February 26, 2009

How To Prepare Your Request To Appeal An IRS Decision


Review the letter and publication(s) that were sent to you by the IRS. The information will usually be straight-forward and will say:

When the request must be received

How to prepare a request for an appeal (protest)

What information you need to include in the request for an appeal

Where to mail the request

For specific information appealing Collection issues, refer to the Collection page.

For specific information appealing Examination issues, refer to the Examination page.

Interest and certain penalties will continue to accrue during the Appeals process and during any subsequent Appeals to the Courts on any amount not paid. In order to stop the accrual of interest and penalties on proposed adjustments, refer to Notice 1016, How to Stop Interest. For an explanation on how to stop interest from accruing on an unpaid balance, refer to Publication 594, What You Should Know About the IRS Collection Process.

Call a California tax attorney for help with your IRS appeal. Call Mitchell A. Port at 310.559.5259.

February 24, 2009

Tax ID Numbers: When Do I Need One?

Generally, businesses and trusts and estates in Los Angeles County, Orange County, Santa Barbara County and Ventura County, California need a new employer identification number (“EIN”) when their ownership or structure has changed. Changing the name of your business does not require you to obtain a new EIN.

What follows are some general rules about when getting a new federal EIN may or may not be appropriate:

You will be required to obtain a new EIN if any of the following statements are true.
• One person is the grantor/maker of many trusts.
• A trust changes to an estate.
• A living or intervivos trust changes to a testamentary trust.
• A living trust terminates by distributing its property to a residual trust.

You will not be required to obtain a new EIN if any of the following statements are true.
• The trustee changes.
• The grantor or beneficiary changes his/her name or address

You will be required to obtain a new EIN if any of the following statements are true.
• A trust is created with funds from the estate (not simply a continuation of the estate).
• You represent an estate that operates a business after the owner's death.

You will not be required to obtain a new EIN if any of the following statement is true.
• The administrator, personal representative, or executor changes his/her name or address.

Limited Liability Company (LLC)
An LLC is a new entity created by state statute. The IRS did not create a new tax classification for the LLC when it was created by the states; instead IRS uses the tax entity classifications it has always had for business taxpayers: corporation, partnership, or sole proprietor. An LLC is always classified by the IRS as one of these types of taxable entities.

You will be required to obtain a new EIN if any of the following statements are true.
• A corporation receives a new charter from the secretary of state.
• You are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
• You change to a partnership or a sole proprietorship.
• A new corporation is created after a statutory merger.

You will not be required to obtain a new EIN if any of the following statements are true.
• You are a division of a corporation.
• The surviving corporation uses the existing EIN after a corporate merger.
• A corporation declares bankruptcy.
• The corporate name or location changes.
• A corporation chooses to be taxed as an S corporation.
• Reorganization of a corporation changes only the identity or place.

Sole Proprietors
You will be required to obtain a new EIN if any of the following statements are true.
• You are subject to a bankruptcy proceeding.
• You incorporate.
• You take in partners and operate as a partnership.
• You purchase or inherit an existing business that you operate as a sole proprietorship.

You will not be required to obtain a new EIN if any of the following statements are true.
• You change the name of your business.
• You change your location and/or add other locations.
• You operate multiple businesses.

You will be required to obtain a new EIN if any of the following statements are true.
• You incorporate.
• Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
• You end an old partnership and begin a new one.

You will not be required to obtain a new EIN if any of the following statements are true.
• The partnership declares bankruptcy.
• The partnership name changes.
• You change the location of the partnership or add other locations.
• A new partnership is formed as a result of the termination of a partnership under IRC section 708(b)(1)(B).
• 50 percent or more of the ownership of the partnership (measured by interests in capital and profits) changes hands within a twelve-month period (terminated partnerships under Reg. 301.6109-1).

Speak to a California tax attorney about this and other business, estate/trust and probate questions. Call Mitchell A. Port at 310.559.5259.

February 20, 2009

Read This Before Choosing A Tax Preparer

The IRS has some great tax tips for California's taxpayers. Take a look at a recent tax tip about selecting your tax preparer. Here's what it said:

You are legally responsible for what’s on your tax returns even if they are prepared by someone else. So, it’s important to find a qualified tax professional. If you will be paying someone to do your tax return, choose a tax preparer wisely.

The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.

Most tax return preparers are professional, honest and provide excellent service to their clients; you can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.

Find out what the service fees are before the return is prepared. Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.

Only use a tax professional that signs your tax return and provides you with a copy for your records.

Avoid tax preparers that ask you to sign a blank tax form.

Choose a tax preparer that will be around to answer questions after the return has been filed.
Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?

Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.

Determine if the preparer’s credentials meet your needs. Does your state have licensing or registration requirements for paid preparers? Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.

Before you sign your tax return, review it and ask questions.

Do you need a referral to qualified tax return preparers? Call Mitchell A. Port at 310.559.5259 and ask for that referral.

February 18, 2009

California's Program To Suspend LLCs For Noncompliance

Beginning now, California’s Franchise Tax Board (FTB) will take action which helps the FTB bring Limited Liability Companies (LLCs) into tax compliance and reduce the State's budget deficit.

Read more about this in the Los Angeles Times article from January 12, 2009.

California’s FTB and California’s Secretary of State (SOS) are working together to implement a suspension/forfeiture process for Limited Liability Companies (LLCs).

The FTB will suspend/forfeit the rights, powers and privileges of LLCs for non-payment of taxes, penalties, or interest, and/or failure to file a return (California’s Revenue and Taxation Code Sections 23301, 23301.5 and 23304.1(d)). The LLC suspension/forfeiture process will be very similar to the one for corporations.

Implementing the suspension/forfeiture process will have a dramatic effect on LLCs that have failed to meet their filing and payment obligations. We will send notification to all entities at their last known addresses, 60 days before imposing suspension/forfeiture.

Non-registered LLCs acting and filing in California will be subject to contract voidability. The reasons for contract voidability are the same as for suspension/forfeiture: failure to file a return, and/or failure to pay taxes, penalties, or interest.

Get help with compliance. Call a tax attorney licensed in California. Call Mitchell A. Port at (310) 559-5259.

February 12, 2009

Help For Financially Distressed Taxpayers From The IRS

If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation.

As the new tax filing season begins, the IRS is taking steps to help people who owe back taxes. The IRS can help in the following areas, to mention just a few:

Hardship Situation. Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where you are unable to pay. If you recently lost a job or face other financial problems, IRS assistors may be able to suspend collection in some situations without documentation to minimize the burden on you.

Home Equity Values in Flux Result in An Additional Review for Offers in Compromise: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.

The IRS May Provide Added Flexibility Where Installment Agreement Payments Are Missed: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. If you are in this situation you should contact the IRS.

Speedier Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

Prevention of Offer in Compromise Defaults: Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.

To talk with a California tax attorney who can help solve your tax problem, call Mitchell A. Port at 310.559.5259.

February 10, 2009

Top Ten Business Entity Errors That Delay Processing Your California Tax Return

California's business owners now have easy access to solutions made available by the Franchise Tax Board in response to errors made when trying to fulfill their California tax obligations. Here's a partial list of how business owners in the counties of Los Angeles, Santa Barbara, Orange and Ventura - and throughout the rest of California - can make unintended mistakes that delay processing those tax returns:

Incorrect math calculations, or incomplete or missing documents

Return account periods overlap

Omitting or using incorrect entity identification numbers

Incomplete entity name

One lump sum payment sent for multiple entities, or multiple payments sent in the same package/envelope

Incorrect payment amount claimed

Multiple tax returns filed for the same account period

Amended returns not clearly identified as amended

Limited Liability Companies (LLCs) filing incorrect forms

Using an incorrect form for the tax year account period indicated on the return

For tax help, speak with a tax lawyer. Mitchell A. Port is a tax attorney located in Los Angeles who can fix the problem. Call (310) 559-5259.