An Ex-IRS District Director Gets 2 Years for Defrauding the IRS

Ex IRS Employees get in trouble, too. The IRS and the U.S. government do not discriminate. Recently, Jesse Ayala Cota, 68, former IRS District Director, was sentenced to 2 years in prison after pleading guilty to one count of conspiracy to defraud the IRS.

Jesse Ayala Cota worked 33 years at the IRS as a revenue agent, audit-training coordinator, large-case examination manager, assistant service center director, assistant district director and district director. After all of these lofty positions, he knows the rules. Yet he still thought he could get away with breaking them. Bad move.

After Cota quit the IRS, he went to work with Renaissance, the Tax People Inc., It was here were Cota went on to defraud the U.S. government of more than $1.3 million while earning more than $300,000 working with the company.

Jesse Ayala Cota used the same old IRS scams. He ran a service that helped home-based businesses who paid to become "members". The services provided included tax preparation, tax advice, and so-called "audit protection".

The "Tax Advantage System" offered by his company was based on fraudulent claims that business owners could legally reduce their tax liability by converting their personal expenses into business deductions. Jess Ayala Cota and other employees assured their clients that this was legal.

More "Renaissance-Cases" will crop up. Jesse Ayala Cota's co-defendant, other members of Renaissance and Renaissance's founder and president, Michael Craig Cooper, are set for sentencing in the coming months. Thomas Steelman, another former long-time IRS employee, was sentenced to 46 months in prison August 10, 2009. Several other tax preparers associated with Renaissance have been sentenced to prison or probation.

Lessons Learned? As a consumer, you have to really look at any tax company you choose to work with. If it sounds to good to be true, it is. Don't be afraid to do your own research. Look up the company's rating with the Better Business Bureau and search their reputation on the web. If you don't do you due diligence as a consumer, a shady company might drag you down with them.

Timothy Geithner's "Turbo Tax" Defense Rejected by U.S. Court

Remember the whole mess with Timothy Geithner's tax debt earlier this year? He blamed it on TurboTax, saying his failure to pay a few years was not flagged by the software. Somehow, he got away with just paying a few fines.

Excuse Trend: According to the news source Bloomberg, A federal court rejected an attempt by two Ohio residents to use the so-called TurboTax defense that Timothy Geithner relied on to help win Senate confirmation as U.S. Treasury Secretary. I'm a little worries this is going to start a trend of blaming TurboTax for any tax issues.

No Excuse If you fail to pay any tax years, there's rarely an excuse. The IRS doesn't want to hear that it's TurboTax's fault, so don't get any funny ideas. Instead, work towards a resolution. Here's what to do:

Steps for Filing Back Taxes

1. File all missing returns. If you don't have your W-2's or other pay information for any of the years, the IRS can provide you with a wage and income transcript. Getting your deductions and credits applied is trickier. If you don't have the records to support a deduction or credit then you can't get anything for it. The good news is you don't have to file anything older than 7 years.

2. Make sure you don't have an existing IRS debt. This debt may or may not be reduced if you file the missing years. More importantly though you can't work with the IRS to settle your debt until you've filed your missing tax years, which is referred to as getting into compliance. So if you have a wage garnishment you can't do anything about getting it lifted until you file your past due returns.

3. If you do have a debt... check to see if it's because of a Substitute Filing Return. If you have a SFR you will need to file an amended return. Your amended return has to prove that the IRS filed your taxes incorrectly. If you don't have any supporting documents for your claim, then the IRS filing stands.

4. If you're expecting a refund from your un-filed taxes you're in for a rude awakening. Granted, re-filing and amended filing can get your total debt reduced. However you can only get actual tax refunds from un-filed returns for the last 2 years. You don't get any money refunded for older returns.

Can you breath now?....Filing your back taxes can seem stressful and difficult and you are pretty likely to owe some money to the IRS. However you're no longer afraid of some IRS-Hitman kicking in your door late some night. OK, we never did that. Or did we?

The New IRS Hitman Video

Director Don Campbell sat me down to ask a few questions about why I left the IRS's collections division and join the good fight to help taxpayers. Take a look, the video is to the right.

If you want to view it larger, you can always go here.

I'm working with my tech guys to add more features to the blog. Here's what to expect in the coming months:

- More helpful tax videos
- More exclusive video interviews
- Helpful free Tax downloads
- A more streamlined design

I'm expanding my presence to more social networks. It's a little tricky to maintain them all (thus, some have remained static) with my work load at the office, but it's rewarding to connect and help people with their tax issues.

Settle Your Tax Debt With Bankruptcy- Avoid 5 Common Traps

Can't Pay! You can make Debt Vanish with a Bankruptcy! Is this true? No, it's not. If you file for Bankruptcy, your debt can grow! Penalties and interest don't stop accruing in the time it takes for a Bankruptcy to be approved. So watch out. Don't fall into this trap.

5 Common Bankruptcy Traps: Why Bankruptcy doesn't work for Tax Debt.

1. Having Money and Assets
If you have plenty of money in the bank to satisfy your debt, your money will be seized to satisfy your debt. You're not escaping the IRS if you have money to pay them. No matter what you try to do.

2. Filed Before?
If you filed under Chapters 7, 11, 12, or 13 and paid your unsecured creditors less than 70% of what you owed them, you cannot get another discharge.

3. Is it Fair?
You may try to file Bankruptcy although you can afford to pay the IRS in monthly installments. Your case for bankruptcy will be thoroughly examined. And if they find you have enough income to pay for your basic needs AND your debts, they won't allow the bankruptcy. Your Bankruptcy will be dismissed on Issues of Fairness and your IRS Debt will remain.

4. Secured Creditors
If a creditor has a right to take specific property to satisfy a debt, that creditor is secured. That means Tax Liens survive Bankruptcy. You either pay after Bankruptcy, or the IRS can repossess your property.

5. Fraudulent Transfers
People try to be slick. They often transfer money out of their account before Bankruptcy to improve their odds of it being discharged. You won't get away with it! The Bankruptcy code deems all transfers of money or property to friends, relatives, or business associates within one year of filing for Bankruptcy as fraudulent transfers. The Bankruptcy court can then seize property from the person who received it, and use it to pay your IRS Debt!

No Easy Way Out: If your financial situation is desperate, the IRS has a solution for you. You might qualify for a Hardship Plan. The Hardship plan would stop the IRS's relentless collections efforts for a few months, giving you time to get your finances in order. It won't be easy to convince the IRS you need the Hardship Plan. But you're better off trying any of the IRS's options then resorting to Bankruptcy.

IRS Tax Debt: The Benefits of Paying Tax Debt in Full

If you owe the IRS, there’s no time to lose. You need to find a way to start paying them, and fast! If you call the IRS directly you’ll soon learn they only want to talk about one thing- how soon can you pay IN FULL. But that’s not your only option. You can pay the IRS in monthly installments or in partial payments.

IRS Installment Agreement
Much like how you pay on your credit card debts, you can pay the IRS in monthly payments. However, there are some key differences. You decide how much you pay creditors, but the IRS determines the amount you’ll pay them monthly. They do this by taking a close look at your financial situation and determining your disposable income. So making a valid case when you apply for an Installment Agreement is a must. Additionally, the amount you pay monthly must satisfy the entire tax debt within three years. In order to apply fill out IRS Form 9465, Installment Agreement Request.

IRS Partial Payment Installment Agreement
In a Partial Payment Installment Agreement, the taxpayer makes regular monthly payments to the IRS, but the payments do not pay off the tax debt in full like the classic Installment Agreement is intended to. After the terms of the Installment Agreement are fulfilled, the remainder of the IRS Tax Debt is forgiven. Although requesting a Partial Payment Installment Agreement with the IRS is easier than submitting an Offer in Compromise, it’s still tricky. First, you need to write a letter stating your request for a Partial Payment Installment Agreement and submit it to the IRS along with IRS Form 9465 and IRS Form 433-A. Consider consulting with a qualified professional to help you with these steps.


Paying in Full When you Don’t have the Cash
Taking out a loan at the bank to pay your IRS debt is a good way to stop interest from accruing on your account. Even if your credit is in trouble you can still qualify for a loan and decrease your Tax Debt. A Bank Loan is cheaper than an IRS Debt. Penalties and Interest on Tax Debt are a lot higher than a loan from a bank. A typical Bank Loan, if you can get one, is around 6.5% interest versus Penalties and Interest on an IRS Debt which is usually 8% compounded daily. If you have the option to pay your Debt in Full with a Bank Loan, you should consider this solution.

If there is any way possible for you to pay your Tax Debt in full, consider that solution as a priority. Remember, penalties and interest continues to accrue on your Tax Debt when you choose to pay with an Installment Agreement. You’ll be saving money in the long run if you borrow money to satisfy your debt.

The Road to Resolution, Featuring the IRS Hitman

I've finally been given the green light to premiere the short cut of our behind-the-scenes video. I make a cameo and discuss my motives from switching from being an IRS Hitman to being one of the Good Guys. Take a look:



Right now, we're working on developing even more helpful videos for the American Taxpayer. Check back for more.

IRS Tax Issues: The Top 3 Tax Sins

IRS Tax Issues: 3 Things You Should Never do with Your Taxes

Be Prepared: Most people learn more from their mistakes. But you don't want to make a mistake when it comes to IRS Issues. Your debt could go from being $100 to $1,000 dollars easily. So be prepared! Here are three key things you should NEVER do when handling your IRS Tax Issues.

1. Get to it “Later”
Procrastination can drain your bank account. Take care of your IRS notices Now not Later. Time will run out, and your debt will be larger than ever. Remember:

• The IRS adds interest and penalties for every month your IRS Debt goes unpaid

• Put it off long enough, and the IRS will be forced to use their collection methods against you. That's right, the infamous IRS Liens, Levies, and Seizures

2. Fail to Proofread
Even tiny mistakes can cost you big when it comes to IRS Issues. For example, when you submit Form 656 “Offer in Compromise” you have to pay a $150 dollar application fee. If you make a mistake the $150 is nonrefundable! Double check every section of an IRS document before you submit it! Common errors include:

• Not answering every question. Fill the form out completely, leave nothing blank
• Not including supporting documents when necessary
• Not signing all paperwork when and where you are required to

3. Neglect to File
Every year people refuse to file their taxes. They rationalize, “I can't pay my taxes this year, so I shouldn't file!” Bad idea. Failure to file is illegal. And although few people are thrown in jail, the maximum sentence you can face for failing to file your taxes is 3 years. If you are taken to court for failure to file, you will be held responsible for court and Attorney fees. If that doesn't convince you, check out some more reasons why you MUST file every year:

• Late filing penalties and interest will make your debt skyrocket out of control

• You will not qualify for Penalty Abatement or an Offer in Compromise if you're not current with your tax filing

• Some employers can fire you if you are not current with your tax filing. (These are usually government jobs)

Final Tip: So now you know the Top 3 things you should do make when you are handling your Tax Issues. But what will happen if you're already guilty of one or all three of these deadly offenses? It's never too late.

The Path to Resolution, Behind the Scenes with the IRS

I gave a quick speech on "The Path to Resolution" with the IRS this morning. Just like I do with this blog, I always tell it straight. There's no easy, fast answers with the IRS after you owe Tax Debt. The process of removing Tax Debt is long, difficult, and stressful, but it's not impossible.

Step 1, Compliance: The first thing that has to happen is Tax Preparation, is the file in compliance? If not, the IRS will send it back to you and ask for all the tax years you're out of compliance for to be filed. This can be incredibly difficult when you no longer have all of the documents to do this.

Step 2, Finances: The IRS wants to know everything about your financial situation. They want to determine why you're not paying them, and how much you can pay them. They want to see your electric bill, mortgage, car statement, the works.

Step 3, The Waiting Game: For most people that owe, a manager personally has to review every file. This is incredibly time consuming, it could be weeks or months before you get a response. Sometimes the manager will send a letter requesting MORE documents to prove your financial situation, and that long process starts all over again. When you don't work with a professional, you have to expect these kinds of delays.

Step 4, The Sentence: After everything is accounted for, the IRS determines how much you will pay from here. Here at our offices this is our cue to speak directly with the manager or revenue officer to prove the financial situation and work out the lowest payment. It's not impossible to negotiate on your own, just be sure to do some extensive research before hand.

Step 5, The Resolution: Once you know how the debt will be resolved (monthly payments, settlement in monthly payments) it's your job to hold up your end of the deal. Make the monthly payments on time, work your hardest to raise funds, do what's required of you. You don't want to make a bigger mess with the IRS.

The Perilous IRS Journey: Of course, this is oversimplifying a bit, but I want taxpayers that owe to get an idea of the kind of work they're looking at when they start on The Road to Resolution. There will be delays, it will be hard, but it's not impossible with persistence.

Hobby vs. Business: How to Classify your Summer Business

Summer Jobs or Summer Hobbies? What's the difference, and why is it important? Over the summer, many people take on small odd jobs for profit. Sometimes the odd job is simply for your enjoyment, and you happen to make some profit from it. Other times, you pass out fliers, promote, and do everything you can to make the extra cash. The difference is important if you want to avoid trouble with the IRS.

Reporting all income The IRS requires that you report all income, including income made from hobbies. But what's the difference between a Hobby and a Business? Here's 8 questions the IRS requires you ask yourself to determine the answer:

1. Is the purpose of your activity to make a profit? You might have fun with your business, but you really engage in it for profit.

2. Do you participate in your activity just for fun? According to the IRS, Hobbies are purely for fun and you might happen to make a little profit from it. Business is Business, you're in it for profit.

3. Do you depend on income from the activity? The hallmark of a business.

4. Have you changed methods of operation to improve profitability? This shows that you're operating with in a business-like sense, and your "Hobby" is probably a "Business".

5. Do you have the knowledge needed to carry on the activity as a successful business? People who carry out hobbies just for fun, often don’t have the business acumen to turn their not-for-profit activity into a profitable business venture.

6. Have you made a profit in similar activities in the past? An activity is presumed carried on for profit if it makes a profit in at least three of the last five tax years, including the current year – or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

7. Does the activity make a profit in some years? You might not make profit every year, but the "hobby" could still be a "business".

8. Do you expect to make a profit in the future from the appreciation of assets used in the activity? This indicates your activity may be a business rather than a hobby.

Business or Hobby? If you determine that your business is actually a hobby, you cannot take deductions that exceed the gross receipts for the activity. But if you're conducting a business, you can make business deductions. If you want to take your hobby seriously as a business and make deductions from there, print some business cards and fliers and you're already on your way.

Ask the IRS Hitman on Yahoo Answers

Ask The Hitman: Many of my readers already know they contact me through the form, by e-mail. Now, there's yet another outlet to reach me at.

Yahoo Answers On top of my hectic schedule, I've made a Yahoo Answers account. From here, I can help more taxpayers in need to answer their burning questions. It's hard work, and I won't be able to put my 100% full attention to it, but I will try to use it as much as possible. I'll even share some helpful answers to questions on Yahoo Answers here on the blog. Here's one from last week, which was voted Best Answer:

Question:
I'm the manager of a small business and want to hire a bookkeeper. What are some good questions to ask this?
potential bookkeeper?

I only need someone who knows quickbooks...what are some good questions to ask. I own a small lounge in a city and need help in keeping up with the cash flow.

My Answer:
Hiring a bookkeeper is an important decision that should not be taken lightly. Here's some questions you should ask straight from the national society of accountants:

- What credentials do you have?
- How long have you been in practice?
- How do you keep current on law changes?
- Have you dealt with tax situations like mine?
- Are you the person who will do my return?
- What organizations do you belong to and do they have a code of ethics?

Don't forget to ask about their experience (looking for 10+ years), licenses, and certifications.

As always, I'm only an e-mail away if you have any specific questions. Drop me a line.

Thinking of Starting a Small Business? Do Your Homework to Avoid IRS Tax Debt

I need to write the book on Small Business Tax Help already. The more cases I handle at the office, the more I realize that the vast majority of business owners don't have any idea how to run a business! They mess up in every way they can- and end up owing the IRS big time. Here's a few basic pointers.

Before You Start, Read Up Starting your own business can be a massive undertaking. Even if it's a side job. It's a drain on time (friends? what friends?), money (start-up hurts), and it's stressful to boot. But even if you combine all of those factors, you still don't get the amount of frustration the IRS brings to the table. The IRS makes things ridiculously hard for Small Business. Here's some things to read up on before you even consider taking the plunge:

-IRS Tax Information for Business: Straight from the source, and intimidating online handbook of rules and regulations.

-Business.gov: Find loans and grants, get business licenses and permits, register your business name, and even a discussion forum.

-Circular E: Thinking of hiring employees? Here's Circular E, the Employer's Tax Guide. Reading this entire guide in one sitting is recommended only for my most masochistic of readers.

Does all of this seem like "too much"? Run while you still can. Starting a business might not be for you.

Expect to Report Income The IRS wants you to report all income, no matter if it's your side job mowing lawns or a bigger 20 man landscaping operation. A lot of people think self-employment is their path to untaxed income. Think again.

Keep All Records We talk with dozens of people daily that don't have any files or bills. The IRS requires this information. Otherwise, how can you prove the deduction? You need to keep receipts, copies of bills, and invoices in a safe place.

Final Tip If you can afford it, hire a third party or an experienced staff accountant to handle your tax issues for you. This will free you up to do what's important, run your business.

IRS Tax Debt, Advice for Service Industry Workers and Tax Cheating Myths

Under a Magnifying Glass: Work in the Service Industry? Be careful, you're being watched. The IRS has determined that the biggest chunk of people who cheat on their Tax Returns work in the service industry. Especially doctors, hairdressers, lawyers and even Accountants. So be extra careful when you're filling out your Tax Returns this year. Watch out for bad advice and myths.

Myth #1: You can claim Kids or a Spouse you don't have.
This is obviously a bad idea. The IRS double checks suspicious Tax Returns. And if it's determined you are lying, you will owe any money you received plus penalties and interest. You even risk criminal charges and jail time.

Myth #2: If you don't file one year, don't file the next.
Failure to file is a criminal offense. And unless you want to risk jail time, it's a good idea to file your taxes. Alarms won't sound, the IRS will not hunt you down when you suddenly start filing again. In fact, the IRS wants to encourage nonfilers to file. So if you haven't filed, get started!

Criminal Intent: The IRS does not take Tax Cheating lightly. They have a special department for people who try to cheat Uncle Sam out of him money. It's called The Criminal Investigation Division, or CID. It has 4, 500 workers. People who work in this division are called “Special Agents” and they even carry badges and have guns. They are like the IRS's police force. They are specially trained by the IRS and the FBI. Don't think you can get away with a Tax Crime when these guys are around.

Prevention is Key: Now you know how dangerous the IRS can be. They have special departments trained to hunt you down. So watch out, make sure you don't follow bad advice. You can end up owing tons of fines, or worse, you can end up in prison.

It's Not Too Late: Don't lie! If the IRS is already investigating you for Tax Fraud, you'll only be fanning the flame if you lie to the IRS. You do have the right to remain silent. This is guaranteed by the 5th amendment. But this is not a permanent solution. Interest due for fraud is 75% added to the tax due! So you can't stay silent and ignore your debt. If you are unsure of how to handle the situation, it's a good idea to find a qualified Tax Care Professional that can help you with your specific case.

Can't Pay the IRS? IRS Hardship Status Explained, See if you Qualify.

Can't Pay: Many of you would pay the IRS...if you could. But times are tough. Jobs are being lost. One thing lead to another, and now you can't afford to pay the IRS. For taxpayers in this situation, there's a little known secret.

Hardship Status: Hardship status is for people who cannot pay on their IRS debt without sacrificing their basic needs. The IRS will compare your monthly gross income versus what they consider your “allowable expenses” to determine if you qualify for this program. If you qualify, collection efforts may be extended for up to 1 year.

Basic Needs? Basic needs or “allowable expenses” includes food, housing, clothing, transportation, medical expenses, and insurance. The IRS will not count any luxury expenses as basic needs. So don't try to include the price for weekly lawn maintenance (The IRS wants you to mow your own lawn), or even the price of private school for your kids. The amount of money you can spend on your basic needs are national standards, which the IRS updates every year.

Qualify? If paying the IRS will make you go without basic needs, you may qualify for Hardship Status. How do you apply for it? First, you fill out Form 433A. The IRS will use this form to figure out your financial situation and see if you apply.

Don't Party Yet: It's not over yet. The IRS Hardship Plan does not suspend collections forever. After the grace period given to you has expired, collections efforts will resume full force. Plus, the IRS will check up on your every couple of months to see if you still qualify for the hardship plan. If your income has changed, the IRS might expect you to pay on your IRS debt.

Criminal Charges: Do not lie on Form 433A in any way to achieve Hardship status. When the IRS finds out, you'll face severe penalties and/or criminal charges. If you are unsure about anything you put on your form, contact a professional that will help you. Don't go to jail just to skip out on your debt for a few months!

Three ways to Remove an IRS Tax Lien

If you're reading this you probably already know the devastating effects a Tax Lien can have on you. Your credit, your assets, your home- it's all at risk. So how do you go about removing a Tax Lien? I have to be honest, the only sure way to remove it is to pay your tax debt in full. But until then, one of these options may work for you.

Appeal the Lien Filing

The IRS has five business days after filing the lien to provide you with written notice. The written notice must include notice of the right to request a hearing within 30 days from the sixth day after the Lien filing. If you win the appeal, the lien will be withdrawn. However, the lien being filed on you will still appear on your credit report. Because of that, this method would not be ideal for those out to protect their credit.

Request Partial Discharge

You may own several assets that are encumbered by the tax lien. You can use one to pay off the IRS. If you want to do this ask for a discharge from the Tax Lien. The IRS will likely do this. You will need to send a detailed letter to the IRS. There is no preprinted form for you to fill out. IRS Publication 784, “Application for Subordination of Federal Tax Lien” lists all the information you will need to include in your letter.

What to do if the IRS Files a Tax Lien in Error
The IRS occasionally files a tax lien notice when you don't owe anything. Perhaps you paid your bill late, and the IRS neglected to update your account. If this happens, under the Taxpayer's Bill of Rights you are entitled to a “Certificate of Release”. The “Certificate of Release” will state that the Lien was filed in error. It will then be your job to mail or deliver photocopies of the release to the three credit bureaus- Experian, TransUnion and Equifax. This will minimize the damage to your credit rating caused by the IRS error.

Avoid Bankruptcy
Contrary to popular belief, filing Bankruptcy will not wipe out a Tax Lien. If your Tax Debts qualify for a discharge under any type of bankruptcy, the Lien will remain. If you owned any property going into bankruptcy, the property is still subject to a Tax Lien. The IRS could seize the property after your bankruptcy is over.

Be careful when you perform any of the above tasks to get the IRS to release your Lien. You risk having your Lien remain until the statute of limitations expires if you make even a small mistake. You also greatly increase your chances of having the Lien removed if you file your back taxes.

Jobless Rate Falls- But Thousands are Still out of Work. Tax Breaks for the Unemployed.

The Good News: This July, Employers cut far fewer jobs from payrolls according to a government's Labor Department Report. Additionally, the unemployment rate just fell for the first time in more than a year. The net job loss for jobs in July is 247,000, which is the fewest since August 2008.

The Bad News: This is good, and better than the expected 325,000. But the fact remains, 247,000 people lost their jobs last month! For the many that are unemployed, he's a quick guide to tax breaks you can qualify for while you're on the hunt for a new job.

Tax Breaks for the Unemployed

Tax Deductible Job Searching... Here's what you can write off while you're on the hunt:

-Resume Services: Go ahead and have your Resume made by a professional.
-Want-Ad Placement Fees: Place your ad in the paper without worry
-Travel Expenses: Applies to going out of the city to hunt for a job
-Agency Fees: The IRS covers employment agency fees
-Printing costs: For business cards, resumes, and letters
-Mailing Fees: For sending out resumes
-Telephone Calls: For if you have to call long-distance

The Catch: There's always a catch. And with the IRS, there's a few big ones. Sorry to get your hopes up, but you have to comply with these rules if you want to deduct the costs from your job hunt.

-Keep Track of Time: Deductions are not allowed if there's a big break between when your last job stopped and your new one began. Basically, get to looking for your job fast. Don't take a long break.

-The Same Field: Your new job has to be in the same line of work as your last job. For example, if you're a writer you will not qualify if you look for a job as an astronomer.

-Recent Graduates: I have some bad news for recent graduates. You do not qualify if you are looking for your own job. Tax law states that you only qualify if you are looking for a job in a field you are already employed in.

So Basically... If you're a Retail Manager and want to move to a different store location that is closer to your house, you qualify. You have to already be employed in the field you seek extra work in.

Word of Caution: I sound like a broken record, but listen up. When I worked as an IRS Hitman, most people were in debt because they made false deductions. Exaggerating your deductions is one of the surest ways to get caught by the IRS. Don't make sudden decisions, follow certified professional advice instead. And keep track of all your spendings!

The IRS Hitman Featured Columnist for Advantage Small Business Magazine

I wrote an article of Advantage Small Business Magazine. It's a detailed Tax Guide for Small Business, advising you how to get started, how to prevent tax debt issues, and how to hire professional help if you need it. Click below to read it.

Richard Close, The IRS Hitmam, shoots documentary

Richard Close is Ready for his Close Up, The IRS Hitman, finally revealed! Actually, if you look hard enough, there’s pictures of me available on the web from columns I've written. But this will be my first time taking part in a documentary. This will be the first of many with the goal of helping taxpayers in need. We want to spread awareness of the big issues.

Photo on the set

By sharing my stories and experiences as a former IRS Revenue Officer we hope to bring awareness about the IRS inner workings to the average taxpayer. Working on these documentaries is a very rewarding experience, and with any luck we'll be able to help hundreds of taxpayers.

Top 3 Ways to Stop a Tax Levy, Creative Solutions

Tried it all? Reasoning with the IRS is next to impossible. Maybe the usual solutions for releasing a Tax Levy didn't work for you. Don't give up hope. Try some of these little known solutions. But before you read and try these, remember that the best way to stop or prevent a Tax Levy is to pay your debt in full.

Request more time: You can have your levy lifted for a short time. But you'll have to work hard for it. Explain how you're going to raise the money to pay. Let the IRS know you're going to sell some assets or get a home equity loan to pay your debt. The IRS might go with you on it, but you have to follow through with them. Keep updating them on your status.

Appeal: Know your rights. You have the Right to appeal a Tax Levy. I'll be honest though, the RO Manager will most likely turn you down. Regardless, you can still complete Form 8423, “Collection Appeal Request” and send it to the IRS. Don't get your hopes up on this option though, few people are approved.

Pay Anything: Again, had to list the obvious answer. You should try to borrow on credit cards, take out a loan, or even ask your family. As long as your making consistent payments to the IRS, they have no reason to levy your bank account or your wages.

You've been warned: I thought I'd list some helpful tips for prevent and cursing Tax levies, but really, the only way to stop them from happening is to face up and pay up. If you're too overwhelmed to cope with your IRS mess, consider working with a professional.

Common Problems Small Businesses Run Into With the IRS

The average owner of a Small Business typically reports a loss in their first year of operation. But when the IRS steps in, many first-timers don’t even stand a chance. It’s important to stay one step ahead of the game when it comes to obeying Tax Laws. Small Business owners need to make sure they avoid the common problems Small Businesses run into with the IRS.

Payroll 941
Failing to withhold payroll taxes is the fast track to trouble with the IRS. The penalty for this equals the amount of the taxes that are owed. It’s called the 100% Payroll Penalty or “Trust Fund Recovery.” The results of this mishap can be devastating for any Small Business regardless of how successful they are.

Classifying Workers

It’s a little tricky, but it’s important to properly classify your Small Business workers. The two classifications are “Employees” and “Independent Contractors.” If Employees are misclassified as Independent Contractors, they would avoid Tax Reporting. This is the same as stealing from the IRS, and the punishments imposed for this are not light. Form 22-8 "Determination of Employee Work Status for Purposes of Federal Income Tax Withholding" will help you determine the important differences between an “Employee” and an “Independent Contractor.”

Overstating Deductions

Knowing and taking advantage of Tax Credits is important if you want your Small Business to survive and thrive. But you can only deduct the cost of items you use for work. This means no deducting expensive vacations, limo rides, or new editions to your house. The deductions you claim must be reasonable and responsible. Additionally, you have to be ready to prove the deducted items are used for work. If a taxpayer is caught making false deductions, they will owe IRS Tax Debt plus penalties and interest. Do not get greedy when it comes to the IRS.

With proper planning and understanding, you can beat the IRS and avoid the Common Problems Small Businesses Encounter. Don’t forget that although there are many issues that come with owning a small business, there are also a few advantages. Don’t overlook valuable Tax Credits. Practically everything purchased that goes towards operating your business is Tax Deductible. This means everything from pens and notepads to ovens, delivery trucks, computers, and more.