A good many of my clients give a substantial amount of money to their churches or other charitable organizations and want to know if they can get credit for that as an allowable expense. Many people give a lot of money to their "religious institution" each month either because it is "required" by their religion or they just want to.
If the IRS gives credit for this expense each month, then it would put a lot of taxpayers in a more favorable light in the offer in compromise process. However, the IRS generally will not allow any charitable donation as an allowable expense for purposes of negotiating an offer in compromise.
So, bottom line, if you’re in good graces with the IRS you may generously give charitable donations to reduce your taxable income each year so you owe less in income tax, but if you are in a quagmire with the IRS and owe them a lot of money, don’t expect them to be very sympathetic when you tell them you can’t afford to pay anything on your taxes (or your estimated taxes each quarter to stay current) because you have are giving money to the charitable organization of your choice.
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Halloween is a fun time where everyone can dress up and be "someone they’re not" for a little while. We can escape reality where everyone wants something from us and go to a playful time where we can go to other people’s homes and ask for tricks and treats.
In reflecting on this and many of my current clients, I notice one thing that underrides all of my clients: they would like to get the IRS off of their back and get a fresh start. Without the weight of the IRS on their back they would be able to make some progress in getting their life and finances straight.
If you are in that position, I would encourage you to take off that mask and don’t pretend to be in a better world. Get some advice on how a tax professional can assist you in getting some relief from the IRS. There are several ways we can assist you with your IRS tax liabilities including an offer in compromise, abatement of penalties, and an installment agreement. I would love to work with you to help you get clear of these hurdles in your life. Shoot me an e-mail or call me toll free (1-800-216-1116) to set up an appointment where we can discuss the options you have. The consultation is free is there is never any obligation, and remember that it doesn’t matter where you live, I can assist you anywhere in the country.
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The question this week is from a person who owns a house as well as some other investment properties and they would like to know whether they will qualify for an offer in compromise. The answer is: it depends.
What does it depend on, you ask? Well, your financial situation as a whole, but most specifically, how much equity do you have in your residence as well as the investment properties. In this particular case, the taxpayer/potential client has over $60,000 in equity in his personal residence and owns an investment property with a closing that is pending where he will net over $100,000. In this case, it is simply impossible for an offer in compromise to be accepted. That is not to say that all people who have substantial equity in their homes will not be able to have an offer in compromise accepted. There are some ways around that equity depending on your credit and ability to borrow.
What do we do in this type of situation? Well, the taxpayer’s immediate need is to prevent any levy of his wages, bank accounts, or seizure of any property. Next, we must negotiate with the IRS to work out a payment plan. I would advise this taxpayer to make as large a lump sum payment to the IRS as he can and set up a payment plan for the balance. The quicker you are able to pay off the balance due, the less interest will add up on your account. We can also analyze what caused the taxpayer to owe the taxes in the first place and see if there is any way to get the IRS to abate any of the penalties. As always, the IRS will not knock off any of the interest unless the IRS has made a mistake - and it is generally very difficult to prove.
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QUESTION:
I am going through a divorce and I know that my spouse and I still owe a lot of money to the IRS. We have filed married filing jointly throughout our entire marriage.
ANSWER:
There are several issues that are apparent in your situation, and some that may come up depending on the exact circumstances of your marriage. Since you filed your tax returns jointly, you are both equally liable for the tax debt. This is called joint and several liability and it means that the IRS can try to collect the tax, penalties and interest from either you or your husband or both of you.
While you are going through your divorce, you should consider that the taxes will need to be taken care of at some point. The IRS isn’t going to just stop trying to collect the taxes from you and your spouse just because your marriage will be no longer. Therefore, you and your spouse should negotiate about who is going to be liable for the taxes (or how you are going to split the tax liability between the two of you). While, your spouse may be made "liable" for the taxes by the family court, that doesn’t force the IRS to cease coming after you for the payment of the taxes. Therefore, it would be imperative that whoever is "liable" for the taxes after the divorce is final, should immediately begin trying to negotiate with the IRS about settling the tax liability before it effects the other party.
Sometimes, however, when a divorced spouse settles tax liability, it still leaves the other spouse liable (according to the IRS). It would be my advice that even though your spouse is "liable" for the taxes according to the family court, it may be in your best interest to attempt to settle the taxes with your spouse. You should contact a qualified tax professional today about your options.
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QUESTION:
I am self-employed as an independent contractor and my business is run as a sole-proprietorship. Therefore, I receive a 1099 from the people I work for. I recently recived a notice from the IRS stating that they were going to levy my wages. Since I do not pay myself a monthly paycheck how can the IRS levy my wages?
ANSWER:
Since you are a sole proprietor, you are correct that the IRS technically cannot levy against your wages. This is because you have no wages. However, you are not getting away from collections that easily. What the IRS does in situations like this is to send the levy notices to those companies and individuals you perform work for. If you have submitted an invoice to those companies or individuals (meaning they owe you money) then they are required to send all the money they owe you to the IRS. This is not good for you, because if you were just an employee, the IRS would leave you some money each week in your paycheck to live on, however in this situation, the IRS will take all of what you are due from your clients. If you are receiving notices from the IRS threatening levy action, you need to take action immediately to prevent the levy from being sent out. Call my office today to set up your free consultation to see how we can assist you with your IRS tax liability. We also handle family court, real estate and probate matters.
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QUESTION:
I am self-employed as an independent contractor and my business is run as a sole-proprietorship. Therefore, I receive a 1099 from the people I work for. I recently recived a notice from the IRS stating that they were going to levy my wages. Since I do not pay myself a monthly paycheck how can the IRS levy my wages?
ANSWER:
Since you are a sole proprietor, you are correct that the IRS technically cannot levy against your wages. This is because you have no wages. However, you are not getting away from collections that easily. What the IRS does in situations like this is to send the levy notices to those companies and individuals you perform work for. If you have submitted an invoice to those companies or individuals (meaning they owe you money) then they are required to send all the money they owe you to the IRS. This is not good for you, because if you were just an employee, the IRS would leave you some money each week in your paycheck to live on, however in this situation, the IRS will take all of what you are due from your clients. If you are receiving notices from the IRS threatening levy action, you need to take action immediately to prevent the levy from being sent out. Call my office today to set up your free consultation to see how we can assist you with your IRS tax liability. We also handle family court, real estate and probate matters.
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