March 30, 2010

Power Of Attorney And The IRS

There is an IRS publication which discusses who can represent you before the IRS and what forms or documents - like powers of attorney - are used to authorize a person to do that. Usually, attorneys, certified public accountants (CPAs), enrolled agents, and enrolled actuaries can represent taxpayers before the IRS. Under special circumstances, other individuals, including unenrolled return preparers, can represent you. To learn more, read Publication 947 on the IRS website. To speak with a qualified tax lawyer about this and other tax problems and tax solutions, call Mitchell A. Port at (310) 559-5259.

March 17, 2010

California's Small Business Owner And The Self Employed Can Find Answers Here

The IRS has a website built to help the small business owner with a multitude of resources. Check out the IRS website used by small businesses and the self-employed. Here is what it looks like:

A-Z Business Topics
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Business Types

Limited Liability Corporation/Partnership (LLC/LLP)
S Corporations
Sole Proprietors

By Subject

Closing a Business
Filing/Paying Taxes
International Taxpayer
Online Learning
Operating a Business
Retirement Plans
Starting a Business

Mitchell A. Port is a business attorney who can assist you and your business with any one or more of the topics listed above.

March 15, 2010

I Got A Notice From The IRS: Now What?

1. Many of these letters can be dealt with simply and painlessly. Do not panic.

2. It’s important that you keep copies of any correspondence with your records.

3. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

4. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

5. There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

6. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

7. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

8. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

9. Call a tax attorney for help. Call Mitchell A. Port at (310) 559-5259.

March 4, 2010

Federal Tax Liens Are A Serious Problem

The “National Taxpayer Advocate” 2009 Annual Report to Congress in part discusses the notice of federal tax lien (NFTL). The Report said that on average, a lien filing reduces a taxpayer’s credit score by 100 points. Unpaid tax liens may remain on a taxpayer’s credit history, leaving a derogatory mark on the credit history indefinitely. Released liens, including those paid off by the taxpayer, are not generally removed from the credit history until seven years from the date of release. Thus, an NFTL has a significant long-term impact on a taxpayer’s credit record. As a result, some lenders decline to extend credit to a taxpayer if the IRS has filed an NFTL against the taxpayer’s property. Others will charge substantially higher rates, even if the lien is subordinated. Impaired credit history can also affect a taxpayer’s ability to obtain insurance or rent an apartment on reasonable terms. Moreover, some licensing boards require members to maintain a clean credit history and some employers require employees to do so as a condition of employment. Thus, a lien filing can mean that employees lose their jobs and self-employed individuals cannot maintain the licensing necessary to remain in business. It can also hamper the taxpayer’s ability to stay compliant and obtain credit needed to pay preexisting tax debts.

Properly applied, the notice of federal tax lien (NFTL) can be an effective tool in tax collection. It gives the IRS a priority interest in the taxpayer’s property, such as a home or a car, and may enable the IRS to collect all or a portion of the tax debt if the taxpayer sells or refinances the property.

If improperly applied, however, tax liens have the potential to cause needless harm to taxpayers and undermine long-term tax collection.

If improperly applied, however, tax liens have the potential to cause needless harm to taxpayers and undermine long-term tax collection. Assume, for example, that a taxpayer loses his job during a recession and becomes unable to pay his tax bill. The filing of a tax lien can significantly harm the taxpayer’s credit and thus negatively affect his or her ability to obtain financing, find or retain a job, secure affordable housing or insurance, and ultimately pay the outstanding tax debt. Moreover, the government must consider that its role as a creditor is different from that of a private entity creditor. If the filing of a tax lien drives up the taxpayer’s costs and renders him or her unemployed or underemployed, the government may be forced to make outlays in the form of unemployment benefits, food stamps, and the like. Thus, the imprudent filing of a tax lien has the potential to badly damage the taxpayer and the taxpayer’s family and simultaneously reduce federal revenue – a lose-lose proposition.

For this reason, the decision whether to impose a tax lien should be made on a case-by-case
basis. Yet, the IRS files many liens systemically….

The results of research done by the Taxpayer Advocate suggest that the IRS’s use of liens may not be furthering the agency’s revenue collection objective and, equally significant, that the IRS has shown very little interest in evaluating the effectiveness of liens for itself.

A federal tax lien (FTL) arises when the IRS assesses a tax liability, sends the taxpayer notice and demand for payment, and the taxpayer does not fully pay the debt within ten days. An FTL is effective as of the date of assessment and attaches to all of the taxpayer’s property and rights to property, whether real or personal, including those acquired by the taxpayer after that date. This lien continues against the taxpayer’s property until the liability either has been fully paid or is legally unenforceable.

It is IRS policy not to use the NFTL as a negotiating tool. The IRS is required to release a lien not later than 30 days after the underlying liability either is fully satisfied through full payment of tax or is legally unenforceable (typically, by expiration of the statutory period for collecting the tax).

If you have tax problems, call a qualified tax attorney. Call Mitchell A. Port at (310) 559-5259.