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Your Tax Liability
Alvin Brown and Associates, tax attorney, formerly with the Office of the Chief Counsel of the IRS. Call (703) 425-1400 for all IRS tax issues, problems and emergencies.
Home page: irstaxattorney.com of interest to taxpayers and consultants
edeposit those savings in a new IRA account within 90 days. Taxpayer withdraws the funds and redeposits them in a new IRA account 63 days later. Upon audit, taxpayer learns that he has been misinformed about the required rollover period and that he is liable for additional taxes, penalties and additions to tax for not having redeposited the amount within 60 days. Had it not been for the erroneous advice that is reflected in the taxpayer's retained copy of the IRS E-Mail response to his inquiry, taxpayer would have redeposited the amount within the required 60-day period. Taxpayer's overall compliance history does not weigh against compromise.
PROBLEM 1
Harry Didit and Mita Didit were assessed with a Trust Fund Recovery Penalty in 1999 in the amount of $112,000. They were the principal officers of a software company and they have no defenses to liability. He is currently employed by Microhard, Inc. as a software specialist. She is employed as a day clerk at a Convenient Store. Harry and Mita reside in Park Ridge, Illinois which is in Cook County. They have two children, Sally Didit, age 14 and John Didit, age 11.
Harry and Mita have the following assets:
Assets F.M.V.
Home (Joint Tenancy) $250,000 1997 Buick 7,500 2000 Chevrolet 12,000 Household Goods 4,000 IRA 3,000 Pension at Microhard 15,000
They have the following liabilities:
Nature of Liability Amount
Home Mortgage $175,000 Loan on Buick 4,000 Loan on Chevrolet 14,000 Charge Cards 16,000 Judgment Debt from Guarantee (Empire Business) 3,000 Loan from brother (Baldizar Didit) 7,000 State Trust Fund Penalty 10,000
The Internal Revenue Service has filed a lien with the Cook County Recorder of Deeds. The Didit's did not respond to the CDP notice issued within 5 days of filing the lien and the 30 day protest period expired before the arrived at you office. The IRS has not yet issued a Letter 1058.
Their income is as follows:
Harry's Pay: Gross: $ 6,000 per month Net: 4,300 per month
Mita's Pay: Gross: $ 1,400 per month Net: 950 per month
They tell you that they have the following monthly expenses:
Mortgage and Real Estate Taxes $ 1,750 Home Repairs and Maintenance 200 Car Payments 700 Repairs, Maintenance and Car Insurance 375 Utilities 400 Medical Expenses 100 Day Care 500 Clothing and Cleaning 400 Personal Hygiene 150 Health Club Dues 100 Payment on State Trust Fund Penalty 150 Children's Parochial School 550 Children's Recreational Activities 100 Family Entertainment and Recreation 200 Magazines, Periodicals and Newspapers 50 Cable TV 35 Charge Card Payments 200 Miscellaneous Expenses 400
The Didits have recently received a phone call from Will Levy of the IRS demanding that they submit a 433-A and begin payments on the Trust Fund Recovery Penalty. The Didits have asked that you represent them before the Internal Revenue Service.
Questions
What is the most important issue to be resolved before you call Mr. Levy? Complete page 4 of the new Form 433-A for the Didits. Which of the expenses of the Didits would the IRS consider to be allowable expenses? Which of the expenses of the Didits would the IRS consider to be conditional expenses? Will the Didits be able to repay the Internal Revenue Service within five years? If not, what payments will the Internal Revenue Service demand from the Didits during the first year of the payment arrangement and what payments will the Didits be required to pay thereafter? What alternatives to an installment agreement would you suggest? Problem 2 Haddy Breakdown is 55 years old and has suffered from manic depression from 1971. If she maintains her medicine regimen she ids able to independently function. When she fails to take her medications she falls into severe depression. She is divorced with no children. During 2000 Haddy's sister, Karen came to visit her at her home in Chicago. Karen discovered that Haddy had failed to take her medications and her home was in a state of squalor. Karen hospitalized Haddy and after a month through treatment and medications she recovered sufficiently to be discharged. During Haddy's Haddy's hospitalization Karen hored a cleaning service to clean Haddy's home it took 2 large trucks to remove the garbage and filth that had accumulated during her illness. While the home was being cleaned Karen discovered Haddy's unfiled tax returns for 1997, 1998, & 1999. Upon Haddy's recovery Karen insisted that Haddy sign and file the returns. Haddy complied with Karen's entreaty and filed all of her returns including the 2000 return in the spring of 2001. She has now received CP-503's totaling $55,000. She has been brought to you by Karen who will pay your fees. During the years when she was not filing Haddy was employed in a series of low paying jobs and never had pay exceeding $10 per hour. She had withholding taken from her pay checks. Haddy is the beneficiary of a spendthrift trust set up by her dad's will which pays her $27,000 per year in monthly installments. During the time from 1997 to her hospitalization she had not paid estimated taxes on her trust income. She is now timely paying estimated taxes. Her current in is as follows: Joe's 6/12 Convenience Store $1,500/Month Net after w/h $1,200 Trust income $2250/month She has the following assets & liabilities: House $100,000 Mortgage $15,000 Savings &checking $1,000 1989 Chevrolet $1,500 Household goods & personal assets $3,000 Charge cards $1,000 Her monthly expenses are as follows: Mortgage, taxes and home repair $500 Utilities $300 Car expenses $350 Food & personal expenses $800 Unreimbursed medical expenses $1,100 Misc. expenses $300 Estimated taxes $500 Charge card payments $75
Questions 1. Prepare page 4 of 433A. 2. What options are are available for Haddy to resolve her tax problems? 3. How much would her payments be in the first year of a payment plan? 4. What would be your first step after receipt of your retainer? 5. If you chose to submit an OIC on her behalf, what would the basis of your offer and how much would you offer? TABLE OF CONTENTS
OFFER IN COMPROMISE
1.110 Background 1 1.120 New Offer in Compromise Procedures 1 1.130 More Supporting Documents 1 1.140 New Addresses 1 1.150 Return of an Offer 2 1.160 Processing Center Review 3 1.170 Offers Increasing 3 1.180 Unnavigable Roadblocks 3 1.190 Horror Stories 3 1.200 Compliance Centers Hinder Substantive Consideration of Offers 3 1.210 Creates Many Barriers to Compromise 4 1.220 A Better Way to Process Offers 4 1.230 1998 Revisions 5 1.240 Prohibition of Levy 5 1.250 Rejections 5 1.260 More Liberal Policies 5 1.270 Minimum Offer Standards 6 1.280 Appeal Rights 6 1.290 Joint Offer - Default by One Spouse 6 1.300 Doubt as to Liability Offers 6 1.305 Accepted Offers 7 1.320 Deferred Offer 7 1.330 Computation of Offer Amount 7 1.340 Cash Offer 7 1.350 Short-Term Deferred Payment Offer 8 1.360 Deferred Payment Offers 8 1.361 Allowable Expense 8 1.362 Necessary Expenses 9 1.363 Conditional Expenses 9 1.364 Expenses Which Will Not Require Substantiation 10 1.365 Housing Expense 10 1.366 Transportation 11 1.367 Necessary Expenses (Other) 11 1.368 Necessary Expenses: Other Unsecured Debts 12 1.369 Necessary for Production of Income 13 1.370 Excessive Necessary and Conditional Expenses Incurred After Assessment of Tax Liability 13 1.371 Applications of the Standards 13 1.372 Harsh Results of IRS Policies 13 1.375 Promote Effective Tax Administration 14 1.380 Rules for Evaluating Offers to Promote Effective Tax Administration 14 1.390 Economic Hardship 14 1.400 Undermine Compliance 16 1.410 Exceptional Circumstances 16
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Lien & Levy Removal - Internal Revenue Service Audit Collection Problem Assistance
Alvin Brown and Associates, Attorney at Law Former Supervisory Manager and Tax Attorney-Advisor, Internal Revenue Service, Office of Chief Counsel, IRS National Office, Washington, DC - possessing delegated final signature authority for technical advice to District Directors, Letter Rulings, and other IRS interpretative determinations - signature authority on IRS Tax Regulations, Revenue Rulings and other published positions of the IRS.
Our
National Using
of Offer in Compromise services as an example, we have the advantage of
having “offer in compromise” cases throughout the References:
1. California Bar Association (and related
courts)
2. District of Columbia Bar Association (and
related courts)
3. U.S. Tax Court
4. U.S. Court of Military Appeals
5. Better Business Bureau
6. IRS - Office of the Chief
Counsel - IRS signature authority - retired after 27 years of
experience
>>>Full Link for Link for State Forms: http://www.taxadmin.org/fta/link/forms.html Search this web site Search Tips All: Finds documents in which all words entered occur. Any: Finds documents in which any of the words entered occur. Boolean: Enter 'AND' or 'OR' between words. IRS LEVERAGE AND OVER TAXATION The Internal Revenue Service is adept at using leverage to intimidate, coerce and bluff taxpayers and their representatives into adverse tax determinations based upon weak legal authority and incomplete or insufficient facts. The IRS agent is both "prosecutor" and "jury." The IRS agent raises issues and comes to conclusions that are presumed to be correct under present law. Also, taxpayers, not the IRS agent, must prove the accuracy of their deductions. This leverage against a taxpayer applies even if the agent uses incorrect or incomplete facts or makes determinations on erroneous or flawed argument and law. When the agent uses incomplete or weak facts and weak legal authority against a taxpayer - it is a "bluff." The agent can be sloppy and incompetent and still get a large and unjustified tax deficiency. The raw power of the agents position and presumption of correctness is intimidating to taxpayers - more importantly, it is intimidating to the representatives of the taxpayer who do not have the skill or ability to identify and expose the "bluff." The "intimidation" of the IRS agent is used as a tool to close cases quickly. It is well documented that the IRS has a high error rate. Accordingly, taxpayers significantly overpay their tax liability, penalties and interest. We specialize
in dealing with IRS controversies, problems and issues of every kind.
Our practice is national with active cases pending
throughout the United States. Having worked within the IRS at a
high executive level, we understand the most effective ways to deal with
the IRS to advocate a reasonable solution to resolve your IRS problems. STOP OVERPAYING YOUR TAX LIABILITY! There is no way to say this nicely - a great deal of the representation of taxpayers by trusted professionals and so-called "tax experts" is inept. Consequently, taxpayers vastly overpay their tax liability. CPAs, accountants, bookkeepers, enrolled agents, and attorneys without a tax specialty may not have the time, experience, education, insight or technical skill to deal with the technical analysis, legal research, identification of issues, interpretative creativity and insight, negotiating skills, knowledge of the IRS, or technical writing ability necessary to effectively prevent avoidable tax overpayments. Unqualified representatives are easily coerced, bluffed and intimidated into tax settlements or adverse determinations that should be contested. Even worse is the representative who is unable to identify a tax issue, tax law or fact that supports and justifies a reduced tax liability or penalty. The person who prepares your tax return may only have six weeks of training, and that training may be limited to how to put numbers into an IRS income tax return. Your bookkeeper is not a tax expert. Your CPA prepares tax returns for approximately three months out of the year and spends the balance of the time preparing books, records, and financial statements . Most, if not all enrolled agents are not tax lawyers. Attorneys may have a general or a specialized practice that does not include tax issues and problems. Nevertheless, accountants, CPAs, bookkeepers, enrolled agents, and non-tax attorneys will usually agree to represent you if you approach them with a tax issue even if they do not have the training or experience to handle difficult, complex, or creative tax issues. Taxpayers are "captive clients" of the CPA or the family attorney. The representative has earned the respect and trust of his client for prior meritorious performance on other matters, and the client has come to rely on the representative for all purposes. Therefore, "captive clients" are subject to tax assistance by individuals who may not offer competent tax law services. Why would a person who is not a tax law expert try to represent you on a complex tax issue or important transaction? The answer is - "money." Taxpayers are billed if his representative meets with or speaks with IRS personnel. If the representative agrees with the IRS, the agreement can be passed of as your legitimate agreed upon tax liability. You pay a fee to your representative even if that person is unaware that there are issues and argument that would have reduced your tax liability. The representative, in effect, "churns" his clients by closing the matter with the IRS as quickly as possible in order to collect fees from a new client. Unfortunately, some representatives have no clue that they are missing issues that could reduce or eliminate a tax liability. Taxpayers will never know if a legal or factual issue was available to either reduce or eliminate tax liability. For example, if there is legal precedent for the elimination of a tax penalty under certain factual situations, neither the representative nor the taxpayer will know that the tax penalties and interest could have been avoided with successful research of the tax cases and effective legal argument. The representative is paid for his services even if those services are inadequate. The taxpayer/client is the only loser. The taxpayer could be required to pay a tax liability that can cost him his home, his business and his life savings. Even a taxpayer's freedom can be jeopardized if the taxpayer is the victim of an adverse fraud investigation that could be resolved for the taxpayer with the proper defense. A tax attorney can do something an accountant cannot do. An experienced tax attorney can thoroughly research a tax statute and master it. He will know its legislative history. He will be familiar with the Treasury regulations and IRS rulings on that statute. He will penetrate the many court decisions involved in the litigation of the tax statute. He will have read tax articles and books that deal with the tax statute. It is improbable that your accountant has the training or experience that would permit him to penetrate the complexity of the tax law on a particular tax issue. It is also not likely that the accountant can take the time out of a busy accounting practice, working with numbers and preparing financial statements, to master the vast array of difficult tax law that bears on a tax statute. Even worse is the fact that the mind-set of an accountant is to see "black and white" rather than the "gray" because they are trained to be precise with numbers. Tax law is drenched with ambiguity where there is mostly no answer that is right or wrong. Tax lawyers are trained to seek and find the ambiguity in the law (i.e., the "gray"). Tax law ambiguity can be used as a "sword" to attack and IRS position and also as a "shield" to protect the taxpayer. However, not all tax attorneys are equal just as, for example, professional golfers have difference levels of skill and ability. Tax attorneys have different levels of creativity, insight and skill. The most important attribute of a good tax attorney is to be "creative" with the tax law. This creativity may arise in many ways. A creative tax attorney will use interpretative skill to find support of a taxpayer position. A creative tax attorney will find a gap in a statute or a regulation (a "tax loophole") that permits favorable tax treatment in situations not covered by the statute under consideration. A creative tax attorney will be able to identify inconsistencies by the IRS in its published positions or private ruling letters. A creative tax attorney will use interpretative skills to spin facts, case law, regulations in favor of the taxpayer. Creativity is unlimited in its potential to interpret and apply the law or the ability to develop that knowledge through research skills. Regardless of your location or taxpayer identity, a Power of Attorney on IRS Form 2848 permits you to be represented by a tax attorney with comprehensive IRS National Office technical, administrative and procedural experience. Harness the "good will" and inside knowledge of a former IRS Chief Counsel attorney. It is advantageous to know IRS personnel, how the IRS thinks, and what "bells to ring" in arguing the facts, the law, and if necessary, negotiating a settlement. Tax attorney representation prevents IRS coercion, intimidation, abuse and bluff. An experienced tax attorney has more training, education, technical skill, experience and overall ability than an adverse IRS agent. The tax attorney can reverse intimidation, stop abusive actions, and prevent IRS bluff. Thus, the tax attorney is in a position to identify faulty logic, argue the correct law, and negate incomplete factual determinations. Except of any reserved powers, you are relieved of the following burden:
You can download the power of attorney form from the IRS, using the freely available Adobe Acrobat Reader to view or print it. LEGAL ISSUES DEVELOPED BY TAX LAWYERS In explaining what a tax lawyer does that other representatives cannot do, it is helpful to understand what is meant by a legal issue. Legal issues are developed from expert creative analytical, interpretative, and technical research skills. Technical research includes: determining Congressional intent from the legislative history of the tax law; a search and analysis of the provisions of the Internal Revenue Code; Treasury tax regulations; IRS revenue rulings, private letter rulings and procedures; IRS internal practice procedures and audit guidelines; case law; tax treatises; and tax articles. A taxpayer representative must have the skill and experience to identify and interpret the applicable tax law and also find ambiguity and inconsistency in the law to protect a taxpayer from erroneously overpaying a tax liability. The same legal skill may be used to identify the tax law that will support a legal argument in favor of a taxpayer position. Tax law is based upon legislation passed by Congress. No tax statute is comprehensive and complete. Congress cannot think of every issue that could arise under tax legislation and draft a comprehensive legislative answer for all potential technical issues. All words have ambiguity. Hence legislation needs to be clarified. Tax law may be interpreted within the context of the statute or related tax statutes. The language of a statute may be interpreted by language in the reports of Committee on Ways and Means of the House of Representatives, the Senate Finance Committee, or the Joint Tax Committee. Legislative intent may also be discerned from Congressional debate or colloquy. The language of a tax statute is further applied and interpreted by tax regulations drafted by the Treasury Department. Treasury regulations have significant ambiguity and require clarification. The IRS issues revenue rulings, private ruling letters, technical advice memoranda to District directors, procedures, guidelines and notices - all designed to clarify the tax law but in turn may be ambiguous or inconsistent. Tax issues are litigated in the Tax Court, the Courts of Appeal, the Claims Court and the Supreme Court. Some issues have judicial precedent and others do not. Other than the Supreme Court, many courts come to opposite and conflicting decisions. All court decisions are limited by the facts and the legal issues in each instance - those distinctions raise interpretative issues. The fact that tax law is complex and arcane is well known. This complexity is he reason a qualified tax attorney is in a superior position to protect a taxpayer from overpaying a tax liability - provided that attorney has strong creative, analytical and interpretative skills. Interpretative and analytical skills involve the sophisticated ability to read tax legislation, regulations, cases and other authority to identify subtle distinctions, ambiguity or supportive facts, issues, and argument. Interpretative and analytical skills are creative when they identify unique authority and argument and ascertain the persuasive law and argument that permits a taxpayer to beat the IRS or reduce tax liability. Similarly, it is helpful to understand the skill of a tax attorney in identifying and developing factual issues A tax attorney identifies, develops and creatively applies factual issues to defend and protect a taxpayer, to reverse an adverse IRS determination or to get a favorable tax settlement. The IRS often makes determinations on incomplete facts, and it will not develop facts that reduce tax liability. The development of factual issues by an experienced tax attorney bears directly on the legal issues and can negate or mitigate tax liability. SETTLEMENTS Due to the proven high IRS error rate, aggressive audit determinations, and its desire to avoid litigation on weak factual and legal determinations, the IRS is willing to negotiate a settlement in a majority of audit issues. The IRS agent, the agent's Supervisor, and an Appeals Officer each have the power to negotiate a settlement and concede issues. Taxpayers have a unique advantage in an Appeals conference - the IRS does not have either the manpower or the inclination to litigate all cases. Settlements increase commensurate with the strength of the facts, law and argument presented by your tax attorney. If the law and the facts are on your side, you will get a 100% settlement and not have any tax liability. In lesser cases, your tax attorney should be able to assess the strengths and weaknesses of your situation and get the best settlement for you in the circumstances. This is where the skill, knowledge and creativity of your attorney is demonstrated for your benefit and tax savings. Inside knowledge of IRS thinking, procedures and personnel is advantageous in negotiating the best possible settlement. IRS agents have varying degrees of knowledge, skill and ability. Some agents are dogged while others careless or lazy. In most situations, agents are under time constraints and are anxious to move on to other taxpayers. The ability to size up the weaknesses of an IRS agent is an important ingredient of how tax issues are resolved or negotiated. Click here for information on IRS Penalties & Interest. Return to the top of the page |
Making appearances at any IRS
office, including Washington, DC.