Posts Tagged ‘IRS Responses’

Do You Require More Time or $$ To Pay All of Your Taxes??

Saturday, April 2nd, 2011

The state of our national economy and the associated high unemployment rate have created many financial problems for all of us.  Addtionally, poor personal financial management and the placement of inappropriate priorities on our financial obligations throughout the year often create significant problems, especially when your unpaid taxes are due.  Note:  This situation is equally applicable to mortgage loans, particularly those that are ARM based,  notes, car loans, payroll tax deposits, business working capital requirements, etc.  This article is intended to provide possible solutions to the problem, and not offer criticism.

Many years ago a fellow employee stated his philosophy on problems to me (true story):  “If you ignore it long enough, the problem will go away!”  This is absolutely not correct, especially when it relates to unpaid taxes.  To the contrary, be proactive and start making telephone calls, sending out e-mails etc as soon as you become aware of the fact that you can not pay your tax obligations when they are due.  There may be options that are available to you for which you do not know.  If you have been notified by either a State of Federal taxing authority, respond to the notification immediately and follow through on the communications until the problem(s) are resolved to the satisfaction of everyone involved.  The list of possible solutions below is not in any order of priority, nor is it intended to be all-inclusive.  It’s simply a starting point:

  1. Request an extension of the time to pay your taxes, especially if there is a personal or financial hardship;
  2. Sumbit an installment agreement request (Form 9465) with your tax return;
  3. Request a “temporary delay” in the payment due dates;
  4. Determine if you may be eligible for an “Offer In Compromise”;
  5. Apply for a loan from your bank;
  6. If available, use some of the available credit from your credit card or line of credit from you bank;
  7. Consider a withdrawal from your savings accounts
  8. Apply for a loan from your retirement account (i.e. 401(K)) but not your IRA which is ineligible. Retirement plan loans usually have to be repaid in five years or less;
  9. Consider a withdrawal from your IRAs.  If you are younger than 59 1/2 you will avoid the 10% premature withdrawal penalty if the funds are used to satisfy a tax levy from the IRS;
  10. Obtain a loan using the cash surrender value of your life insurance policy;
  11. Apply for a loan using the equity in real estate holdings or your investments as collateral;
  12. Sell or liquidate some of your assets, i.e. investments, CDs, etc
  13. Borrow from friends, relatives etc 
  14. If you own a business and there is sufficient working capital available, you could use some of these funds.  Be sure to record the required accounting entry in either the Note Receivable or Accounts Receivable account and re-pay the loan as soon as possible.     (more…)

Have You Failed to Report or Pay Any Taxes?

Saturday, February 26th, 2011

The articles from this website are provided solely for the purpose of disseminating and sharing of important information related to a variety of topics.  In the United States the timely filing of required tax returns and the payment of the associated taxes are not an option.

Although every American may have a different opinion, my own experience has lead me to conclude that our nation has been in a downward recessionary spiral since the year 2000.  There have been a myriad of outcomes and associated adverse economic impacts which have already occurred or are still occurring throughout our nation, including (but not limited to):  a)  job losses, b) unacceptably high unemployment, c) unprecedented losses in the housing market, d) the transfer of jobs overseas which were previously filled in America, e) an erosion of the customer base for most businesses, f) personal and business failures (bankruptcy), and g) a significant loss of available working capital (businesses) or available cash after monthly living expenses have been paid (individuals).  

One of the related outcomes from one of more of the above situations is a failure to file all of the required tax returns in a timely manner (on or before the required due date), and failing to make the required tax deposits and/or pay the required taxes when due.  This article is intended to provide important information for you when either or both of these events has occurred.

Before proceeeding, there is a special major category of taxes that requires a separate discussion.  This category is “Payroll Taxes.”  Anyone who withholds payroll taxes for another person (i.e. your employee) is considered to be a “fiduciary” and one who holds assets for another person is a “trustee.”   Therefore, a fiduciary is a person who holds assets in trust for a beneficiary. It is illegal for a fiduciary to misappropriate money held in trust for someone else for personal gain.  From page 3-47 of the Thomson-Reuters “Write Up Services” manual “The IRS can also assess a penalty equal to 100% of the taxes due if the employer does not withhold or remit employment taxes.  The penalty can be assessed on any person that the IRS determines is (a) responsible for collecting, accounting for, and paying the taxes, and (b) acted willfully in not doing so.  Thus the penalty can be lievied against the company (or organization), or an officer or employee of the company (or organization)” (   ) additional entity added.

If you are in a situation which is described above, there may be courses of action which you can follow to successfully resolve the matter and move yourself back to a position of “compliance with all of the Federal and state laws.”  Generally speaking, the following events either have already occurred, are in the process of occurring, or will occur:

  • You failed to file your tax returns and/or pay the associated taxes when required by law.
  • You have received a notification letter in the mail from the “taxing authority” (Federal or state).  In the upper right hand corner of the notice is a  Notice Number.  This code provides specific information on the cause for the notification. 
  • The body of the letter provides you with a specific period of time in which to respond (i.e. usually 30-60 days).  Even if you can not presently pay the taxes, don’t fail to respond to this notice.  It will only make matters worse for you.
  • Depending on the decisions that you make and the events that occur after you receive the notification letter, you may:  a) file the delinquent report(s) and pay the taxes which are due, plus interest and penalties, b) execute an installment agreement with the taxing authority, c) mutually resolve the matter via an “Offer In Compromise” with the taxing authority, d) the taxing authority will place a “lien” against any and all of the property that you own to satisfy the delinquent taxes, interest and penalties, or e) liquidate all of the seized assets to satisfy the lien

You should certainly consult with and engage the services of a CPA, but preferably a tax attorney,who will act as your representative, IF your situation can not be successfully resolved via options a) through c) above.  This representative should have an extensive background and experience in the successful resolution of tax matters exactly as yours. (more…)

Failure to Pay and Failure to File Penalties

Thursday, March 18th, 2010

This can be a relatively complex subject based on the myriad of tax returns that are required to be filed by taxpayers.  The major income tax returns  are the Form 990 (Tax Exempt organizations), Form 1040 (Individuals), Form 1041 (Estates and Trusts), Form 1065 (Partnerships),  Form 1120 (Corporations), and the Form 1120-S (Sub Chapter “S” Corporations).  The best guidance available as to filing instructions and due dates is provided by the IRS website (  Search for the instructions for your specific tax return and then carefully review the information that is provided in the document.  Most states follow the Federal guidelines since the state returns utilize your Federal return as a starting point for your state tax obligations.  However, this is a general rule and the state department of revenue requirements should also be reviewed.

In my profession we have an adage (that is shared with the IRS) “Ignorance of the law is not a defense!”

If you can not file your tax return by the statutory due date request an extension of the time to file.  There are legitimate reasons for encountering this situation.  However, an extension of the time to file your tax returns is NOT an extension of time to pay your taxes.  The taxes (including your best estimates) have to be remitted to the taxing authority on or before the original due date.  If you can not accurately determine your tax liability there are “safe harbor” rules which if followed will usually allow you to avoid interest and penalties.

Additonal information on this subject is provided below:  (more…)

What To Do If The IRS Contacts You

Wednesday, August 26th, 2009

There is an excellent possibility that no matter how honest that you think that you are, how many times you attend church each week, or what an outstanding citizen that you consider yourself to be, one day you’ll go to the mail box and receive a letter from the Department of the Treasury, specifically the Internal Revenue Service.  Even Clint Eastwood can’t really describe just how bad your day will become afterwards.  There is an important note here – the IRS will always contact you in writing via the U.S. Mail.  They do not use unsolicited phone calls, e-mails, “twitters”, Facebook invitations etc. 

 What should you do after you receive your letter?  There are some very important steps to follow.  Recommendation #1 below is among the most important.  What is not mentioned is to contact your CPA, tax preparer, and attorney before you send any response to the IRS.  It would also be best to provide each of them with a copy of the letter for their review and to provide you with both a recommended response to the letter and alternative courses of action for you to follow.

 Here’s the IRS’ recommendations: (more…)