A lot of the competitors in my business spend a ton of money advertising on television and the radio. You hear the hype, “settle your taxes for ‘pennies on the dollar.’” This hype gets people going. They want to get out of what they owe to the IRS for much less! Can this happen? It depends.
An offer in compromise is not an available alternative in every situation. I don’t like to make spot judgments for each client, so I always look at every possibility, but for some people, it is simply impossible to get an offer in compromise accepted. Now, I try to be honest with my clients and not simply prepare and offer in compromise if I know it will be rejected just so I can earn a fee. How is that honest or the in the best interest of my client? It wastes their money on my legal fee (since we charge much more for processing an offer in compromise than just setting up an installment agreement). It also wastes their money and time because while that bogus offer is being considered the client is not paying the IRS and their account continues to accrue interest, and the collection statute is tolled while the offer is being reviewed. I wonder how many “tax resolution specialists” tell their clients that?
My advice is to listen to your tax attorney. If you are told that you won’t qualify for an offer in compromise by one attorney, but another “tax resolution specialist” is all to happy to prepare your offer in compromise, you may want to ask yourself, “are they interested in helping me or padding their own wallet?” It may not be in your best interest to spend the money on the offer in compromise when there is no likelihood that it can be accepted. Just remember that you need to temper your desire to eliminate the amount of taxes you have to pay and be real with yourself.
Stay tuned to this blog for more information about offers in compromise, installment agreements, and tax resolution information. There will be some future articles about qualifying for an offer in compromise and other tax resolution possibilities.
QUESTION:
I always seem to owe taxes in April, and since I am trying to get my tax liability straightened out, I’ve heard I cannot owe any more taxes or it will adversely affect my potential to negotiate an offer in compromise or an installment agreement. Is that true?
ANSWER:
Well, you’ve made it through another tax season. It is true that you cannot continue to owe the IRS money in taxes each year after you file your return. Depending on whether you work for wages or whether you are self employed, the IRS may require you to do one of two things. If you are an employee, you may be required to reduce the number of dependents on your W-4 with your employer so that the amount of taxes withheld from your check increases. If you are self-employed you will be required to make estimated tax payments each quarter depending on the amount of taxes you owed for the previous year. By paying these taxes, you will continue to be in compliance. This puts your best foot forward with the IRS and prevents any installment agreement or offer in compromise from being defaulted or cancelled by the IRS.
If you have a tax problem, I will be happy to talk with you about your situation and tell you how I can help. Your initial consultation is free and you will be under no obligation. The sooner you take action to solve your tax problem, the sooner you can rest easy and cease worrying about those taxes. Also, I want to let all of my readers know that I can help you with real estate, probate, domestic and personal injury matters also. If you need help with any legal matter, please call today for your free consultation.
There is a statute of limitations for the IRS to contest an income tax return and begin to collect a deficiency. So what is a statute of limitations? The statute of limitations provides a final date where the IRS cannot begin new collection action on a tax return. Here’s the kicker - a return that is not filed is not protected by a statute of limitations. If you don’t take anything else away from this post, take this: you should always file your tax returns on time.
The three year statute of limitations means, normally, that after three years, the IRS cannot readjust your return. So if you had some questionable matter in your 2003 tax return and you filed it before April 15, 2003, you can breathe a sigh of relief. You are probably good to go. The flipside is, any return that is fraudulently prepared or returns that omit 25% of gross income.
Collection Statute Expiration Date
“I thought the IRS could come after you for ten years?” Well, that is the collection statute expiration date. Once the IRS has assessed the taxes you owe then they can attempt to collect those taxes from you for ten years. A taxpayer can consent to extend the collection statute, but I rarely advise clients to do so. This statute of limitations is different from that above because the statute of limitations above deals with accepting or rejecting a return and assessing the taxes and/or penalties. The collection statute actually deals with how long the IRS can come after you for the taxes you owe.
For more information about dealing with the IRS, offers in compromise and more - check out our home page for recent articles.
QUESTION:
I haven’t filed my taxes in over ten years, but recently my bank account was levied and the notice I received showed that I owed a lot more money than I ever thought? How can the IRS assess taxes against me even though I never filed a return?
ANSWER:
The IRS cannot assess a tax against you without a return being filed. However, that doesn’t mean that if you don’t file your tax return, the IRS can’t bother you. There is a procedure where the IRS will prepare the tax return for you based on financial information they have on file such as the W2 your employer filed for your or any 1099’s that were issued to you. This return is called a Substitute Filed Return (SFR). Based on the SFR the IRS can assess taxes against you and collect through filing a Federal Tax Lien or worse, a levy. You will almost always come out better by filing your own tax return because most times, the IRS will not give you credit for all tax deductions that you qualify for. Therefore, I always recommend that my clients prepare and file tax returns for all years, even if there is an SFR because most of the time it will substantially lower your tax debt. On that note, I would like to remind everyone that the deadline for paying your 2006 taxes is April 17, 2007. I will be happy to talk with you about your situation and tell you how I can help. Your initial consultation is free and you will be under no obligation. The sooner you take action to solve your tax problem, the sooner you can rest easy and cease worrying about those taxes!
Since I had to temporarily take over the operations of a law practice due to my boss being temporarily suspended, I have really felt the stresses of operating a small business and the pressures of whether you will make payroll, or be able to pay the bills. For a lawyer, obtaining new clients is what provides the cashflow to pay your bills, your staff, and yourself. For many experienced, or should I say, more well known attorneys, it may be pretty easy to attract new clients and have them retain you. For a young attorney, who probably looks younger than I actually am, I have had a problem convincing some prospective clients to hire me because of my age/inexperience/combination. I’m not sure if it is a lack of salesmanship on my part or just the outward appearance. I have had this discussion with several other, more established attorneys in hopes of trying to curb the problem and have more prospective clients retain my firm.
Here are some of the pointers that I have been given to increase the rate of prospective clients that retain my firm (and ultimately me, a young attorney).
- Ooze Confidence. Clients can tell if you are nervous or if you don’t know what you’re talking about. Not knowing procedures and trying to provide too much information in the initial meeting was one problem early on in my practice. Once I started looking nervous like I didn’t know what I was doing, I definitely lost credibility when I told them what the fee was going to be.
- Fake it ’til you make it! This kind of goes back to the first point. You have to look like you know what you’re doing. Eventually you will have to know, but at your intial client meeting/consultation, you just need to make your clients know that you will be able to handle their case competently, effeciently and affordably.
- Do your initial consultations in your office. My office seems to be much more impressive than the conference room. My law license, undergraduate and law degrees dress the walls along with some other artwork, law books decorate the bookshelves, and there is always a stack of files on my desk. By showing that you have the credentials, and a backlog of work (i.e. the files on your desk) you give your prospective client confidence because other clients have confidence in your handling of their case.
- Don’t price yourself out of your client’s league. The flipside to this is you don’t want to undercharge either. However, when you are a young, inexperienced attorney, you simply cannot command the same amounts of fees as more experienced attorneys.
- Don’t give away too much free legal advice. I think I have some prospective clients who when they see a young attorney feel like they can “trick” me into giving them just enough free legal advice to answer all of their questions and handle their issues on their own. I have had to learn, not to be too nice, and try to fully answer all of my prospect’s questions without giving away the tricks of the trade.
- Dress the part. When I started working, my office dress code was business casual. However, when I became the rainmaker, I had to step up my dress to impress the new clients. Now, a tie is generally necessary. It makes me look older and generally a little more high class. I think clients have the impression that lawyers wear suits and have fancy offices. If they don’t see what they are expecting to see, they may just pack up and go somewhere else and talk to someone who looks and dresses more like a lawyer.
If you have any more tips on how young attorneys practicing on their own can get more clients, please comment on this blog post. Thanks in advance for your participation!
Whew! Made it through another tax year. Did you end up having to mortgage the farm to pay your taxes this year? Did you pay a little more in taxes than you were expecting? Did you not file or pay your taxes at all because you’re afraid that if you file and can’t pay the IRS will catch up with you and put you through the ringer? It should be you goal that next year’s tax season is much calmer, easier and less stressful.
Many of my clients are small business owners and it seems that they get into trouble each and every year at tax time. The first cause of trouble is generally their procrastination. During the year, they don’t keep accurate records, they throw away necessary receipts, and never reconcile their bank statements. When tax time rolls around they have to spend hours or days (where they could be earning money) separating the records they do have and getting ready to take all of that information down the CPA to “sort it out.”
This poor record keeping is what tends to get my clients in trouble with the IRS. Most of them are very honest when preparing their tax returns, however without the proper backup, they put deductions down and when the return is audited, they simply cannot provide any substantiation and end up owing lots of money to the IRS in taxes. With this underreporting of tax comes penalties and, of course, interest!
This year, make it your goal to be organized from the very beginning. You have no idea how much money you may be paying to the government in taxes unnecessarily each year based on your terrible record keeping. This will help your business to be more profitable, you will be able to write-off more of your business expenses, and you will also be able to verify everything shown on your return, so when the tax man does call for an audit, you can provide back-up documentation for everything and save yourself money paying for extra taxes, penalties and interest.