When you are looking for someone to represent you before the IRS you need to look for several things.
First, I would look for a firm where you can speak with the actual person who will be representing you. Many tax resolution companies out there have local offices where they have "sales people" getting people in the door and several attorneys, CPA’s or enrolled agents doing all of the work. You never know who you might get when you call on the telephone and you likely never get the person who is working on your case. This sounds about as bad as calling the IRS directly.
Second, I would look for someone who is going to tell it to you straight. Some solutions do not apply to everyone. I don’t represent every prospective client who comes through my office door and I don’t tell everyone that comes in that I can get an offer in compromise accepted for them. Sometimes I feel very confident, sometimes it is a stretch and other times it is clear from the beginning that there is no chance of ever having an offer in compromise accepted. You want someone that is not just trying to earn a fee, but has your best interest in mind and is going to do everything possible to get the best outcome for you.
Third, you want someone that knows what they are doing. When you hire an attorney, you don’t necessarily need or want to understand all of the technicalities of the resolution process, but you want to be confident that your attorney knows what is going on. Ask him questions, see if he is able to answer your questions and make you feel comfortable. The law books and the Internal Revenue Code say one thing, but experience and action in the field lead to true knowledge.
When you are interviewing your next attorney, be sure to think about these three things. If you can think of anything that you feel makes a good tax attorney, be sure to comment below.
QUESTION:
I am trying to negotiate an offer in compromise with the IRS for my tax liability. I went to college and graduate school and I had to borrow a lot of money to get those degrees, but it lead to getting a good paying job. Now I also have children in college and I am trying to pay for their education so they don’t get stuck with student loans like I did. Will the IRS allow those expenses in the calculation of my offer in compromise.
ANSWER:
The IRS generally will not allow you an expense for college tuition or student loan repayments for you children or anyone else for that matter. College tuition is not considered to be a "necessary expense." Rather, the IRS considers paying college tuition an excess or luxury. However, depending on how quickly you can repay the amount you owe for taxes, penalties and interest the IRS may allow the expense. If you can pay off your total liability (including taxes, penalties and the interest that continues to accrue) within 36 months they will allow educational expenses as an expense. This is the same rule if you do not have children in college yet, but you have them enrolled in private school.
On the other hand, if you are paying student loans or you have school or education expenses for yourself that is "income generating" meaning you will earn more money for completing the course of study, then the IRS will allow those payments. Using this logic, you can see that paying for a child to go to college is not considered "income generating" for you personally.
The Government Accountability Office recently began to investigate the "tax gap" found where medical providers owe over $1 Billion in back taxes, however, they continue to receive Medicaid payments for services provided to the over 55 million Medicaid participants.
The problem the IRS seems to run into in this situation is that Medicaid is a "partnership" between the federal and individual state governments, and the payments technically come from the individual states rather than the federal government. Therefore, the payments are not subject to the Federal Payment Levy Program which allows the IRS to garnish payments made by any branch of the U. S. Government to a taxpayer (which includes businesses) that is receiving payment by the U. S. Government.
It is estimated that if there was some type of levy process where the payments could be directly levied before the medical providers are paid, the IRS could have collected between $70 and $160 million last year alone.
Most of my clients who are actual employees (rather than being self-employed) do not have enough money withheld from their paychecks each week. The common thing I see is that people claim 9 exemptions on their W-4 with their payroll department so there will be almost no income tax withheld from their check and they will get more cash. Obviously, this is not proper. You are only allowed to claim the number of exemptions you will be allowed on your income tax return at the end of the year and the steps on the W-4 walk you through determining how to determine how many exemptions you will qualify for.
At the end of the year, these people have not had enough withheld and when they file their income tax returns, not only will they owe more money, but they typically have spent the extra money they received in their paychecks throughout the year. If you find yourself in this situation, I can help you resolve your liability with the IRS either through an offer in compromise or an installment agreement depending on your situation. However, the IRS will require you to adjust your withholdings to make sure you do not end up owing more in taxes in the years to come.
In this series, I am going to be asking the question, "do you make this mistake?" The majority of times people get into trouble with the IRS it is because they do not know what they are doing rather than some intentional action. While ignorance is not a defense (even when dealing with complex issues like the Internal Revenue Code and your income taxes) a few steps can be taken to make sure you don’t make huge mistakes that cost you down the road.
Some of the topics we will discuss are listed below, but if you think of anything you would like considered, please comment below.
- You don’t have enough income tax withheld from your paycheck. You claim 9 exemptions on your W-4 so you can get a lot of money in your paycheck?
- You don’t file your tax returns on time.
- You don’t claim enough exemptions.
- You ignore communications from the IRS
- You mix your business and personal expenses
- Do you prepare your own tax returns?
- Do you underreport income?
As we get ready to celebrate the Thanksgiving holiday I am and will be doing what most Americans are and thinking of the things that I am thankful for in my life. Included in my list are Christ, my family and friends, fulfilling work, and there is much more that I am sure I take for granted. I think my list is similar to 99% of Americans, but that got me thinking - are there people (other than those in Washington D.C.) "thankful" for taxes or the IRS? Can we be thankful for those things? I say, "absolutely!"
Taxes pay for those things that make our country great. Sure there is the debate on how wisely those tax dollars are spent, but the USA would not be the great country that it is without the things that our taxes pay for. We wouldn’t have the freedoms that we have that our Armed Forces provide for us if our taxes didn’t pay for it. So, this Thanksgiving, instead of complaining about the taxes that we are paying or the IRS that is collecting, give thanks for the great things that our tax dollars provide that we take for granted every day. Then, tomorrow you can get back to worrying about how are tax dollars are being spent and I will get back to fighting the IRS for the best possible deals for my clients.
Powered by Qumana