Category Archives: Blog

IRS Whistleblowers: Who and What they are

A Whistleblower is a person who is paid by the IRS Whistleblower Office in result of blowing the whistle on individuals who have failed to pay the tax that they owe. If the IRS uses information given by the whistleblower, they can be rewarded up to 30% of the additional tax. The primary purpose of the Whistleblower Award is to encourage people with the knowledge of significant tax disobedience to come forward and provide information to the IRS. The IRS vision of the Whistleblower Informant Award includes broadening the program’s reach and providing better communication with existing and potential whistleblowers. Continue reading →

How Well is the IRS Handling Taxpayer Phone Calls?

For the past few filing seasons, the IRS has been under difficult workplace circumstances. The IRS has had to deal with low funding, fewer employees, and lack of motivation to answer customer’s calls. This affects the IRS’s ability to give proper customer service to taxpayers. In a report by Head Taxpayer Advocate Nina E. Olson, statistics on the IRS’s poor phone service performance was noted frequently. Continue reading →

How Does Gambling Lead to Tax Problems – In Michigan it’s Worse

In Michigan, gamblers at the casino are required to report any and all winnings on their tax returns. However, you cannot deduct your losses. If you play cards, pull slots, or gamble in any other way your winnings are taxable. Here are a few tips to help steer clear from trouble with the IRS: Continue reading →

Discharging Taxes in Bankruptcy

Most people don’t realize that income taxes can be discharged in bankruptcy. However there are rules that must be followed in order to determine whether or not a particular year can be discharged.

The basic rules are as follows:

  1. At the time of the filing of the bankruptcy the tax debt must be at least three years from the date the tax return was due for that year.
  2. At the time of the filing of bankruptcy it has been at least 2 years from the date the tax return, on which the balance is owed, was filed.
  3. At the time of the filing of the bankruptcy it has been at least 240 days since the IRS last assessed the tax.
  4. There was no fraud or willful tax evasion in connection with the tax debt looking to be discharged.

 

Even though there are 4 basic rules to discharging income tax, there are other events that can add time to the calculation of when a tax debt becomes dischargeable. Those events include, but are not limited to, requests for a collection due process hearing, the time in a prior bankruptcy, and the filing of an Offer in Compromise.
At Lothamer, our attorneys and CPAs have the ability to review IRS transcripts and determine whether or not the taxes you owe are dischargeable in a bankruptcy. Lothamer clients have saved hundreds of thousands of dollars over the years by utilizing the bankruptcy process to either eliminate or greatly reduce their tax debt.

If you are contemplating a bankruptcy, call Lothamer today to schedule a initial consultation.

Does Your Business Owe Taxes?

Does your business owe taxes that it can’t pay?

Have you recently received correspondence from the IRS indicating that your business owes past taxes? If you have found yourself in a situation where your business is not able to pay the balance in full, you will need to establish resolution on the balances.

Much like individual income taxes, the IRS offers various resolution options for businesses. In some situations, the business may be able to request an In Business Trust Fund Express Installment Agreement. This agreement allows the business to pay its tax debt in full over 24 months.

If a business cannot make this payment or otherwise does not qualify for this agreement, it will need to complete a form 433-B, Collection Information Statement for Businesses. The form 433-B provides the IRS with a comprehensive view of business income, expense, assets, and liabilities in order to better determine the businesses ability to pay.

When completing a form 433-B, you will need the following information: the basic information for the business (address, EIN, entity type); information regarding officers/members; bank account information; receivables and liability accounts; asset information including real property, vehicles; and equipment owned by the business; and monthly income and expenses of the business.

Although completion of a 433-B may seem rather straight forward, there are issues that you need to be aware of when completing the form. For instance, a seasonal business needs to determine what monthly income to report, as there may be large fluctuations from month to month. Also, a business that just received a large payment may show excess money in the business bank account, although that money may be needed to support other expenses of the business.

The best advice when dealing with the IRS to set-up an installment agreement on your business is to hire a Tax Attorney or CPA to represent you, especially if a Revenue Officer has been assigned to your case. The IRS will first review your business to determine if it is viable. They will make a determination as to whether your business is capable of meeting tax obligations and still having a profit and whether your business should continue to operate. The IRS may also deny expenses claimed on your tax return, such as depreciation, when determining your business’s ability to pay.

For most people, their business is their livelihood. Therefore, it is essential that it gets into and remains in compliance with the IRS, continues to operate, and the payment plan is something that can be afforded by the business. A Tax Attorney or CPA can help you to navigate the IRS forms and can represent you before the IRS to achieve the best possible results.

Contacted

Have you been contacted by an IRS Revenue Officer?

The following situation is a very common one:

You return home from your day at work to find that an IRS Revenue Officer has stopped by your home. You see a “final demand” notice along with their business card in your door. Revenue Officers are trained collection agents for the IRS that specialize in getting cases closed as expeditiously as possible. This means they are not looking out for the best interest of the taxpayer, and they will likely aggressively pursue whatever avenues are available to them to get you to pay up. It is also a common procedure for a Revenue Officer to request to meet with you for an in-person interview. This puts you at risk of providing them with more information than is legally required.
If you are contacted by an IRS Revenue Officer, you have the right to be represented by a CPA or tax attorney. A CPA or tax attorney will make sure you are protected from levy and asset seizure, and that all legal procedures are followed. When a taxpayer has a CPA or tax attorney representing them, all correspondence and interviews will be conducted between the Revenue Officer and your CPA or tax attorney, therefore eliminating the potential hazards of saying too much.

Inside the IRS

IRS employees do not have it easy.

The IRS has been slimming down in many ways. Last year, the agency had lost 11 percent of its workers. Vital office employee positions, such as secretary positions, have had a hiring freeze for four years. This hiring freeze has impacted all employees because they must take on additional duties along with their everyday work schedules. Furthermore, 40 percent of customer service calls during tax season will be put on hold or through to someone else, in many cases over an hour. Lastly, IRS employees have strict travel restrictions in place.

So what does this mean for people with tax problems?

  1. Longer hold times or more frequent disconnections for taxpayers calling the IRS.

  2. Denial of requests due to excessive work load of IRS employees.

  3. Negative employee morale, leading to unpleasant customer service aid.

  4. Increased amount of stress for taxpayers.

 

Lothamer Tax Resolution understands your tax needs and are here to help. At Lothamer Tax Resolution, we take your tax problems seriously with face-to-face consultations catered to your needs. Call today at (800)-619-8277 to schedule your initial consultation. We take pride in providing personal consultation help that will enable you to get on with your life.

How Does the IRS Select Returns for Audit?

Although the IRS does not have a set list of items that a return can be audited for, there are some general items that may make a return more likely to be audited.
  1. The IRS may audit or make an adjustment to a return when the information reported to the IRS by employers, banks, etc. does not match the information reported on the tax return
  2. One or more IRS “red flag” items are on a return:
    • Home office deduction
    • High itemized deductions
    • Multiple years of Schedule C losses
    • High auto or travel deductions
    • Rounded numbers on a return
  3. Large changes or fluctuations with a return from year to year.
  4. Audits of related returns. For instance, if your business is audited, your personal return may subsequently be audited based on changes made to the business return.
  5. Random selection. The IRS does audits for statistical purposes. These are done at random and generally require the taxpayer to substantiate all/most items on their tax returns.
  6. Possible tax fraud, tips to the IRS, or information reported from State or local compliance.

As a taxpayer, it is your responsibility to provide documentation and authority supporting the items and positions taken on your return. The IRS generally has three years from the date the return was filed to assess additional tax. However, that can be extended to 6 years in cases where more than 25% of the income was not reported, and indefinitely for a return where there is fraud.

It is important that you keep all of your records in a safe, dry place. It is also advisable to keep duplicate copies of records in different formats (electronic and print versions) and different locations in case one set gets destroyed. It is often very difficult and expensive to try to get prior years’ statements in the year of the audit in order to attempt to create your records.

If you are thinking about filing a return that has an item you believe may result in a future audit, you should contact a CPA or Tax Attorney prior to filing to ensure that you are taking a proper position on the return. If you later receive notice of audit, you should again contact a CPA or Tax Attorney to represent you before the auditor.