January 31, 2011

Are Your Taxes Dischargeable In Bankruptcy?

Taxpayers often believe that their tax liabilities are automatically dischargeable in bankruptcy as part of the process of eliminating all debts, including tax debts. This belief is accurate to a point.

Generally, federal income tax debts are dischargeable in bankruptcy when the tax debts are more than 3 years old and for which the tax return, if one was to be filed, was filed more than 240 days before filing the bankruptcy petition.

In addition to being able to discharge federal income tax debts in bankruptcy, filing a bankruptcy petition usually stops the IRS’s collection efforts. Therefore, bankruptcy may be an option to prevent the IRS from levying on bank accounts, wages or other property.

Bankruptcy can be used to leverage a taxpayer’s request for tax relief. So, if the tax debt is dischargeable in bankruptcy, the threat of filing bankruptcy may compel the IRS to settle the taxpayer's debt on the taxpayer's terms for perhaps “pennies on the dollar”.

There are also several disadvantages to filing bankruptcy. For example, federal tax liens may survive the bankruptcy process. Further, to the extent that the tax debt is not discharged in bankruptcy, the IRS may view the taxpayer as being in a better position to pay the IRS now that some of the other debts have been eliminated by the bankruptcy.

An experienced tax attorney can help you determine if bankruptcy is a viable option for resolving your tax debt. Call Mitchell A. Port at (310) 559-5259 to discuss resolving your tax problem.

January 20, 2011

What's The 100% Penalty Assessed By The IRS?

When social security, Medicare and income taxes that must be withheld are not withheld or are not deposited or paid to the IRS, the trust fund recovery penalty (aka "100% penalty") may apply. The penalty is the full amount of the unpaid trust fund tax. This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business.

The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes and who acted willfully in not doing so.

For example, if you volunteer for a charitable organization and perhaps are a member of the board or are an officer, if the charity fails to pay it’s trust fund taxes, you may be personally liable for all or a portion of the unpaid amount. There may not be insurance available to cover you if that happens.

Call for professional tax advice to help solve tax problems like this. Call Mitchell A. Port at (310) 559-5259.

January 17, 2011

When You Owe More Than $100,000 In Tax

To expedite resolving accounts when $100,000 or more in tax, penalties and interest are owed, the Internal Revenue Service needs to have the following information available when making contact:

• Valid Power of Attorney (Form 2848) covering all tax periods
• Copies of delinquent tax returns and /or ASFR returns (automated substitute for returns)
• Completed Form 433- A, 433-B or 433-F
• Explain in detail why the taxpayer is not able to full pay or borrow to full pay
• Three months of current bank statements (all accounts)
• Three months of current pay stubs for both the taxpayer and the taxpayer’s spouse
• Value of 401K/Retirement
• Investment income
• Employer’s information including work number
• Value of all property and/or available equity
• Year make of vehicles, value, equity, balance owed, and monthly payments
• Commission statement
• Profit and Loss statements for self-employed taxpayers
• Life insurance policies, (whole or term), any borrowing ability? And/or value of policy
• Spouse’s income and source with name/address/phone number
• Rental income
• Pension income and/or Social Security income
• Out-of-pocket medical expenses
• Substantiation of Court ordered payments
• Substantiation of payments being made
• Secured loan(s) - amount of loan and remaining balance(s)
• Number of individual’s living in the house hold

For tax help from an attorney, call an experienced lawyer who can get the IRS off your back. Call Mitchell A. Port at (310) 559-5259.

January 6, 2011

What Happens When You Don't File Your Past Due Tax Return Or Contact The IRS

Here is a bit of information about not filing a past due tax return and the steps that the IRS will take as a result. Taxpayers who don't file a past due return or contact the IRS are subject to the following:

The IRS will file a substitute return for you. Be aware that this substitute return is based only on information the IRS has from other sources. Consequently, if the IRS prepares this substitute return, it will not include any additional exemptions or expenses you may be entitled to and may overstate your actual tax liability.

Interest and penalties will be assessed and will increase the amount of your payment obligation.

Once the tax is assessed the IRS will start the collection process, which can include imposing a levy on bank accounts or on your wages or filing a federal tax lien against your property.

Even if the IRS has already filed a substitute return, it still makes sense for you to file your own return to make sure you take advantage of all the credits, exemptions and deductions you are allowed. The IRS will generally adjust your account to reflect the correct figures which might result is a reduction of the amount of tax, penalties and interest owed.

Tax problems are solveable with the help of a tax lawyer experienced in solving hard tax questions. Call Mitchell A. Port at (310) 559-5259 for tax help.