QUESTION:
I am receiving letters from the IRS. I don’t have enough money to pay the taxes that I owe. If I ignore them, will they go away?
ANSWER:
Thank you for your question. Ignoring the IRS will not make them go away. If anything, it might make them pursue you more aggressively because they are not able to get any information from you. You should definitely take a proactive stance when dealing with the IRS because if you wait around hoping nothing will happen, something negative will always happen. Once you start receiving collection notices from the IRS you are on a very reduced timeline in trying to resolve your case. If you do not respond and begin to attempt to resolve your case, you leave yourself open to levies and wage garnishments. If however, you act quickly, you will protect your rights and be able to prevent levies and garnishments. If you have been receiving IRS collection letters and have been ignoring them, stop! Call me today for a consultation to see how we can assist you in resolving your tax liability.
QUESTION:
I am receiving letters from the IRS. I don’t have enough money to pay the taxes that I owe. If I ignore them, will they go away?
ANSWER:
Thank you for your question. Ignoring the IRS will not make them go away. If anything, it might make them pursue you more aggressively because they are not able to get any information from you. You should definitely take a proactive stance when dealing with the IRS because if you wait around hoping nothing will happen, something negative will always happen. Once you start receiving collection notices from the IRS you are on a very reduced timeline in trying to resolve your case. If you do not respond and begin to attempt to resolve your case, you leave yourself open to levies and wage garnishments. If however, you act quickly, you will protect your rights and be able to prevent levies and garnishments. If you have been receiving IRS collection letters and have been ignoring them, stop! Call me today for a consultation to see how we can assist you in resolving your tax liability.
One question I am asked in this type of situation is what can the IRS do if I have classified a worker as an independent contractor and it turns out that the IRS believes he is an employee.
Worst-case: the IRS may assess all of the employment related taxes against the employer for the workers who were incorrectly classified. What this means to the employer is a potentially huge liability - including penalties and interest - that they had no idea they would be responsible for. Even worse than just being assessed the taxes is that the IRS may assess those employment taxes against the employer individually in the form of the Trust Fund Recovery Penalty if the business is unable to pay those taxes. What is bad about this type of civil penalty is that it cannot be bankrupted. The taxpayer will be forced to deal with repaying the tax in some way. At least the tax can be reduced by going through the offer in compromise process if the taxpayer qualifies.
Is there anything else the employer can do? There is a non-statutory provision that was enacted by Congress nearly 30 years ago as a "temporary solution" that can shiled a taxpayer who has mistakenly classified his workers as independent contractors when they are actually employees. The employer must show that there was a "reasonable basis" for such a failure to pay the employment taxes. The employer must also be filing alll of the required Federal tax forms and paying those taxes in a manner consistent with the taxpayers’ classification. The trick is to be able to show that the employer had a "reasonable basis." The employer could go about doing this by showing other companies in the same business do things in that manner, by showing a judicial decision on point, or a tax ruling letter sent to the taxpayer by the IRS, or a past audit where the tax was not assessed against the taxpayer for the same situation.
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The final factor that we will consider in determining whether a worker is an employee or an independent contractor is the Intent of both the employer and the worker of the type of relationship they are creating.
This means - what did the employer believe his worker to be? If he considered his worker to be an independent contractor then that would be given some weight in support of the classification. However, one would have to notice that this factor can be very self-serving and is probably not given as much weight as the previous six factors.
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The sixth factor considered by the IRS in determining whether or not a worker is an independent contractor or an employee is the "Permanence" factor.
The nature of an independent contractor’s work is just that - it is independent. Meaning once that particular job has been completed the job is over and the independent contractor moves on to his next job.
An employee’s job is much more permanent in nature. Meaning that the employee is going to continue to come to the employer’s place of business day after day to do his job. Employees are often subject to being disciplined by their employers for doing their job incorrectly or not how their boss wanted it done.
The final common law factor in determining whether a worker is an independent contractor or an employee is "Intent."
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QUESTION:
I owe the IRS some money from several years ago. How do I calculate the end of the statute of limitations that the IRS has to be able to collect from me?
ANSWER:
Generally, the IRS has ten years to collect a tax liability. The ten-year clock begins to run from the date the taxes are assessed, not when you file the return. If you never file a return, the IRS may collect those taxes from you forever. For the purposes of your question, I will assume that you have filed all of your tax returns. So for example, if you owed taxes for the year 1996, you would have filed your income tax return on or before April 15, 1997. We will also assume that the IRS assessed the taxes on April 15, 1997. So in general, the IRS may collect from you until April 15, 2007. If you are still receiving collection notices from the IRS for that tax return, you may have extended the statute of limitations somehow. The statute may be extended by voluntarily extending the statute, submitting an offer in compromise, filing bankruptcy, or filing a collection due process hearing request. If you have an outstanding tax liability I would be happy to discuss how I can help you resolve your problem.
The fifth factor considered by the IRS in determining whether a worker qualifies as an employee or an independent contractor is the integral nature of the worker to the work being performed. The main question being asked by the IRS in this instance is whether the tasks being performed by the worker are an essential part of the service recipient’s regular business. The "service recipient" is the employer of the worker.
While this factor is a little more abstract than the previous factors, an example may help illustrate the factor. If the service recipient or employer’s normal business involves trucking and uses its own trucks, trailers and drivers. If the employer uses drivers that provide their own trucks, those drivers may be considered employees by the IRS rather than independent contractors because they are performing substantially the same job as those using the employer’s trucks.
Next time, we will discuss the sixth factor, permanence.
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