California Tax Attorney Blog

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.

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During income tax filing season, there are a lot of IRS impersonation schemes. These schemes may take place by email, phone, fax, internet sites and social networking sites.

The IRS will not send you unsolicited e-mails about your tax situations, tax accounts or personal tax issues. If you receive such an e-mail, most likely it's a scam.

Some impersonations may be commercial internet sites that you unknowingly visit, thinking you’re accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

Many impersonations are identity theft scams that try to trick you into revealing personal and financial information that can be used to access your financial accounts. Some email scams contain links or attachments that download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site when you click on them.

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There exists an official YouTube channel of the Internal Revenue Service. It features videos produced by the IRS on various tax administration topics. Information is available about all kinds of topics, including the the appeals examination process, appeals collection process, tax tips, record keeping, choosing a tax preparer, how to track your tax refund, how to check your tax withholding and the homeowner credit claim.

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Here are some things to know if you need copies of your federal tax return information from the IRS.

There are2 options for obtaining free copies of your federal tax return information — tax account transcripts and tax return transcripts.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income.

A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.

To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.

To request a tax return transcript through the mail, businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return. Individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return.

You should receive your tax account transcript within 30 calendar days from the time the IRS receives your request. Allow 10 working days for delivery of a tax return transcript.

If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.

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California's Franchise Tax Board publishes an annual list of the state's largest tax debtors. Some of those on the list are people who habitually flout or violate the law. The amount of income tax due from taxpayers ranges from $9,940,513 to $100,000. Federal individual income taxes are probably unpaid as well - but the IRS does not publish the names of delinquent taxpayers. The FTB's list is here.

If you owe California or the IRS over $25,000 in unpaid tax, call an experienced tax attorney for help resolving your tax problem. Call Mitchell A. Port at (310) 559-5259.

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Next month, the Internal Revenue Service will begin its Employment Tax National Research Project (“ET NRP”). The last one was performed 25 years ago. The study is needed because business practices regarding employment tax issues may have changed significantly since the last IRS employment tax study.

Examinations comprising the study will be conducted to collect data that will allow the IRS to understand the compliance characteristics of employment tax filers.

The IRS will randomly select 2,000 taxpayers each year for the next three years. The examinations will be comprehensive in scope. Taxpayers will receive notices describing the ET NRP process.

When completed, this information will help the IRS select and audit future employment tax returns with the greatest compliance risk. The results will allow the IRS to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements.

There are two main goals for the ET NRP:

To determine compliance characteristics so IRS can focus on the most noncompliant employment tax areas, and

To secure statistically valid information for computing the Employment Tax Gap.

Records pertaining to employment tax returns and issues will be subject to review during these examinations. Employers should have all of their records available to expedite these examinations.

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There is any number of different ways by which the IRS mistakenly files a federal tax lien against you for your unpaid taxes. In California (and throughout the U.S.), federal tax lies are filed in the county in which you live: say, Los Angeles, Orange, Santa Barbara or Ventura county. If the IRS erroneously files a tax lien, you should file Form 12277: Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. This application is based on Internal Revenue Code section 6323(j).

Erroneously Filed Notice of Federal Tax Lien

Treasury Regulation Section 301.6326-1 defines an erroneously filed Notice of Federal Tax Lien (NFTL) as one which is filed during the presence of one of the following conditions:

1. The tax liability was assessed in violation of a bankruptcy stay.

2. The statute of limitations for collection expired prior to the filing of the NFTL.

3. The tax liability was satisfied prior to the NFTL filing.

4. The tax liability was assessed in violation of deficiency procedures in Internal Revenue Code Section 6213.

Within 14 days of when an erroneous NFTL is identified, a Form 668Z, Certificate of Release of Federal Tax Lien, and Letter 544, Letter of Apology - Improvident/Erroneous Filing of Notice of Federal Tax Lien, must be issued by Advisory.

At your written request, a copy of the release and letter of apology may be furnished to creditors or credit bureaus. You may be instructed to provide names, mailing addresses, and permission to disclose the information.

Filing and release fees will be abated on erroneously filed NFTLs.

Improvident or Inadvertent Lien Filing

If an improvidently or inadvertently filed NFTL has been released, no consideration will be given to a request that the NFTL also be withdrawn.

When a NFTL is improvidently or inadvertently filed and then subsequently released, the Internal Revenue Service will provide you with a Letter 544.

If the criteria for release of a lien that has been improvidently or inadvertently filed are not present, the Internal Revenue Service will consider withdrawal of the NFTL.

Remember, a lien is not a levy. These two things are different from each other. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt. A levy is a legal seizure of your property to satisfy a tax debt.

For additional tax help, call Mitchell A. Port, a tax attorney in Los Angeles, for guidance. Call (310) 559-5259.

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What is the difference between an IRS tax lien and an IRS tax levy?

A tax lien is a document filed in a public place such as a California County Recorder’s Office telling the world that you owe taxes. A tax lien lists the years for which taxes are owed the type of tax and the amount of the taxes owed. Credit reporting agencies will find the tax lien and report it on your credit report. If you want to sell any real property you own, the IRS or Franchise Tax Board of California will be paid out of the equity in your property by the escrow company. No money will be taken out of your bank account by the tax lien.

If the IRS or California FTB serves a tax levy on your bank then the bank is required to send all of your money to the IRS or FTB that is on deposit the day the levy is served. If the IRS or FTB sends a wage levy for delinquent taxes to your employer then your employer is required to send almost all of your earnings to the IRS or FTB less a small amount which is exempt.

Call a California tax attorney to discuss the help you need to fix your tax problem. Call Mitchell A. Port at (310) 559-5259.

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California business owners are subject to a variety of taxes by the State and also by the cities (including Los Angeles, Santa Barbara, Orange and Ventura). Some of those California businesses might have cash flow problems as a result. Some may be involved in one or more of the eight schemes where federal employment taxes are not properly withheld or paid by employers from their employees’ paychecks recently described by an IRS alert to taxpayers and business owners.

Regardless of the reason, federal law requires employment tax withholding and payment by employers. Nevertheless, there are many reasons employers don’t withhold or pay employment taxes. One reason may be because of a situation where an employer collects the taxes and elects to keep it during a period of financial difficulty rather than pay it to the Internal Revenue Service. Another reason may arise from an effort to use the government as a bank to 'borrow the money for a short time' with intentions to pay it back later. For a few tax protestors, it involves philosophical differences with the tax law of the United States that courts consistently reject.

Employment taxes consist of Social Security along with federal income tax withholding, Medicare taxes and unemployment taxes. Also, many states have withholding requirements for various employment related taxes.

The IRS takes a variety of steps to minimize employment tax non-compliance. These efforts have led to some criminal convictions resulting in jail-time and fines. The agency has a number of civil actions it can take like audits and filing tax liens against property the taxpayer owns.

Tax Prison

During the past three years, 117 individuals have been sentenced to confinement in a federal prison, a halfway house or home detention for criminal violations related to employment taxes. Approximately 77 percent of the persons sentenced for evading employment taxes served an average of 17 months confinement and were ordered to make restitution to the government for the taxes evaded, plus interest and penalties.

The eight most common types of employment tax non-compliance include:

1. Paying Employees in Cash. Paying employees in whole or partially in cash is a common method of evading income and employment taxes. There is nothing wrong with compensating an employee in cash, but employment taxes are owed regardless of how the employees are paid. And the IRS will build its case using all available information even if there are no payroll records or checks.

2. Misclassifying worker status. Sometimes employers incorrectly treat employees as independent contractors to avoid paying employment taxes. Generally if the payer has the right to control what work will be done and how it will be done, the worker is an employee. Employers who misclassify employees as independent contractors (and are not eligible for relief under Section 530 of the Revenue Act of 1978) will be liable for the employment taxes on wages paid to the misclassified worker and subject to penalties.

3. Pyramiding. "Pyramiding" of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. An often cause is a lack of profit or capital for operating costs, so the business owner uses the trust funds to pay other liabilities. The quarterly employment tax liabilities accumulate (or “pyramid”) until the employer has little hope of catching up. Businesses involved in pyramiding frequently shut down or file for bankruptcy and then start a new business under a different name starting the cycle over.

4. S Corporation Officers Compensation Treated as Corporate Distributions. In an effort to avoid employment taxes, some S Corporations are improperly treating officer compensation as a corporate distribution instead of wages or salary. By law, officers are employees of the corporation for employment tax purposes and compensation they receive for their services is subject to employment taxes.

5. Unreliable Third Party Payers. There are two primary categories of third party payers – Payroll Service Providers and Professional Employer Organizations. Payroll Service Providers typically perform services for employers such as filing employment tax returns and making employment tax payments. Professional Employer Organizations offer employee leasing meaning that they handle administrative, personnel, and payroll accounting functions for employees who have been leased to other companies that use their services. Many of these companies provide outstanding services to employers. Unfortunately, in some instances, companies of both types of services have failed to pay over to the IRS the collected employment taxes. When these employment service companies dissolve, millions in employment taxes can be left unpaid. Employers are urged to exercise due diligence in selecting and monitoring a third party payer. For example, when choosing a third party payer, employers should look for one that is reputable and uses the Electronic Federal Tax Payment System (EFTPS). This allows the business owner to verify payments made on their behalf. Also, an employer should never allow their address of record with the IRS be changed to that of the third party payer.

6. Offshore Employee Leasing. This scheme, which was designated as a Listed Transaction by the Service in 2003, misuses the otherwise legal business practice of employee leasing. Under the typical promotion, an individual taxpayer supposedly resigns from his or her current employer or professional corporation and signs an employment contract with an offshore employee leasing company. The offshore company indirectly leases the individual’s services back to the original employer using a domestic leasing company as an intermediary. The individual performs the same services before and after entering into the leasing arrangement. While the total amount paid for the individual’s services stays the same or increases, most of the funds are sent offshore as “deferred” compensation. The “deferred” compensation is then paid to the individual as a “loan” or ends up in an account under the individual’s control. Promoters of these arrangements improperly claim that neither employment taxes nor income taxes are owed on the “deferred” compensation. Because it is a Listed Transaction those who use the scheme are required to disclose their participation on current tax returns, and will be liable for the unpaid tax and subject to penalties and interest. Civil and criminal actions are being taken against promoters and participants in offshore leasing schemes – one promoter was convicted of defrauding the U.S. and sentenced to 70 months imprisonment, two other promoters have been ordered by the courts to stop marketing the scheme and a San Diego doctor plead guilty to tax evasion and is awaiting sentencing.

7. Frivolous Arguments. Unscrupulous individuals and promoters have used a variety of false or misleading arguments for not paying employment taxes. These schemes are based on an incorrect interpretation of “Section 861” and other parts of the tax law and have been refuted in court. One variation of this scheme involves the improper use of Form 941c, Supporting Statement to Correct Information on Form 941, to attempt to get a refund of previously paid employment taxes. Recent court cases have resulted in criminal convictions of promoters. Employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest.

8. Filing False Payroll Tax Returns or Failing to File Payroll Tax Returns. Preparing false payroll tax returns intentionally understating the amount of wages on which taxes are owed or failing to file employment tax returns are methods commonly used to evade employment taxes.

Tax problems? Need tax help? Call a tax attorney. Call Mitchell A. Port at 310.559.5259.

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If you applied for and received a taxpayer identification number for your trust or an employer identification number for your business but have since misplaced it, try the following actions to locate the number:

• If you used your EIN to open a bank account, or apply for any type of state or local license, you should contact the bank or agency to get your EIN.

• Ask the IRS to search for your EIN by calling the Business & Specialty Tax Line at (800) 829-4933. The hours of operation are 7:00 a.m. - 10:00 p.m. local time, Monday through Friday. An assistor will ask you for identifying information and provide the number to you over the telephone, as long as you are a person who is authorized to receive it. Examples of an authorized person include, but are not limited to, a sole proprietor, a partner in a partnership, a corporate officer, a trustee of a trust, or an executor of an estate.

• Find the computer-generated notice that was issued by the IRS when you applied for your EIN. This notice is issued as a confirmation of your application for, and receipt of an EIN.

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Under IRS audit or exam? Help yourself and know what to expect. The IRS publishes information – Guides - telling you what it looks for during an audit. The Audit Techniques Guides (ATGs) contain examination techniques, common and unique industry issues, business practices, industry terminology and other information to assist examiners in performing examinations. These Guides focus on developing highly trained examiners for a particular market segment. These Guides cover all types of business, such as:

Construction Industry

Factoring of Receivables

Golden Parachutes

Retail Industry

Veterinary Medicine

Get help and use an experienced professional. Call Mitchell A. Port at (310) 559-5259.

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The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are seeking help in resolving problems with the Internal Revenue Service, who believe that an IRS system or procedure is not working as it should or who are experiencing economic harm. Here are some things you should know about TAS:

1. The service is confidential, suited to meet your needs and FREE.

2. TAS employees know the IRS and how to navigate it. They say they will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

3. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.

4. You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should.

5. TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in Publication 1546, Taxpayer Advocate Service. You can also call the toll-free case intake line at 1-877-777-4778.

You can also file Form 911, Request for Taxpayer Advocate Service Assistance, with the Taxpayer Advocate Service, or request that an IRS employee complete Form 911 on your behalf.

Call Your Local Taxpayer Advocate in California:

Laguna Niguel
24000 Avila Rd.
Stop 2000
Laguna Niguel, CA 92677
949-389-4804

Los Angeles
300 N. Los Angeles St.
Stop 6710 LA
Los Angeles, CA 90012
213-576-3140

Oakland
1301 Clay St.
Suite 1540S
Oakland, CA 94612
510-637-2703

Sacramento
4330 Watt Ave.
Stop SA5043
Sacramento, CA 95821
916-974-5007

San Jose
55 Market St.
Stop 0004
San Jose, CA 95113
408-817-6850

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The IRS and the Taxpayer Advocate Service (TAS) worked together to develop a toolkit. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. It's purpose is to make it easier for you to:

• Understand why it’s important to follow the tax laws

• Get your tax refund quickly and fairly Learn about special tax credits

• Understand your options when you owe the IRS money

• Understand basic tax information

• Learn more about the tax end of starting a small business

• Help prevent identity theft

• Determine if you need an Individual Taxpayer Identification Number (ITIN)

Specific tax topics include:

Help with Tax Problems

Receiving an IRS Notice
Taxpayer Advocate Service (TAS)
Low Income Taxpayer Clinics (LITC)

Individuals

Federal Payment Levy Program
Cancellation of Debt
Income Tax Refund Delivery
Identity Theft
Taxpayers with Disabilities
Recovery Rebate Credit for Individuals
Individual Taxpayer Identification Numbers (ITIN)

Home and Family

TaxTax Benefits for Education
Credit to Aid First-Time Homebuyers
Mortgages: Basic Information
Earned Income Tax Credit (EITC) and Family Credits

Businesses

Starting a Small Business
Recordkeeping for Small Businesses
Employers of Disabled Persons

General Tax Information

Collection and Payment Alternatives
Complying with Tax Laws
Choosing a Tax Preparer
Visiting an IRS Office

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In a policy statement issued by the Internal Revenue Service about the Freedom of Information Act, the IRS states the following:

The Internal Revenue Service is committed to full compliance with the Freedom of Information Act (FOIA), 5 U.S.C. § 552. The FOIA provides that agency records are to be made available to the public unless required or permitted to be withheld. The FOIA accommodates the countervailing interests in disclosure and nondisclosure. The IRS is committed to administering the FOIA with respect to agency records in a manner consistent with preserving the fundamental values held by our society, including public accountability, safeguarding national security, enhancing the effectiveness of law enforcement agencies and the decision-making processes, protecting sensitive business information, and protecting personal privacy.

The Freedom of Information Act (FOIA), 5 U.S.C. § 552, provides public access to agency records unless protected from disclosure by one of the FOIA’s nine exemptions or three exclusions. The FOIA applies to records created by Federal agencies and does not cover records held by Congress, the courts, or state and local government agencies. Each state has its own public access laws which should be consulted for access to state and local records.

The IRS provides guidance accessing FOIA information. Click on any of the following:

IRS FOIA Guide

How to Write Your Request

Example FOIA Letter

Optional Items

Proof of Identity and Right to Access

Fee Schedule

IRS Disclosure Offices

CAF Client Listing Request

Here's a sampling of frequently asked questions about FOIA:

This page answers Frequently Asked Questions about FOIA. Please also see How to Write a FOIA Request and the Guide to Accessing Treasury Records .

Who can make a request under the Freedom of Information Act?

What is a reasonable description of records?

What authorization is required if I make a FOIA requests about myself?

What authorization is required for FOIA information to be released to a third party?

What the FOIA does not require.

When can I expect a response?

How and Under what circumstances may I receive expedited processing?

What is the 30-day rule?

What will cause a delay in the processing of a request?

What if I can't specify exactly where the records are located, but I have some information?

Contract records, solicitation and winning bid records are sometimes available to the public. How do I know when a FOIA request is needed?

Will the FOIA allow me to see records on my neighbor/coworker who is being investigated by the Treasury?

Why should a request sent by fax also contain my signature?

Why should I send my request to the specific Treasury bureau and not one office at Departmental Offices (DO)?

Why should requests for tax records go to the IRS when the Secretary of the Treasury is authorized by law to make tax assessments?

Are there fees associated with a FOIA request and what are they?

What are the various requester fee categories?

What services are free and what are chargeable for the various fee categories?

How are fees determined?

Can a fee be waived?

Under what circumstances may records be withheld?

Can I appeal a denial of request?

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The Internal Revenue Service and California’s tax agencies (Franchise Tax Board, Employment Development Department and Board of Equalization) have formed a partnership called the Joint Tax Agency Communications Committee. The mission of the committee is to “speak with one voice” where feasible with regards to tax issues and to enhance education and outreach efforts by leveraging resources. The website is: California Tax Service Center.

These tax agencies have joined together to streamline and improve taxpayer resources and educational programs. One-stop tax help is the goal.

Income tax, payroll tax, and sales and use tax FAQs are now at one joint website. Information is available in one place for things like forms and publications, filing online, payment options, reporting requirements, rates and schedules, important dates, as well as credits and deductions.

"In this world nothing can be said to be certain, except death and taxes."

For tax help from a tax lawyer, call Mitchell A. Port at (310) 559-5259.

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The IRS is interested in what are the top mistakes on individual income tax returns filed on paper and by e-file. Errors are categorized by whether you filed Form 1040EZ, 1040A, or 1040.

1. We computed your recovery rebate credit for you.

2. We changed the amount of the recovery rebate credit you claimed on your tax return because the amount entered was computed incorrectly.

3. We changed the amount of tax shown on your return. The amount entered was incorrect based on your taxable income and filing status.

4. We changed the amount of taxable income on your return because there was an error in the subtraction of your exemption or combined standard deduction/exemption amount.

5. The refund amount or the amount you owe was computed incorrectly.

6. We changed the amount claimed as standard deduction on your tax return. You are entitled to a higher standard deduction if you and/or your spouse are age 65 or older and/or blind.

7. We changed the amount of taxable social security benefits on because there was an error in the computation of the taxable amount.

8. We didn't allow the recovery rebate credit you claimed. You do not qualify for the credit since there was no qualifying income.

9. For one or more of your dependents the last name doesn’t match our records or the records provided by the Social Security Administration.

If you owe tax and have a serious tax problem, call Los Angeles attorney Mitchell A. Port at (310) 559-5259 for tax help.

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You are legally responsible for what’s on your tax returns even if prepared by someone else. As a result, it is important to choose carefully when hiring an individual or firm to prepare your personal income tax returns. So, if you pay someone to prepare your tax return, choose that preparer wisely.

The IRS has a long and helpful list of points to keep in mind when someone else prepares your return which you can read by clicking here.

Once the tax return is finished and you owe more money than you can pay, you may need to speak to a tax attorney to help with that tax problem. Mitchell A. Port can help.

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This year's list of the top 250 delinquent taxpayers who owe the California Franchise Tax Board $100,000 or more in income tax is now available here. By the time they make it on the list, a tax lien has already been recorded.

Before making it to the list, the FTB sends the taxpayer a certified letter with a return receipt requested. The letter provides information about how to avoid being placed on the list. Here are the options:

• Pay the liability in full
• Establish an installment agreement
• Enter into an Offer in Compromise
• Substantiate a bankruptcy filing

The largest amount owed is $9,940,513.49 and the smallest amount is $217,909.17.

Negotiate a tax resolution with a qualified tax lawyer. Call attorney Mitchell A. Port at (310) 559-5259 for help.

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PURPOSE

Revenue procedure 2009-44 updates the mediation procedure for cases in the Appeals administrative process. This revenue procedure expands and clarifies the types of cases that may be mediated in Appeals. Generally, this program is available for cases in which a limited number of legal and factual issues remain unresolved following settlement discussions in Appeals.

SIGNIFICANT CHANGES

This revenue procedure modifies the Appeals mediation program to expand the types of cases that are eligible for mediation while also clarifying the types of cases that are ineligible.

SCOPE OF MEDIATION

.01 In general. Mediation may be used to resolve issues in cases that qualify under this revenue procedure while they are under consideration by Appeals. This procedure may be used only after Appeals settlement discussions are unsuccessful and, generally, when all other issues are resolved but for the issue(s) for which mediation is being requested.

.02 Applicability. Mediation is available for:
(1) Legal issues;

(2) Factual issues;

(3) A Compliance Coordinated Issue (CCI) or an Appeals Coordinated Issue (ACI). (CCI and ACI issues are listed online at www.irs.gov/appeals.) However, a CCI or ACI issue will not be eligible for mediation when the taxpayer has declined the opportunity to discuss the CCI or ACI issue with the Appeals CCI or ACI coordinator during the course of regular Appeals settlement discussions;

(4) An early referral issue when an agreement is not reached, provided the early referral issue meets the requirements for mediation;

(5) Issues for which a request for competent authority assistance has not yet been filed.

(6) Unsuccessful attempts to enter into a closing agreement; and

(7) Offer in compromise and Trust Fund Recovery Penalty cases.

.03 Inapplicability. Mediation will not be available for:
(1) Cases in which mediation is not appropriate under the general statutory authority and guidelines for use of alternative dispute resolution in the administrative process;

(2) Issues designated for litigation;

(3) Issues docketed in any court;

(4) Collection cases, except for certain offer in compromise and Trust Fund Recovery Penalty cases;

(5) Issues for which mediation would not be consistent with sound tax administration, such as, but not limited to, issues governed by closing agreements, by res judicata, or by controlling Supreme Court precedent;

(6) Frivolous issues;

(7) “Whipsaw” issues, such as, but not limited to, issues for which resolution with respect to one party might result in inconsistent treatment in the absence of participation of another party;

(8) Cases in which the taxpayer did not act in good faith during settlement negotiations, such as, but not limited to, cases in which the taxpayer failed to timely respond to document requests or offers to settle, or failed to address arguments and precedents raised by Appeals; and

(9) Issues that have been otherwise identified in subsequent guidance issued by the IRS as excluded from the mediation program.

APPLICATION PROCESS

.01 Mediation is optional. A taxpayer and Appeals may request mediation after consultation with each other.

.02 Filing requirements.
(1) Where to file. To request mediation, the taxpayer should send a written request to the appropriate Appeals Team Manager. The taxpayer should also send copies of the written request to the appropriate Appeals Area Director and to the Chief Appeals, 1099 14th Street, NW, Suite 4200E – East, Washington, DC 20005, Attn: AP:TS:TPP. (See Exhibit 1 of this revenue procedure for a listing of the addresses for each Appeals Area Director.)

(2) Required information. The mediation request should include:

(a) The taxpayer’s name, taxpayer identification number, and address (and the name, title, address, and telephone number of a person to contact);

(b) The name of the Team Case Leader, Appeals Officer, or Settlement Officer;

(c) The taxable period(s) involved;

(d) A description of the issue for which mediation is being requested, including the dollar amount of the adjustment in dispute; and

(e) A representation that the issue is not an excluded issue listed in the “Scope of Mediation” section above.

.03 Review of Mediation Request. The Appeals Team Manager will confer with the Appeals Office of Tax Policy and Procedure before deciding to approve or deny a mediation request. Generally, the Appeals Team Manager will respond to the taxpayer and the Team Case Leader or Appeals Officer within two weeks after the Appeals Team Manager receives the request for mediation.

(1) Request approved. If Appeals approves the mediation request, the Appeals Team Manager will inform the taxpayer and the Team Case Leader or Appeals Officer and will schedule a conference or conference call that may include a representative from Appeals Tax Policy and Procedure Headquarters to discuss the mediation process.

(2) Request denied. If Appeals denies the mediation request, the Appeals Team Manager will promptly inform the taxpayer and the Team Case Leader or Appeals Officer. Although no formal appeal procedure exists for the denial of a mediation request, a taxpayer may request a conference with the Appeals Team Manager to discuss the denial. The denial of a mediation request is not subject to judicial review.

AGREEMENT TO MEDIATE

.01 Written agreement. Upon approval of the request to mediate, the taxpayer and Appeals will enter into a written agreement to mediate. The agreement to mediate should:
(a) Be as concise as possible;

(b) Specify the issue(s) that the parties have agreed to mediate;

(c) Contain an initial list of witnesses, attorneys, representatives, and observers for each party;

(d) Identify the location and the proposed date of the mediation session; and

(e) Prohibit ex parte contacts between the mediator and the parties.

.02 Participants. The parties to the mediation process will be the taxpayer and Appeals. Each party must have at least one participant with decision-making authority attending the mediation session. The agreement to mediate will set forth the procedures by which the parties inform each other and the mediator of the participants in the mediation, and will set forth any limitation on the number, identity, or participation of such participants. In general, the parties are encouraged to include, in addition to the required decision-makers, those persons with information and expertise that will be useful to the decision-makers and the mediator. In this regard, Appeals has the discretion to communicate ex parte with the IRS Office of Chief Counsel, the originating function, e.g., Compliance, or both, in preparation for or during the mediation session. Appeals also has the discretion to have Counsel, the originating function, or both, participate in the mediation proceeding to present the position and views of the IRS, and to rebut representations and arguments made by the taxpayer. Counsel's participation in this regard is separate from the review function outlined in Section 9.02 of this revenue procedure.

MEDIATION PROCESS

.01 Selection of mediator and expenses. An Appeals employee trained as a mediator will serve as the mediator under this revenue procedure. Appeals will pay all expenses associated with the use of an Appeals mediator. The taxpayer and the Appeals Team Manager will select the Appeals mediator from a list of trained employees who, generally, will be located in the same Appeals office or geographical area as the taxpayer, but will not be a member of the same team that was assigned to the case. Additionally, at the taxpayer’s expense, the taxpayer may elect to use a co-mediator who is not employed by the IRS. The taxpayer and the Appeals Team Manager will select the non-IRS co-mediator from any local or national organization that provides a roster of neutrals. A representative from the Appeals Office of Tax Policy and Procedure may participate in the negotiations to select a non-IRS co-mediator. Criteria for selecting a non-IRS co-mediator may include: completion of mediation training; previous mediation experience; substantive knowledge of tax law; or knowledge of industry practices. A mediator shall have no official, financial, or personal conflict of interest with respect to the parties, unless such interest is fully disclosed in writing to the taxpayer and the Appeals Team Manager and they agree that the mediator may serve.

.02 Appeals personnel as mediators and conflict statement. To address the inherent conflict arising from the Appeals mediator’s status as an employee of the IRS, the Appeals mediator will provide to the taxpayer a statement confirming his or her proposed service as a mediator and stating that (i) he or she is a current employee of the IRS, (ii) a conflict results from his or her continued status as an IRS employee, and (iii) this conflict will not interfere in the mediator’s ability to facilitate the case impartially.

MEDIATION SESSION

.01 Discussion summaries. Each party will prepare a discussion summary of the issues (including the party’s arguments in favor of the party’s position) for consideration by the mediator. The discussion summaries should be submitted to the mediator and the other party no later than two weeks before the mediation session is scheduled to occur.

.02 Confidentiality. The mediation process is confidential. Therefore, all information concerning any dispute resolution communication is confidential and may not be disclosed by any party, participant, observer or mediator except as provided by statute.

.03 Withdrawal. Either party may withdraw from the process anytime before reaching a settlement of the issue(s) being mediated by notifying the other party and the mediator in writing.

POST-SESSION PROCEDURES

.01 Mediator's report. At the conclusion of the mediation process, the mediator will prepare a brief written report and submit a copy to each party.

.02 Closing procedures. If the parties reach an agreement on all or some issues through the mediation process, Appeals will use established procedures, including preparation of a Form 906, Closing Agreement on Final Determination Covering Specific Matters. For offer in compromise cases with liabilities of $50,000 or more, any settlement or agreement reached through mediation must be reviewed by the Office of Chief Counsel before being finalized.

If the parties do not reach an agreement on an issue being mediated, they may request arbitration for the issue, provided the mediation issue meets the requirements for arbitration. If arbitration is not requested or approved, Appeals will not reconsider the mediated issue(s), and a statutory notice of deficiency will be issued with respect to all unagreed issues (or the case will be processed using established closing procedures if there is no deficiency).

GENERAL PROVISIONS

Use as precedent. A settlement reached by the parties through mediation will not be binding on the parties (or be otherwise controlling) for taxable years not covered by the agreement. Except as provided in the agreement, no party may use such settlement as precedent.

EFFECTIVE DATE
This procedure is effective October 5, 2009, the date this revenue procedure is published in the Internal Revenue Bulletin.

This type of tax problem necessitates the input of a qualified tax attorney. Mitchell A. Port is just such an attorney. Call Mitch at (310) 559-5259.

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I like to pay taxes. With them I buy civilization.
~Oliver Wendell Holmes, Jr.

The income tax created more criminals than any other single act of government.
~Barry Goldwater

The taxpayer - that's someone who works for the federal government but doesn't have to take the civil service examination.
~Ronald Reagan

Did you ever notice that when you put the words "The" and "IRS" together, it spells "THEIRS?"
~Author Unknown

Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.
~F.J. Raymond

Taxes grow without rain.
~Jewish Proverb

If we don't do something to simplify the tax system, we're going to end up with a national police force of internal revenue agents.
~Leon Panetta

Tax complexity itself is a kind of tax.
~Max Baucus

I can give you 1040 good reasons why I hate to pay taxes. Mitchell A. Port

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
Benjamin Franklin - Letter to Jean-Baptiste Leroy (13 November 1789)

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The IRS recently updated its "Audit Technique Guides". These Guides contain examination techniques, common and unique industry issues, business practices, industry terminology and other information to assist examiners in performing examinations. If you have a construction business, a new vehicle dealership, a retail business or if you're in the laundromat business, learn what an auditor is trained to look for. Dozens of other audit guides for all kinds of economic and financial activities are available to help you before the audit begins.

If you want the help of a tax attorney during the audit and exam process, call Mitchell A. Port at (310) 559-5259.

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Earlier this morning the Internal Revenue Service announced that it is allowing a one-time extension of the deadline for special voluntary disclosures by those with unreported income from offshore accounts. Those taxpayers now have until Oct. 15, 2009.

PURPOSE OF EXTENSION:

By providing a short extention of the deadline, the IRS is providing relief for those taxpayers who had intended to come forward before the deadline, but faced various challenges in meeting it.

The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these undisclosed offshore accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

Remember, your tax preparer may also be extremely busy completing individual income tax returns (Forms 1040) for 2008 for those clients on extension. Speak with your advisor sooner than later in order to avoid missing the deadline.

IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests.

LAST CHANCE! There will be no further extensions.

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The IRS Tax Amnesty for Foreign Bank Account Report ("FBAR") filings is ending this coming September 23rd. Individuals and entities who have foreign financial accounts are required to file Form 90-22.1 with the IRS every June 30th.

Those who don't file by June 30th next year are subject to criminal penalties of up to five years in jail and a fine of $250,000. In addition, a willful failure to file the FBAR can result in a civil penalty of the GREATER of $100,000 or 50% of the balance in the account. This penalty can be imposed on an annual basis, and can exceed the balance in the account.

Those who come forward by September 23rd will have penalties limited.

Since early in the year, the IRS has been advertising its offshore voluntary disclosure program under which the IRS will not to bring criminal prosecutions of owners of foreign bank accounts if they work with the IRS Criminal Investigation Division by no later than September 23rd.

The IRS has a FAQs page worth reviewing too.

Get help NOW! Call tax attorney Mitchell A. Port at (310) 559-5259.

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It is no surprise in California that the Franchise Tax Board provides many different payment options to pay your individual income tax.

The options are:

Check, money order, or cash - Mail your payment or pay in person.

Installment Agreement request - Complete and submit an online request to make monthly payments for tax, bill, or notice.

Credit Card - Pay with your Discover/NOVUS, MasterCard, Visa, or American Express. Make your payment online or by phone. Official Payments Corporation charges a convenience fee of 2.5% (minimum $1) to use this service.

Web Pay - Pay the current amount you owe and schedule payments up to one year in advance. Select the payment amount and payment date. We'll deduct the payment from your account on the day you selected.

Western Union - Pay online, by phone, or in person at one of their worldwide offices.

For California businesses who owe tax, there are also these options:

Check, money order, or cash - Mail your payment or pay in person.

Installment agreement request - Make monthly payments.

Electronic funds transfer for banks and corporations.

Still have trouble paying your taxes? For tax help, call attorney Mitchell A. Port at (310) 559-5259.

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Don’t call a tax attorney for tax help if your tax problem is that you owe $25,000 or less in combined tax, penalties, and interest. You can use the online payment agreement (OPA) application to request a payment agreement.

Often, the application allows you to qualify, apply for an installment agreement, and receive immediate notification of approval. Sometimes you will need to mail in paperwork or speak with the Internal Revenue Service before they can determine your eligibility for an installment agreement. If that is the case, the OPA application will give you an address or a toll-free phone number to reach them.

The information you need to have when using the Online Payment Agreement is here.

The IRS even explains the three payment options you have.

If you want to know when to call the IRS, check here.

For less than $25,000 in tax, penalties and interest, do not call a tax attorney.

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One of the most unpleasant experiences my clients in Los Angeles, California and across the country have is when they receive a notice from the IRS about unpaid taxes, underpaid taxes or unfiled tax returns.

The IRS published its "Summertime Tax Tips" which provides a short list of eight things you should know about IRS notices in case you get one.

If you owe more than $50,000 in tax, call a qualified tax attorney for help. Call Mitchell A. Port at (310) 559-5259.

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The IRS has excellent information on its website easily understood about Offers in Compromise. Those of us in Los Angeles, California and throughout the rest of the country who owe tax ought to consider an OIC.

Here's what the website covers:

What You Must Know Before You File an Offer in Compromise

All Taxpayers Do Not Qualify for an Offer in Compromise

Offer in Compromise Payments are Non-refundable

Federal Tax Liens are Not Released

Payments May be Designated

Refunds

Levies

Statutory Period for Collection Suspended

Five Year Compliance

OIC Payment and Application Fee Exceptions

Appeal

Approved Installment Agreement

Mandatory Acceptance

Work with a qualified tax attorney on your tax problem. Call Mitchell A. Port at (310) 559-5259.

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Beware of promoters’ claims that tax debts can be settled through the offer in compromise program for "pennies on the dollar".

The preferred approach to the IRS is through your tax attorney so that your interests are protected from those at the tax agency who try and gather information from you to use it to your disadvantage.

Unless you have special circumstances (and some Californians do), an offer in compromise (OIC) will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

An offer is an agreement between you and the Internal Revenue Service that settles your tax liabilities for less than the full amount owed.

Usually, the IRS will not accept an OIC unless the amount you offer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures your ability to pay and includes the value that can be realized from your assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

Three Types of OICs

The IRS may accept an offer in compromise based on three grounds:

1. Doubt as to Collectibility - Doubt exists that you could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

Example: You owe $20,000 for unpaid tax liabilities and agree that the tax you owe is correct. Your monthly income does not meet your necessary living expenses. You do not own any real property and do not have the ability to fully pay the liability now or through monthly installment payments.

2. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, you must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Example: You have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that you will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct.

3. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider your evidence or (3) you has new evidence.

Example: You were vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and you were assessed a trust fund recovery penalty as a responsible party of the corporation. You were no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since you resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.

OIC Payment Options

Usually, you must submit a $150 application fee and initial payment along with the Form 656, Offer in Compromise. You may chose to pay your offer in compromise in one of three payment options:

1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance. A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656.

If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less.

If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less.

If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the statute.

2. Short Term Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation.

The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.

3. Deferred Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the investigation.

The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.

The IRS is not bound by either the offer amount or the terms proposed by you. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise you as to what larger amount or different terms would likely be recommended for acceptance.

Payments and Application Fees

When filing an offer in compromise, two separate remittance documents should be sent, one for the application fee and the other for the required offer payment.

The Form 656-PPV, Offer in Compromise Payment Voucher, included in the Form 656, should be completed and attached to any periodic payment(s) that becomes due. Failure to submit any required periodic payments, after the initial payment has been submitted, will result in the offer being declared withdrawn.

The OIC application fee reduces the assessed tax or other amounts due. The application fee will be returned if the OIC is deemed not to be processable. Unless the offer in compromise has been submitted under doubt as to liability or a completed Form 656-A and Offer in Compromise Application Fee and Payment Worksheet is included with the Form 656, the $150 application fee must be included with the offer or the IRS will return the offer.

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At the end of last year, the IRS announced a two-year test of two programs: the post-Appeals mediation and arbitration procedures for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (TFRP).

Under these two alternative dispute resolution programs, the taxpayer or Appeals may request nonbinding mediation. The taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111. A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals.

During the test period, Appeals employees will advise the taxpayer of the availability of these alternative dispute strategies and the deadline for timely requesting such strategies when a rejection of an OIC is sustained or a proposed TFRP assessment is sustained. An OIC submitted during Collection Due Process (CDP) as an alternative to a Collection action is not eligible for these alternative dispute resolution strategies during the test period.

The Post-Appeals mediation process is available for both legal and factual issues. The mediator’s role is to facilitate settlement negotiations so the parties can reach their own agreement. The mediator does not have settlement authority over any issue.

The Arbitration procedure is available for factual issues only. The arbitrator’s role is to hear both sides of a disputed issue and then render a decision on the specific factual issue being arbitrated. This decision is binding on both parties. However, the arbitrator does not have the authority to decide that the offer in compromise itself must be accepted or that a person is/is not liable for the TFRP under § 6672. Neither party may appeal the decision of the arbitrator or contest the decision in any judicial proceeding.

Complete procedures for initiating a request for post-Appeals mediation or arbitration are in Announcement 2008-111. The agency will seek appropriate Offer in Compromise and Trust Fund Recovery Penalty cases for both post-Appeals mediation and arbitration during the two-year test period in order to evaluate the effectiveness of alternative dispute resolution for these cases.

For the two-year test period, Appeals will offer post-Appeals mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Ga.; Chicago, Ill.; Cincinnati, Ohio; Houston, Texas; Indianapolis, Ind.; Louisville, Ky.; Phoenix, Ariz.; and San Francisco, Calif.

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Whether you live in Los Angeles, California, anywhere else in California or across the U.S., if you get a letter from the IRS you must respond appropriately and timely. Here's a sampling of some of the letters commonly used:

Collection Letters

Letter 11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing

Letter 1058 – Final Notice Reply Within 30 Days

Letter 1085 – 30-Day Letter Proposed 6020(b) Assessment

Letter 3172 – Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320

Examination Letters

Letter 525 – General 30 Day Letter

Letter 531 – Notice of Deficiency

Letter 692 – Request for Consideration of Additional Findings

Letter 1153 – Trust Funds Recovery Penalty Letter

Letter 1389 – 30 Day Letter, Tax Shelter Activity

Letter 3016 – IRC Section 6015 Preliminary Determination Letter (30 Day)

Letter 3391 – 30-Day Nonfiler Letter

Letter 3727 – 30-Day Letter Notifying Taxpayer No Change to Original Report Disallowing EIC Based on Failure to Meet Residency Test for Children Claimed

Letter 3728 – 30-Day Letter Notifying Taxpayer No Change to Original Report Partially Disallowing EIC Based on Failure to Meet Residency Test for 1 Child

Notices

CP 90 – Final Notice of Intent to Levy

CP 92 – Notice of Levy upon Your State Tax Refund

CP 242 – Notice of Levy upon Your State Tax Refund

CP 523 – IMF Installment Agreement Default Notice

CP 2000 - You receive this letter when the IRS receives income, deduction or credit information that does not match your return.

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On July 7, 2009, the Franchise Tax Board (FTB) announced payment of current and past due personal and corporate taxes with California registered warrants (IOUs) is acceptable

By law, FTB cannot deposit the IOU until it is payable, but FTB will credit your account on the date the IOU is received to stop the accrual of interest. If the IOU is not sufficient to pay the outstanding balance, you should send an additional payment for the difference.

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To submit an Offer In Compromise (OIC) with the Internal Revenue Service in order to pay pennies on the dollar, a nonrefundable 20% downpayment is required. Combined with a very low acceptance rate by the Internal Revenue Service of OICs, the downpayment has the effect of discouraging people from applying for an Offer.

A Congressional bill was recently introduced the title to which tells it all: “Repeal of the Partial Payment Requirement on Submissions of Offers in Compromise”. If this is enacted into law, the struggle with your tax debts may be a bit easier.

If you have a tax problem and need a tax lawyer, call Mitchell A. Port at (310) 559-5259.

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The Internal Revenue Service has filed a $819,848 federal tax lien against Sen. John Kerry's 2004 presidential campaign. The campaign says the tax return was filed and lost by the IRS while the IRS says no tax return was ever filed. Sen. Kerry's office blamed IRS clerical error for the claim and said his campaign owes no penalties.

The liability described in the tax lien is based on Internal Revenue Code Section 6721 entitled "Failure to File Correct Information Returns".

The Massachusetts Democrat said the IRS mishandled payroll tax forms that he said were correctly filed by his campaign in 2005.

Avoid this tax problem. Speak with a qualified tax attorney in Los Angeles from anywhere in the U.S. about your situation. Call Mitchell A. Port at (310) 559-5259.

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Filing a past due return may not be as difficult as you think. Los Angeles, California taxpayers should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Same is true for California tax returns.

Whether paying taxes with a timely filed tax return, or filing late and paying taxes late after receiving a bill from the IRS (and the bill is correct), LA's taxpayers are encouraged to pay the taxes they owe in full.

Prevent the IRS from levying bank accounts, wages, or other income, or taking other assets. Prevent the IRS from filing a Notice of Federal Tax Lien that may have a detrimental effect on your credit standing.

If you don't file your tax return, the IRS will file a substitute return for you, which will not include any additional exemptions or expenses you may be entitled to and may overstate your real tax liability. Once the tax is assessed the IRS will start the collection process, which can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.

Call a tax professional - call attorney Mitchell A. Port.

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Get Free Help.

The IRS offers free tax assistance in person, by telephone, computer and by fax. The IRS can assist taxpayers with obtaining forms, publications and answers to a wide range of tax questions. The IRS can also help find free tax preparation for those who qualify.

In Person

Taxpayers needing face-to-face help solving individual or business tax problems can get help every business day in every IRS Taxpayer Assistance Center.

By Phone

Call the toll-free customer service line at 1-800-829-1040.

Use Your Computer

Through the Internet, you can access a wealth of free tax information on the IRS Web site. Taxpayers can check out links such as Forms and Publications to download necessary forms, instructions or publications; get the FAQs (Frequently Asked Questions) to get answers to questions

By Fax

You can receive faxed forms and publications by calling 1-703-368-9694 (not a toll-free call). Simply follow the directions from the prompts.

Be careful when providing the IRS with your information while you are trying to information from them. Hire a tax professional if you are concerned you might inadvertantly disclose information you may not want the IRS to have at this time.

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There are jobs in California.

The IRS is recruiting hundreds of Internal Revenue Agents with a minimum 30 hours of college-level accounting coursework for openings around the country. To apply for these and other IRS jobs, go to the IRS job search on USAJOBS.

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Do You Have a Foreign Financial Account?

If you have authority over or own a foreign financial account, including a brokerage account, unit trust, mutual fund, bank account or other types of financial accounts, then you may be required to report the account yearly to the IRS. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if

1. The value of the account exceeds $10,000 at any time during the calendar year, and

2. The person has financial interest in, signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country.

The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

A United States person is not prohibited from owning foreign accounts. The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.

Definition of Terms

What is an FBAR?

Who must file an FBAR?

When is the FBAR due?

Where are FBAR forms available?

What are the exceptions to the FBAR filing requirement?

How do foreign account holders report their accounts to the IRS?

Where do account holders file the FBAR?

How long should account holders retain records of the foreign accounts?

What is a United States person?

Would a foreign athlete or entertainer that occasionally visits the U.S. in order to compete or perform in an event, be considered a United States person for FBAR purposes?

What is a foreign country?

What is a financial account?

Does more than one form need to be filed for a husband and wife owning a joint account?

What constitutes signature or other authority over an account?

What does “maximum value of account” mean (for Box 15 on the FBAR)?

Is an FBAR required if the account generates neither interest nor dividend income?

How does an FBAR filer amend a previously filed FBAR?

What is the statute of limitations for assessing civil penalties for violations of the FBAR requirements?

What happens if an account holder is required to file an FBAR and fails to do so?

An American citizen, X, gives a person who is a citizen or resident of the U.S. power of attorney to X’s Canadian bank accounts. X files an FBAR form annually. Does the power of attorney also need to file an FBAR?

A fiduciary who is a U.S. person has control as a trustee for an IRA with a foreign account. Should an FBAR be filed?

Does the term “other authority over a financial account” mean that a person, who has the power to direct how an account is invested, but who cannot make disbursements to the accounts, has to file an FBAR?

Must a U.S. person file an FBAR on a Eurodollar account in the Cayman Islands?

A N.Y. corporation owns a foreign company that has foreign accounts. The corporation will file an FBAR for the foreign company’s accounts. Do the primary owners of the U.S. Company also have to file?

A company has over 25 foreign accounts. What should they enter in Part ll of the FBAR?

A person is a non-resident alien and only visits the United States to manage his personal interests, such as rental property. Does that person have to file an FBAR?

Reporting and Filing Information

A person who holds a foreign account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on Form 1040 Schedule B, and filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, satisfies the account holder’s reporting obligation.

A foreign account holder must mail the Form TD F 90-22.1 on or before June 30 of the following year to:

U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621.

The FBAR is not to be filed with the filer’s Federal income tax return.

The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. There is no extension available for filing the FBAR.

Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.

Exceptions to the Reporting Requirement

There are exceptions to the reporting requirement. These exceptions include:

1. Accounts in U.S. military banking facilities operated by a United States financial institution to serve U.S. Government installations abroad are not considered to be accounts in a foreign country for purposes of the reporting requirement.

2. An officer or employee of a bank that is subject to the supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation, is not required to report having signature or other authority over a foreign account if the officer or employee has no personal interest in the account.

3. An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, is not required to report having signature or other authority over a foreign account if the person has no personal financial interest in the account, and the officer or employee has been advised in writing by the chief financial officer of the corporation that the corporation has filed a current report that includes the foreign account.

The IRS has launched a "tax amnesty" for those who turn themselves in within the next 5 months. It is critical that clients be made aware of this program, and be counseled on whether it is in their best interest to participate. The issues are complex, and require a balancing of a number of financial, tax and criminal considerations including the non-applicability of the federal authorized tax practitioner privilege. The "amnesty" will expire on September 22, 2009, so time is of the essence. Current year FBARs are due June 30th.

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The United States Tax Court will begin a pilot eFiling program through Practitioner Access and Petitioner Access on May 7, 2009.

The pilot will be restricted to petitioners and practitioners in good standing with the Court who have registered for eAccess, agreed to its Terms of Use, and consented to eService. The pilot applies to all cases first calendared for trial or hearing after August 31, 2009.

For example, if you have registered for Practitioner Access, consented to eService, and your case is first calendared for trial or hearing on September 21, 2009, you may eFile in that case during the pilot, but not if the case was set for hearing or trial before September 1, 2009. You can also participate in the pilot if your case has not been set for trial. If your case is set for trial or hearing before September 1, 2009, you may not eFile in that case during the pilot.

Please note that eFiling in a particular case can be commenced only after the petition has been filed with the Tax Court in that case. All petitions must be submitted to the Court in paper form.

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The Internal Revenue Service issued its 2009 “dirty dozen” list of tax scams, including schemes involving phishing, hiding income offshore and false claims for refunds.

Tax schemes are illegal and can lead to problems for both scam artists and taxpayers who risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

Filing False or Misleading Forms

The IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to. Frivolous information returns, such as Form 1099-Original Issue Discount (OID), claiming false withholding credits are used to legitimize erroneous refund claims. The new scam has evolved from an earlier phony argument that a “strawman” bank account has been created for each citizen. Under this scheme, taxpayers fabricate an information return, arguing they used their “strawman” account to pay for goods and services and falsely claim the corresponding amount as withholding as a way to seek a tax refund.

False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is "Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service."

Hiding Income Offshore

The IRS aggressively pursues taxpayers and promoters involved in abusive offshore transactions. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through other entities. Recently, the IRS provided guidance to auditors on how to deal with those hiding income offshore in undisclosed accounts. The IRS draws a clear line between taxpayers with offshore accounts who voluntarily come forward and those who fail to come forward.

Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans. The IRS has also identified abusive offshore schemes including those that involve use of electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

Return Preparer Fraud

Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

Phishing

Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Taxpayers who receive unsolicited e-mails that claim to be from the IRS can forward the message to phishing@irs.gov. Further instructions are available at IRS.gov. To date, taxpayers have forwarded scam e-mails reflecting thousands of confirmed IRS phishing sites. If you believe you have been the target of an identity thief, information is available at IRS.gov.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of the positions on the list are subject to a $5,000 penalty. More information is available on IRS.gov.

Disguised Corporate Ownership

Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising the ownership of a business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to divert income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into IRAs or companies owned by their IRAs at less than fair market value to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity which is considered prohibited.

Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

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The IRS publishes a thorough explanation of your rights as a taxpayer.

You have rights as a taxpayer when dealing with the IRS. Whether you file a Form 1040 or a complicated corporate return, you will benefit from knowing your rights as a taxpayer and being familiar with the IRS' obligations to protect them.

The Taxpayer Advocate Service (TAS) is an IRS program that provides an independent system to assure that tax problems, which have not been resolved through normal channels, are promptly and fairly handled.

What should you do if you receive a notice from the IRS?

You have rights to representation - learn more about granting power of attorney.

The IRS accepts most taxpayer's returns as filed. If it inquires about your return or select it for examination, it does not suggest that you are dishonest. The inquiry or examination may or may not result in more tax. Learn about your rights during the examination process and get information about how audits are conducted.

It is your right to appeal any action taken by the IRS to change your account.

Learn about the collection process IRS may follow to collect overdue taxes, including a summary of your rights and other important information about the collection process.

For further tax help, call former IRS attorney Mitchell A. Port at (310) 559-5259.

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A request for an Offer in Compromise from the IRS or the California Franchise Tax Board can also be used by businesses to resolve outstanding corporate income and payroll taxes.

Similar to an Offer in Compromise for an individual, the offer for a business is computed based upon the business’s current assets and financial disclosure statement. The IRS uses the company’s reasonable collection potential to determine the Offer amount. The reasonable collection potential for a business is computed in a manner similar to that of an individual. However, unlike individual expenses, the IRS does not have “national standards” for business expenses. In most circumstances the IRS will allow all ordinary and necessary expenses of the business.

The IRS’s recent revisions to its Internal Revenue Manual make these types of Offers more difficult.

Offers submitted by an in-business taxpayer with payroll/trust fund recovery penalty liabilities will not be investigated unless the trust fund portion of the taxes are paid, the trust fund recovery penalties are assessed against all responsible persons, or the trust fund package has been forwarded for assessment.

To submit an Offer for an ongoing business, all of the responsible persons must either agree to be assessed with the trust fund recovery penalties, or pay the underlying trust fund amount.

Offers submitted by active businesses with trust fund liabilities no longer require that the Offer amount include the reasonable collection potential of both the entity and all responsible persons. Instead, the ongoing business is only required to offer an amount reflective of its reasonable collection potential.

This policy is likely due to the IRS’s renewed focus on the collection of the trust fund liabilities from all responsible persons, despite an Offer at the entity level.

The IRS will continue to collect the trust fund portion of the liability from the responsible persons despite the entity’s successful Offer; most responsible persons would not be motivated to file an Offer on behalf of the company due to their continued liability. The IRS’s interest in collecting from all responsible persons diminishes some of the benefits of an Offer for an ongoing business taxpayer.

These policies leave most responsible persons in a precarious situation because the Offer for the business will not alleviate their personal liabilities. Unless all of the responsible persons independently qualify for a personal Offer in Compromise, this might not be the best solution for the business. However, it may be the only solution available for the entity to remain in business.

For tax help on your unpaid payroll or income tax, call Mitchell A. Port at (310) 559-5259.

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Standards of Conduct for Certified Public Accountants, Attorneys, Enrolled Actuaries and Enrolled Agents are available at the IRS website. Circular 230 contains regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the Internal Revenue Service.

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It's crunch time for California’s taxpayers and their accountants alike in the rush to get state and federal income taxes postmarked in by tonight's 11:59:59 p.m. deadline.

Some of my CPA friends can't wait to teach their teenagers how to drive.

My other friends who are tax preparers are just looking forward to getting some sleep.

Another California tax season over – at last.

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Here is a link to the "Top Frequently Asked Questions for IRS Procedures".

Try this link to the "Frequently Asked Question Subcategories for IRS Procedures".

For tax assistance with the IRS or California's tax authorities such as the Franchise Tax Board or California State Board of Equalization, call a qualified tax attorney. Call Mitchell A. Port at (310) 559-5259.

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Curious about what tax law changes occurred in California that impacts your income tax return (Form 540)? The Franchise Tax Board (FTB) publised a summary of those changes which you can view here.

Some of the tax changes cover these topics:

Electronic payments

Mortgage forgiveness debt relief

Net operating loss

Tax shelters

Business tax credit limitation

Estimated tax payments

Same-Sex married couples

Voluntary contributions

Third party designee

Conformity

Rice Straw Credit

Withholding on California Real Estate

Consult your tax preparer to determine whether any of these changes may apply and benefit you.

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The IRS makes available the Tax Code, Regulations and Official Guidance at its website. Proper tax planning is available by proper use of the Code, Treasury Regulations and other government resources. Here is your source for last minute planning opportunities which can treat last year's income, expenses and deductions in a way advatageous to you.

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California's tax season means proper tax planning. A most important tool is the tax code. Access to the entire tax code for California is available by clicking here.

Here's a list of the tax code's table of contents.

CALIFORNIA REVENUE AND TAXATION CODE

TABLE OF CONTENTS

GENERAL PROVISIONS ................................................... 1-38
DIVISION 1. PROPERTY TAXATION
PART 0.5. IMPLEMENTATION OF ARTICLE XIIIA OF THE CALIFORNIA
CONSTITUTION

Continue reading "California Revenue and Taxation Code" »

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The IRS website is a fantastic resource during this tax season for providing information and answers to commonly asked questions. Here is a few of the topics covered:

2009 Tax Year Highlights

Recovery Rebate Credit

First-Time Homeowners Credit

Earned Income Tax Credit

Facing Difficult times financially?

Use Online Tools

Find out if you qualify for Earned Income Tax Credit

Calculate your optional itemized deduction for state and local sales taxes

See if you might be subject to the Alternative Minimum Tax

Find out the status of your refund and more

Products and Services in Spanish

Frequently Asked Questions and Answers

Are you or your spouse a member of the U.S. Armed Forces?

Tax relief in disaster situations

Tips for Choosing a Tax Preparer

Commonly Requested Tax Forms and Instructions

Taxpayer Advocate Service

Need more assistance? The IRS wants to help; lots of information is available for individuals and businesses.

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Deductibility of Theft Losses:

The Internal Revenue Service and Treasury Department are aware of investment arrangements that have been discovered to be fraudulent, resulting in significant losses to taxpayers. These arrangements often take the form of so-called "Ponzi" schemes, in which the party perpetrating the fraud receives cash or property from investors, purports to earn income for the investors, and reports to the investors income amounts that are wholly or partially fictitious.

The Internal Revenue Service and Treasury Department recognize that whether and when investors meet the requirements for claiming a theft loss for an investment in a Ponzi scheme are highly factual determinations that often cannot be made by taxpayers with certainty in the year the loss is discovered.

Payments, if any, of purported income or principal to investors are made from cash or property that other investors invested in the fraudulent arrangement. The party perpetrating the fraud criminally appropriates some or all of the investors' cash or property.

Revenue Ruling 2009-9, 2009 I.R.B (March 2, 2009), describes the proper income tax treatment for losses resulting from these Ponzi schemes.

In view of the number of investment arrangements recently discovered to be fraudulent and the extent of the potential losses, this revenue procedure provides an optional safe harbor under which qualified investors (as defined in the revenue procedure) may treat a loss as a theft loss deduction when certain conditions are met.

This treatment provides qualified investors with a uniform manner for determining their theft losses. In addition, this treatment avoids potentially difficult problems of proof in determining how much income reported in prior years was fictitious or a return of capital, and alleviates compliance and administrative burdens on both taxpayers and the Service.

Under Revenue Procedure 2009-20, the IRS issued guidance on the examination of returns and claims for refund, credit or abatement. This revenue procedure provides an optional safe harbor treatment for taxpayers that experienced losses in certain investment arrangements discovered to be criminally fraudulent. This revenue procedure also describes how the Internal Revenue Service will treat a return that claims a deduction for such a loss and does not use the safe harbor treatment described in this revenue procedure.

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If you owe over $100,000 in unpaid income tax to the Internal Revenue Service or a large amount to the California Franchise Tax Board, you can quickly resolve your tax problem by having the following information available when contacting the Internal Revenue Service:

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

Additional information and /or documentation may be needed to determine disposition of the account.

Call a qualified Los Angeles tax attorney for the right tax help. Call Mitchell A. Port at (310) 559-5259.

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California's Franchise Tax Board, Employment Development Department and the State Board of Equalization now allow taxpayers behind in their tax payments to use one form when applying to more than one tax agency for an Offer in Compromise.

Are you an OIC candidate for taxes owed to California's tax agencies?

The Offer in Compromise (OIC) program is for taxpayers that do not have, and will not have in the foreseeable future, the income, assets, or means to pay the tax liability. It allows you to offer a lesser amount for payment of a nondisputed final tax liability. Although each case is evaluated based on its own unique set of facts and circumstances, California gives the following factors strong consideration in the evaluation:

The offer is in the best interest of California.

Your present and future expenses.

The amount of equity in your assets.

Your present and future income.

Your ability to pay.

The potential for changed circumstances.

California’s tax agencies will not recommend approval of offers if there are assets or income available to pay more than the amount offered.

Can California’s tax agencies process your application?

Your offers will be evaluated independently by each agency. The BOE, FTB, and EDD have different criteria for participation in their OIC programs.

For all agencies, you must agree that you owe the amount of the liability. If you dispute the liability, you should appeal through the appropriate agency’s appeal process.

For FTB, your application will be processed if all of the required FTB income tax returns have been filed. If you have no filing requirement, note it on your application.

For both BOE and EDD, you must be out of business and must not have a controlling interest or an association with the business or a successor to the business that incurred the liability. This includes operating a business of the same nature.

For EDD, you cannot have access to income to pay more than the accumulating interest and 6.7 percent of the outstanding liability on an annual basis.

For EDD, an offer will not be considered for liabilities assessed for fraud or where the employer has been convicted of a violation under the California Unemployment Insurance Code.

For BOE, an offer for a liability with a fraud assessment will not be considered if there is a criminal conviction of fraud. For other fraud assessments, an offer will be considered if a minimum of the tax plus the fraud penalty is offered.

Are collections suspended?

Submitting an offer does not automatically suspend collection activity. Wage garnishments already in place at the time of the offer will continue and will not be considered as partial payment of the offered amount. However, in many cases, collection action will be suspended until the OIC evaluation is completed. If delaying collection activity jeopardizes California’s ability to collect, collection efforts may continue. Interest will continue to accrue as prescribed by law.

Will California’s tax agencies require you to continue payments on an Installment Agreement?

All the agencies require that you continue making periodic payments as called for in any existing installment agreement while your offer is being considered.

Call Mitchell A. Port, a California tax attorney, for help with your tax problems. Call (310) 559-5259.

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The California Franchise Tax Board explains that if you meet certain legal requirements, you may qualify for relief of payment on all or part of your unpaid income tax balance. California's Franchise Tax Board will work with you to determine if you meet the requirements for relief. One approach is to complete and submit a "Request for Innocent Joint Filer Relief".

Speak to a licensed California tax attorney to discuss fixing your tax problems. Call Mitchell A. Port at (310) 559-5259.

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INTEREST AND PENALTIES DO NOT STOP ACCRUING WHEN YOU FILE YOUR REQUEST FOR APPEAL

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 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.

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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.

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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.

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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.

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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.

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The Taxpayer Advocate independently represents your interests and concerns within the Internal Revenue Service. The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers who believe that an IRS system or procedure is not working as it should, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who are experiencing economic harm. The goals of the Taxpayer Advocate Service are to protect individual and business taxpayer rights and to reduce taxpayer burden. This is accomplished in two ways:

Identifying issues that increase burden or create problems for taxpayers: Bringing those issues to the attention of IRS management and making legislative proposals where necessary;

Ensuring that taxpayer problems which have not been resolved through normal channels, are promptly and fairly handled.

Need further help? Call a qualified California tax attorney - call Mitchell A. Port at (310) 559-5259.

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“The hardest thing in the world to understand is the income tax.” — Albert Einstein, physicist

“I am proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money.” — Arthur Godfrey, entertainer

"Like mothers, taxes are often misunderstood, but seldom forgotten.'' — Lord Bramwell, 19th Century English jurist

“Income tax has made more liars out of the American people than golf.” — Will Rogers, humorist

"The power of taxing people and their property is essential to the very existence of government.'' — James Madison, U.S. President

"To tax and to please, no more than to love and to be wise, is not given to men." — Edmund Burke, 18th Century Irish political philosopher and British statesman

"No government can exist without taxation. This money must necessarily be levied on the people; and the grand art consists of levying so as not to oppress.'' — Frederick the Great, 18th Century Prussian king

"The best measure of a man's honesty isn't his income tax return. It's the zero adjust on his bathroom scale.'' — Arthur C. Clarke, author

“People who complain about taxes can be divided into two classes: men and women.”
— Unknown

"Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F. J. Raymond, humorist

A tax loophole is "something that benefits the other guy. If it benefits you, it is tax reform.''
— Russell B. Long, U.S. Senator

"Few of us ever test our powers of deduction, except when filling out an income tax form.''
— Laurence J. Peter, author

“Taxation with representation ain’t so hot either.” — Gerald Barzan, humorist

“Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” — Plato

"Taxes are what we pay for civilized society.'' — Oliver Wendell Holmes, Jr., U.S. Supreme Court Justice

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California is a community property state which means most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death. Joint ownership is automatically presumed by law in the absence of specific evidence that would point to a contrary conclusion for a particular piece of property.

In a recent Fifth Circuit Court of Appeals decision, the taxpayer claimed that in determining her share of the community property interest in order to calculate how much income to pay tax on, the IRS should have made the “separate tax formula allocation . . . upon the basis of the spouse who earned the income and not upon the basis of a community property split.”

The only disputed issue before the court was how the separate tax liability should be calculated—the taxpayer argued that it should be calculated based on the wages she personally earned, and the IRS argued that it should be calculated based on fifty percent of all community income.

The court simply held that the taxpayer's argument is not supported by the IRS's revenue rulings or any other legal authority. The court relied on Revenue Ruling 2004-74 which provides that tax is simply not calculated on the share of community income earned by just one spouse but instead is calculated on the 50% interest attributable to the spouse who live in a community property state (like California).

Do you qualify for innocent spouse relief? Speak with a California tax attorney who understands community property law. Call Mitchell A. Port at 310.559.5259.

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Simply not filing a federal tax return for your California business or for your income earned in California, be it a payroll tax return or a corporate tax return, or an individual income tax return doesn’t mean you or your California based business won’t be assessed a tax.

Internal Revenue Code Section 6020(b) is the authority given to the Commissioner of the Internal Revenue Service to prepare and process tax returns for non-filing business and individual taxpayers. If the tax returns prepared for you by the government are taxable, as they almost certainly will be, then a tax is assessed and collection efforts will be made.

Final regulations were recently issued by the Internal Revenue Service and they affect any person who fails to file a required federal tax return.

The final regulations relate to tax returns prepared or signed by the Commissioner or other Internal Revenue Officers or employees under Section 6020 of the Internal Revenue Code. The final regulations provide guidance for preparing a substitute for return under Section 6020(b).

IRC 6020(b) provides a way to prepare returns and secure assessments from non-filing taxpayers who:

Have an open filing requirement

Do not file a return as required

Speaking with the formality of final tax regulations, here’s what they say: “If any person required by the Internal Revenue Code or by the regulations to make a tax return, fails to make such return at the time prescribed for it, or makes, willfully or otherwise, a false, fraudulent or frivolous return, the Commissioner or other authorized Internal Revenue Officer or employee shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. The Commissioner or other authorized Internal Revenue Officer or employee may make the tax return by gathering information and making computations through electronic, automated or other means to make a determination of the taxpayer’s tax liability.”

File your unfiled tax returns for your California business or for you personally. Negotiate with a tax attorney’s help how you can pay the tax and how much of it must be paid. Call Mitchell A. Port, an attorney formerly with the IRS, at (310) 559-5259.

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Attention California small business owners: The 2009 IRS Tax Calendar for Small Businesses and the Self-Employed (Publication 1518) is now available in English and Spanish. The Tax Calendar is a handy resource to help small business owners meet their tax obligations. The twelve month wall calendar is packed with useful information on retirement plans, common tax filing dates, general business taxes, electronic filing and paying options, business publications and forms and a lot more.

Each page highlights different tax issues and tips that may be relevant to small-business owners.

Tax problems may nevertheless still come up in California and elsewhere. Call a tax attorney for help. Call Mitchell A. Port at (310) 559-5259.

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To reduce burden on small employers many of whom do business in Los Angeles County, Ventura County, Santa Barbara County and Orange County California, the IRS has simplified the rules for filing employment tax returns to report social security, Medicare, and withheld federal income taxes. Certain employers must file Form 944, Employer’s ANNUAL Federal Tax Return, instead of Form 941, Employer’s QUARTERLY Federal Tax Return.

For taxable years beginning on or after January 1, 2009, employers who estimate that their annual employment tax liability will be $1,000 or less can contact the IRS to request filing Form 944 instead of Forms 941 for a taxable year. Instructions for filing Form 944 are here. Only upon request will the IRS send a notification letter to qualified employers confirming that they may file Form 944 for that taxable year. Once employers receive this notice they must file Form 944 and cannot file Forms 941 instead for a taxable year until they contact the IRS to change their filing requirement to Form 941 for that taxable year and receive confirmation that their filing requirement has been changed.

The IRS will issue guidance published in the Internal Revenue Bulletin informing employers how they can contact the IRS to participate in the Form 944 Program and how they can elect out if they later decide that they want to file Forms 941 instead of Form 944. Under the 2006 regulations, employers were only eligible to opt out if they estimated that their employment tax liability would exceed the $1,000 threshold or if they wanted to e-file Forms 941 quarterly instead. Because the program is being made voluntary, beginning in tax year 2010, employers will be able to opt out for any reason if they follow procedures to be provided in future guidance.

For payroll tax issues, call tax attorney Mitchell A. Port for further information and help.

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Currently, there are more than 1 million federal tax liens outstanding tied to both real and personal property - many filed in California. The IRS issues more than 600,000 federal tax lien notices annually. Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property. The federal tax lien will make it difficult to address financial problems you may be having about your home.

In a recent announcement, the IRS said:

"An expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.

Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.

To apply for a tax lien discharge, applicants must follow directions in Publication 783, Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information.

The IRS also urges people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process so that it can begin work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction.

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New Section 19011.5 of the California Revenue & Taxation Code requires some taxpayers to make their tax payments using an electronic method which California calls “mandatory e-pay”.
There is a one percent penalty of the amount paid unless the failure to pay electronically was for reasonable cause and not willful neglect.

As a California tax attorney, I don’t know and the law remains unclear whether the penalty applies to those who are employees and who make regular tax payments by having employee withholding done by their employer.

In California, beginning January 1, 2009, personal income taxpayers whose tax liability is greater than $80,000 or who make an estimated tax or extension payment that exceeds $20,000 for taxable years beginning on or after January 1, 2009, must send the payment electronically. Once either of these conditions is met, all payments regardless of type, amount, or tax year must be remitted electronically by credit card, Electronic Funds Withdrawal (EFW), or web pay.

Taxpayers whose tax thresholds fall below the mandatory e-pay amounts may request to discontinue making electronic payments. In March 2009, the California Franchise Tax Board will provide a waiver form for taxpayers to file.

On December 1, the California Franchise Tax Board sent courtesy letters to taxpayers who made a payment in 2008 that could qualify them for mandatory e-pay. The letter informed these taxpayers of the law change, and that they may meet the mandatory e-pay threshold in 2009.

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When closing a business in California, there is much to do. Some of the following suggestions may require help from your tax attorney or CPA.

You must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes.

The annual tax return for a partnership, corporation, S corporation, limited liability company or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.

You will also need to file returns to report disposing of business property, reporting the exchange of like-kind property, and/or changing the form of your business. Below is a list of typical actions to take when closing a business, depending on your type of business structure:

Checklist

Make final federal tax deposits
Electronic Federal Tax Paying System (EFTPS)
OR
Form 8109-B

File final quarterly or annual employment tax form
Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
Form 941, Employer's Quarterly Federal Tax Return
Form 943, Employer's Annual Tax Return for Agricultural Employees
Form 943-A, Agricultural Employer's Record of Federal Tax Liability

Issue final wage and withholding information to employees
Form W-2, Wage and Tax Statement

Report information from W-2s issued
Form W-3, Transmittal of Income and Tax Statements

File final tip income and allocated tips information return
Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips

Report capital gains or losses
Form 1040, U.S. Individual Income Tax Return
Form 1065, U.S. Partnership Return of Income
Form 1120 (Schedule D), Capital Gains and Losses

Report partner's/shareholder's shares
Form 1065 (Schedule K-1), Partner's Share of Income, Credits, Deductions, etc.
Form 1120S (Schedule K-1), Shareholder's Share of Income, Credits, Deductions, etc.

File final employee pension/benefit plan
Form 5500, Annual Return/Report of Employee Benefit Plan

Issue payment information to sub-contractors
Form 1099-MISC, Miscellaneous Income

Report information from 1099s issued
Form 1096, Annual Summary and Transmittal of U.S. Information Returns

Report corporate dissolution or liquidation
Form 966, Corporate Dissolution or Liquidation

Consider allowing S corporation election to terminate
Form 1120S, Instructions

Report business asset sales
Form 8594, Asset Acquisition Statement

Report the sale or exchange of property used in your trade or business
Form 4797, Sales of Business Property

Contact local and California state agencies.

Speak with a California business attorney about this and your other business questions. Call Mitchell A. Port.

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The IRS provided interim guidance with regard to the application of the 2-percent floor under Internal Revenue Code section 67 to certain investment advisory fees. Specifically, the IRS notice provides that, for taxable years beginning before January 1, 2009, non-grantor trusts and estates will not be required to “unbundled” a fiduciary fee into portions consisting of costs that are fully deductible and costs that are subject to the 2-percent floor.

On January 16, 2008, the Supreme Court of the United States issued its decision in Michael J. Knight, Trustee of William L. Rudkin Testamentary Trust v. Commissioner, 552 U.S. ___, 128 S. Ct. 782 (2008), holding that costs paid to an investment advisor by a nongrantor trust or estate generally are subject to the 2-percent floor for miscellaneous itemized deductions under § 67(a).

The IRS and the Treasury Department expect to issue regulations under § 1.67-4 of the Income Tax Regulations consistent with the Supreme Court’s holding in Knight. The regulations, however, will not be issued in time to be applicable to the 2008 taxable year.

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An advance draft copy of a California tax form for same-sex married couples is now available. It is subject to change and Franchise Tax Board (FTB) approval before it is officially released. This form includes the 2008 legislative changes. It will likely be released by the FTB as Publication 776.

This publication is primarily to assist same-sex married couples (SSMC) in filing their California income tax returns, if they have SSMC adjustments. The FTB has also included information about the legal history of SSMC and community property that may be useful in completing the return.

On June 20, 2008, the FTB issued NOTICE 2008-5 on the subject of California Income Tax Treatment and Tax Return Filing Obligations of Same-Sex Married Couples. The purpose of the Notice is to advise same-sex married couples of their California income tax treatment and tax return filing obligations resulting from the California Supreme Court's recent decision in In re Marriage Cases (2008) 43 Cal.4th 757.

California's FTB has more information on same-sex married couples' tax obligations at its website.

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Two new Appeals programs are available from the IRS:

Applicable in California (and elsewhere) is a two-year test of two programs referred to as the post-Appeals mediation and arbitration procedures for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (TFRP).

Beginning Dec. 1, 2008, for a two-year test period, Appeals will offer post-Appeals mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Ga.; Chicago, Ill.; Cincinnati, Ohio; Houston, Texas; Indianapolis, Ind.; Louisville, Ky.; Phoenix, Ariz.; and San Francisco, Calif.

Under these two alternative dispute resolution programs, the taxpayer or Appeals may request nonbinding mediation. The taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111. A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals.

During the test period, Appeals employees will advise the taxpayer of the availability of these alternative dispute strategies and the deadline for timely requesting such strategies when a rejection of an OIC is sustained or a proposed TFRP assessment is sustained. An OIC submitted during Collection Due Process (CDP) as an alternative to a Collection action is not eligible for these alternative dispute resolution strategies during the test period.

The Post-Appeals mediation process is available for both legal and factual issues. The mediator’s role is to facilitate settlement negotiations so the parties can reach their own agreement. The mediator does not have settlement authority over any issue.

The Arbitration procedure is available for factual issues only. The arbitrator’s role is to hear both sides of a disputed issue and then render a decision on the specific factual issue being arbitrated. This decision is binding on both parties. However, the arbitrator does not have the authority to decide that the offer in compromise itself must be accepted or that a person is/is not liable for the TFRP under § 6672. Neither party may appeal the decision of the arbitrator or contest the decision in any judicial proceeding.

Complete procedures for initiating a request for post-Appeals mediation or arbitration are in Announcement 2008-111. The agency will seek appropriate Offer in Compromise and Trust Fund Recovery Penalty cases for both post-Appeals mediation and arbitration during the two-year test period in order to evaluate the effectiveness of alternative dispute resolution for these cases.

Call a California tax attorney to assist in preserving your rights when it comes to resolving your tax problems. Call Mitchell A. Port at (310) 559-5259.

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Unpaid individual income taxes and other unpaid federal taxes may be satisfied by the sale of property seized by the IRS.

Under authority of the Internal Revenue Code, the property described in the IRS website has been seized or acquired for nonpayment of internal revenue taxes and will be sold. The IRS posts legal notices covering the nature of title, redemption rights, effect of junior encumbrances, title offered, and forms of payment before making a bid.

The types of property sold are listed under the headings below and each state in the U.S. may contain some or all of these types of property for sale.

Internet Domain Names

Real Estate

Real Estate - Seeking Guaranteed Bids

Antiques, Art, Jewelry, Collectibles and Luxury Items

Misc. Property - Quick Notice Sales - Seeking Bidders

Household Goods - Personal Property

Commercial/Industrial Property, Equipment and Supplies

Financial Instruments, Notes, Patents

Automobiles, Motorcycles, Trucks and Boats

Liquor Licenses

Don't let your tax liability go unpaid. Call a California tax attorney for help. Call Mitchell A. Port at (310) 559-5259.