address to to the IRS. You can download it at IRS.gov, or order it from 800-829-3676 (800-TAX-FORM).

-Don't forget to notify the U.S Postal Service so you can receive IRS correspondence. Don't try to avoid them, the IRS will find you.

-Don't forget to notify your Employer. Report your name and address changes to ensure that you'll receive receipt of your Form W-2 and your Wage and Tax Statement at the end of the year.

3. Check Your Withholding- You and your spouse's combined income could place you in a higher tax bracket. Double check your withholding to make sure the correct amount is being withheld for your filing status. The IRS has a convenient Withholding Calculator that will help you do this now.

Here's what to do:
-Go to IRS.gov and type "IRS Withholding Calculator" into the search bar

-Be prepared with your personal payroll and tax information to enter the information

The IRS Withholding Calculator will provide a new Form W-4, Employee's Withholding Allowance Certificate. Just print it out and give it to your payroll department so they will withhold the correct amount from each paycheck.

4. Don't Marry Tax Debt You can marry debt. Watch out if you're in one of the Community Property States, which include:

-Arizona
-California
-Idaho
-Louisiana
-Nevada
-New Mexico
-Texas
-Washington
-Wisconsin

If you live in any of the States, be careful who you marry. If they owe, YOU OWE. And nothing will turn your marriage into an episode of "Married with Children" faster than a shared Tax debt issue. Here's some more scary facts:

-As long as you are legally married, the IRS can seize money and assets from YOU for your SPOUSE'S Debt.

-No Innocent Spouse Relief is allowed, the spouse is guilty by way of the state laws.

Scared yet? make sure your spouse doesn't have a Tax Debt issue before you marry them. And if they don't want you to know it, why are you marrying them in the first place?

Final Warning Tip- You may have heard of "Innocent Spouse Relief" or "Equitable Relief" which relieves the "innocent spouse" from Tax Obligation. Well, if you signed the Tax Return for that Tax Year, you're guilty and it will take an act of congress to prove you're "innocent". Basically, it's your fault for signing without double checking all the information on the form! So read, research, and double check your joint Tax Returns before you sign on the dotted line!

IRS Bank Levy- How to Stop an IRS Bank Levy Dead in its Tracks

Silent Strike: Like a skilled assassin- a Bank Levy strikes without notice. One day your debit card will be working fine, the next day your card will be declined while you're buying your groceries. The IRS Bank Levy can be devastating and makes normal day to day living impossible.

Letter after Letter: If you're reading this, you may have received some threatening letters from the IRS about your tax debt. If you receive a letter entitled “Final Notice of Intent to Levy” the IRS is letting you know that they intend to Levy your Bank Account. This means that they are in essence, freezing your account and not allowing you access to it. This is one of the most powerful tools the IRS uses to collect their debt.

Act Now: When the IRS freezes your account, they give you 21 days before they seize all the money out of your account. Take advantage of this small window of time and take what steps it takes to make sure Uncle Sam doesn't keep your money.

Ways To Stop A Bank Levy:

1) Hardship Plan: Send a letter to the IRS with evidence proving that if they Levy your Bank Account you will not be able to meet the standards of basic living.

2) Payment Plan: Work out an affordable payment plan with the IRS that will have you paying a monthly amount on your debt. The Bank Levy will be removed as long as you continue to pay monthly and on time.

3) Negotiate a Settlement: If you can absolutely prove that you will never be able to pay the full amount of your tax debt, you can get a settlement with the IRS to have your debt paid in one lump sum. If you qualify, with the help of a tax professional, this could become a reality.

It's your choice: You can let the IRS seize the funds in your bank account, leaving you penniless- or you can act fast and make the right choices. Take these tips and get on the fast track to being debt free.

Summer Camp and Childcare might qualify for a Tax Credit

Summer is in full swing, and with the kids out of school, Summer Camp, Daycare, and Babysitters may be a necessity. Recently, the IRS released a report about Tax Credit available for child care expenses, and Summer child are expenses are a convenient fit.

1. Day Camp- The cost of Summer Day Camp can count as an expense toward the child and dependent care credit.

2. Overnight Camps- The cost of overnight camps DO NOT qualify, however.

3. Sitters- if you have a babysitter at your home or at a daycare facility outside the home, you'll receive a tax benefit if you qualify for the credit. (this could be up to 35% of your qualifying expenses, it depends on your income amount.)

4. You can use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

5. The dependent must be 13 years old or younger, unless they are over 13 and are unable to care for themselves (ex: disabled).

First Steps for New Small Businesses, Start Right and Avoid IRS Debt

Starting a new summer business? Before you do anything else, you need to read up on your tax obligations. Nothing will ruin your Small Business' chances of survival more than an IRS issue. Here's the first steps a budding entrepreneur should take to avoid tax mishaps.

Step 1: Determine your Business Type
The type of business you choose will determine which tax forms you use. The five most common business types include:

- LLC
- Sole Proprietorship
- Partnership
- Corporation
- S Corporation

Step 2: Determine Your Business Tax Type
The type of business chosen also determines the taxes you'll encounter and how you'll pay them. Four general types of business tax are:

- income tax
- self-employment tax
- employment tax
- excise tax

Step 3: Get your ID Number
An EIN or Employer Identification Number is used to identify your business. You can apply for an EIN online on the IRS website. If you are a sole proprietor, you will only need an EIN if you hire employees. Otherwise, the IRS only needs your Social Security Number since your business income will be assessed to you personally.

Step 4: Keep Records
With few exceptions, the law does not require you to keep records for your business. This might be a calculated move on the IRS's part, because keeping accurate records is an almost guaranteed method for preventing IRS issues later in your operation! Records you need to keep vary from business type to business type, but some universal things to keep track of include:

- All expenses
- All receipts
- All income
- All invoices

You can keep records manually, with excel, or with accounting programs. Consider hiring an accountant if this all seems intimidating.

Step 5: Calendar or Fiscal Year
Every business taxpayer must figure their taxable income every "Tax Year," which is the annual accounting period of a business. The calendar year and the fiscal year are the most common tax years used.

- Calendar year
- Fiscal year

Step 6: Choose your Accounting Method
As a business you are required to report income and expenses to the IRS throughout the year. You have to choose a consistent accounting method for doing this. The two most commonly used methods are:

-Cash Method: you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them.

-Accrual Method: you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

The IRS does not require any courses on running a small businesses. You don't need to know anything about your tax obligations before you receive your Employer Identification Number. This is why so many small businesses are in huge trouble with the IRS. Use the Resources below to educate yourself and prevent problems before they happen.

Tax Resources for Small Businesses:


The A to Z Index for Business- Just like the title suggests, covers a variety of subjects relating to the IRS and Business.

The IRS Small Business Resources Guide, 2009 This guide covers everything, from starting up, to preparing Tax Returns.

Tax Changes for Businesses - Stay up-to-date on the various Small Business Changes with news directly from the IRS.

Economic Stimulus Payment Info Center for Business- Find information on the business provisions of the economic stimulus payments.

Get the 2009 Business Tax Calendar- This Calendar will help you make quarterly payroll payments and other important deposits on time.

E-File for Business and Self-Employed Taxpayers- This is for helping you find the E-filing option to suit your business needs.

State Taxes- Business tax required by the federal government are tough enough. But you also need to know about you State Tax obligations. This source provides access to key resources that will help you learn about your state tax obligations.

Specific Questions? And if none of the resources help, I'm always available to answer any specific questions you may have. Send me an e-mail at irs-hitman@taxdefensenetwork.com

IRS Penalties: How do you remove them?

Penalties and Interest fees are devastating. More than punishment, these outlandish fees are a lucrative source of income for the IRS. If you want to keep your finances from being swallowed by ever-increasing tax debt, know your enemy- the dreaded IRS Penalties.

The Penalty Box:

Accuracy Penalties: The IRS can add a 20% penalty if they find you understated your income tax liability.

Fraud Penalties: If you fraudulently under-report your income the penalty is 75% of the under-reported amount.

Failure to Pay Taxes Penalties: This penalty starts on April 16 for the unpaid amount. It can be as high as 1% per month on the balance due.

Late Filing of Return Penalties: The IRS can impose a penalty of 5% per month based on the the tax balance due, up to 25% total.

Stop the Bleeding: Apply for Penalty Abatement.

Penalties will grow unless you stop them or pay the debt in full. If you apply for Penalty Abatement you can stop the penalties and reduce your debt by thousands of dollars. But first, you have to qualify.

Qualifications- Reasonable Cause for Not Paying Penalties

- Serious illness of you or a family member.
- Unavoidable absence
- Business Records destroyed (by fire or other cause)
- Taxpayer's ability to make deposits or payments impaired by civil disturbances
- Lack of funds applies, but only when you can prove lack of funds occurred despite exercising ordinary business prudence.

Other explanations may be acceptable, but you have to prove you exercised ordinary business care. If you owe taxes for more than a couple of years, the IRS will likely ignore your request. Why? Because they will suspect that your tax debt has more to do with you not making an effort to play by the rules, than the reason you are giving them. Also remember, the penalty abatement review process is very subjective. A perfectly reasonable request may be turned down, simply because the IRS agent reviewing it had a bad day. In this case, you may want to send another request. Just make sure you have a tax resolution in place, so you aren't left vulnerable to collections.

Fight Back: How to request Penalty Abatement.

- Fill out IRS form 843, “Claim for Refund or Request for Abatement.”
- Include copies of documents that prove your case
- Make copies of any letter you send to the IRS

Warning: Convincing the IRS that you need Penalty Abatement is incredibly difficult, even for the professionals! Now you know if you qualify for it, don't let a fast-talking Tax Resolution company take you down that road if you don't qualify, or it will cost you.

IRS Offer in Compromise, The Facts against the Fiction

This Morning I gave a quick talk about the pros and cons of Tax Debt Settlements, otherwise known as "Offer in Compromise". No matter where I speak, I keep hearing the "Pennies on the Dollar" and "Settling Tax Debt is Easy" mantras. I feel compelled to dispel these rumors with the cold hard facts.

Qualifying for an Offer in Compromise requires a thorough investigation

It's incredibly difficult to qualify for an Offer in Compromise. The IRS will perform an incredibly thorough investigation. This is the most thorough financial background check that is performed by the IRS. They won't sacrifice thousands without exceptional cause! Here's a few things they consider:

Can you pay the debt in full before the statutes run out? If the IRS determines you can pay the debt before the statutes run out, your Offer will not be approved.

Projected Income Potential: You may be unemployed now, but you could be making $100K when you find work again next year. The IRS will look at the income you've made before and consider the income you'll make it in the future when you apply for an Offer in Compromise. This means you can be broke now, but still have to pay!

Assets and Savings: The IRS will determine the market value for any assets you have. This includes everything, including your home and car. When you receive your Offer in Compromise rejection letter you'll see the IRS's determination that you can pay the debt in full (or more than the debt amount!) and they will list each asset and it's market value. If you're living big without paying the IRS, expect to pay big. (Sorry, John Karoly Jr.)

But there's hope If there is no way you could pay your tax debt in full before the statutes run out, the IRS may allow you to settle. If you think you qualify, work with a reliable  Tax Resolution Professional to make sure that you do not put yourself into a worse situation. With help, you could Settle your Tax Debt and save thousands. My team can help you figure out if this is the best tax resolution for you or if there are better options.

Lawyer John Karoly Jr. pleads Guilty to Tax Evasion Charges

John Karoly Jr. recently pleaded guilty to Tax Evasion charges. He's guilty of three counts of willfully filing false tax returns and for failing to pay taxes on $5.2 million in income. John Karoly Jr. may have to pay a $750,000 fine in addition to the $1.9 million he agreed to pay in back taxes to the IRS. If that's not enough, he faces prison, suspension of his law license, or disbarment.

What happened? Basically, John Karoly Jr. got greedy. He received $4.15 million in fees but only reported $3.12 million of his earnings to the IRS. He used the extra 1 million of the IRS's money to fix up his pool and his home. The IRS doesn't take that lightly...

But wait, there's more: John Karoly Jr. received a $938,125 fee and reported only $92,000. He bought $70,000 worth of stock and claimed it as a "client expense" and he will soon be tried for making a $500,000 "Donation to charity" that was supposedly used for personal expenditure.

Listen up, Lawyers: It comes a surprise to many that attorneys often get into trouble with the IRS. They know the laws, but they'll disregard them or push their boundaries. But with Tax Evasion, your careers are on the line. Don't even think about bending or breaking the tax laws, because you will get caught.

IRS Tax Liens: How to Save Your Credit and Your House from a Tax Lien

The Silent Killer You may have heard of the IRS Tax Levy. It's a vicious tool the IRS uses to seize money and assets. Tax Liens don't transfer your property to the IRS, but they certainly mess up your credit. Not many people know how serious the dangers of a Tax Lien are. Educate yourself; don't wind up with a ruined credit report and no assets to your name.

Goodbye, Credit! The most common Lien is the one placed on your credit. This is the kiss of death for your credit report. Your debt with the IRS and your failure to pay it is now public knowledge! Now, it's impossible to take out a loan, get a car, open a lease, or do anything else credit related.

The Clock's Ticking: Maybe your credit is already shot? Maybe you kept ignoring the IRS because you think a Lien can't hurt you? Think again! The longer you go without paying your IRS debt, the closer the IRS gets to turning a Lien into a Seizure. So if you don't settle your IRS Debt, get ready to ride the bus!

30 Day Deadline: A Tax Lien can be removed. The IRS must notify you that they've filed a Lien within five days after it's filed. You then have 30 Days from the day after the 5-day period expires to file an Administrative Appeal. But it won't be easy. It’s a good idea to hire a certified tax professional with an excellent track record. With help, you can avoid having bad credit. You can also avoid being homeless!

Be Prepared: The IRS will not remove a Lien without a fight. They gave you notice; you ignored them. Now they want to make you pay. But you don't have to take it! Now you know how to fight back.

Tax Reduction, Reduce the Amount of Tax Debt Owed and Save Thousands

Everyone wants to pay as little as possible towards their IRS Tax Debt. And luckily, you can reduce the amount owed. Here's a review of the main ways to reduce your tax debt, and save thousands!

Penalty Abatement

There are special circumstances that will eliminate the accrued penalties from your IRS Tax Debt. For example, if you were late making payments on your IRS Tax Debt because you were in the hospital and could not pay your Taxes on time you would qualify for having the penalties removed. If you think you have a circumstance that would allow the penalties to be removed from your IRS Tax Debt you should contact a professional and see if that is a possibility. You could save hundreds of dollars if you qualify.

Offer in Compromise

Another way to have your IRS Tax Debt greatly reduced would be to settle it with an IRS “Offer in Compromise.” If you qualify, your debt could be cut in half or more- saving you hundreds or even thousands of dollars. But it is no easy task to convince the IRS that you deserve to have your Tax Debt amount lowered. You have to prove that you simply do not now or ever will have the funds to pay the entire tax debt.

Professional Help

If you want to have your Tax Debt Reduced, you may need to seek professional help. The IRS is very stingy with its money. They don’t want to lose a dime. But if you a hire a professional that knows the ins and outs of the IRS’s processes, you may stand a better chance at success.

The Truth about Independence Day Tax Tea Parties

A couple of weeks back an enthusiastic man wearing a stars-and-stripes Uncle Sam top hat enthusiastically gave me a flier inviting me to a Fourth of July tax protesting event, or tea party...

No Taxes. No Problems: We all wish we didn't have to pay our taxes. We all might fantasize, but the tax protesters take this one step further by refusing to pay their taxes. They don't believe they have to pay. But are they right? And what will happen to you if you decide to side with them?

Just Letting You Know: In all my years as an IRS-Hitman, I've never seen a single court ruling supporting these groups. They have been denied in Federal courts and they will keep being denied. So why do they continue to protest and refuse to pay their taxes unlike the rest of us?

The Argument:

"Taxes Are Unconstitutional!" The most consistent "evidence" the Tax Protesters use is that the 16th Amendment to the constitution is unconstitutional. The 16th Amendment which was ratified in 1913 states:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

Tax Protesters have tried (and failed) to convince courts that this amendment is not valid and was not properly ratified. They've also tried to say that federal notes do not constitute that cash is income. These positions are unfounded and are called "frivolous arguments" by the Federal Government and the IRS.

The Punishment:

Protesting Federal income tax is not a criminal offense. However, the IRS has found a way to stop people from filing frivolous returns due to protesting (Section 6702 "in an effort to deter tax protesters from filing frivolous returns."). The penalty is $500 if you did it before March 15, 2007. But for positions taken after that, the amount has increased to $5,000. It obviously doesn't pay to protest!

Get Real: I recommend spending your holiday with friends and family rather than baking outside- both from the heat and your anger. You won't change the tax system by wasting your weekend.

Happy Independence Day, I'll be Back in Town to Answer Tax Questions on Monday

Ask the IRS Hitman: Why doesn't Bankruptcy Discharge my Tax Debt?

I receive tons of e-mails throughout the day from people in desperate need of Tax Help. I never mind answering questions, feel free to drop me a line if you have specific questions. But I never usually share them along with my answers with the readers. But now, I'm sharing the answer to one pressing questions about Bankruptcy:

I filed for chapter 7 on 1/31/09 and obtained a discharge on 5/19/2009. At the time of my filing for chapter 7, I had IRS debts for the following tax periods;

Years 2000, and 2004 both filed on 12/5/2005
and year 2005 filed on 10/30/2006

I thought that I could wipe out the 2000 and 2004 tax liabilities since it's been more than 3 years from the time they were due, but when I spoke to the IRS today I was told the debts are not dischargeble. Is there something here that I'm missing? The person that I spoke to had a typical IRS response? what can I do? Is it better to write to them and if so to whom?

My Reply:
There are a couple of factors that could rule you out of having your tax debt discharged.

1. You had to have personally filed the return, if a Substitute for Return or SFR was filed, that tax year will not qualify.

2. The Tax Return has to have been filed and accessed more than 24 months to filing for bankruptcy. This means the returns were filed AND processed and you were billed for tax debt 24 months before applying for bankruptcy.

Most taxpayers can’t clear those hurtles to have their tax debt discharged, and unfortunately it seems a lot of bankruptcy attorneys will erroneously claim tax debt can universally be removed. And about the “typical IRS response,” if the person you spoke with had the, “Yeah right, you owe it” attitude, that’s the culture of the organization. Typically, the Taxpayer does owe the IRS, and this makes them particularly difficult to communicate with.

If you want a real solution to your tax debt, hire a tax debt professional. Call 1-888-415-1337 or fill out the submission form to get real answers to your tax problems.

Solve Your Tax Debt: See if you Qualify for an Offer in Compromise

Settle Down: If you have a tax debt and are in need of settling, you have a few options available to you. Most taxpayers are not able to pay off their debt in full. If this is your case, and you are unable to pay the IRS through an Installment Agreement, an Offer in Compromise (OIC) may be an option.

Last Resort: An Offer in Compromise is an agreement between you and the IRS that resolves tax debt by settling or compromising for less than full payment. An OIC is only considered after all other payment options have been exhausted. This means that you have sorted through the requirements of the other plans and find that you don’t qualify, or you can’t make the payments.

The Choice is Yours: In order to initiate the process; you must file the all the forms, and submit the non-refundable $150 application fee and 20% initial payment. It’s in your hands and it’s not easy. Acceptance into the program is stringent; the IRS rarely accepts any offers. So it’s important that, if you are applying for the program, you are sure it is one of your final options. Otherwise you could end up wasting time, and money. Also, if your offer is rejected, the IRS uses the information you sent to levy any account that your name is attached to.

The Equation: Basically an OIC is your ability to pay vs. the IRS’ ability to collect.
Ask yourself this question: if the IRS were to take everything from you (your wages, your assets, your available credit, etc.) would that satisfy the debt? If the answer is no then you may just qualify. However, keep in mind that the IRS has a very specific formula for determining your ability to pay.

Big Picture: The entire process of an OIC may take up to two years just to get accepted, and during that time your debt continues to grow. Remember that almost all Offer in Compromise cases are rejected by the IRS. Speak to a tax professional and make sure that you can qualify; otherwise you may wind up in an even worse situation.