Tax Problems

Tax Season starts today. That means that soon, you will be receiving your W-2’s and tax documents in the mail. If you are currently a client, we will mail you a client organizer that will help you keep everything straight. Once you have your tax papers, get into my office so that we can help with your income tax preparation. You don’t need an appointment, just drop in. If you want to have an appointment and discuss your situation in person, great, anyone in the office can schedule an appointment. All you need to do is call and let whomever answers the phone, let them schedule you an appointment.

If you are thinking about preparing your own taxes, I would advise against that. Taxes are increasingly complicated, and the costs of a mistake are in excess of what you can save. In other words, say you are a do it your selfer, and you miss a deduction, like the excise taxes that you pay. The additional tax that you pay as a result of that single error would pay for my services. What if you improperly claim a deduction? The cost of an improper deduction may be additional taxes, penalties, interest and the cost of amending the return that claimed the improper deduction. If I have not given you reason enough not to prepare your own returns, self prepared returns are examined (AUDITED) more frequently than the returns prepared by a competent professional.

The risk of leaving deductions on the table, taking deductions that you are NOT entitled to, or the additional risk of being audited are 3 fantastic reasons that you should choose to have your returns prepared by a professional tax preparer here at Tax Matters Solutions.

Tax Matters Solutions, LLC is pleased to announce its client referral program. If you are a client, or become a client, you are invited to participate. We give you the $25 for any referrals you send our way. This is real simple. When you become a client, you will receive cards, fill out your information on the back of the card, when the person you refer comes to the firm, they give us the card, we send you a check for $25. Easy! Who can’t use $25? Thanks for your confidence in the firm, we look forward to printing you checks.

I represent a corporation that has been assessed a penalty under IRC 6699. Essentially, the IRS charges a penalty to a corporation if the corporation does not timely file an income tax return.

The IRS charges $195 per month per shareholder for not to exceed 12 months. So if you have 2 shareholders of a corporation and the corporation fails to timely file its corporate income tax return for 5 months, the penalty would be $1950 (2 shareholders X $195) X 5 Months Late = $1950.
However, my client timely filed Form 7004. Form 7004 is the Form required for the IRS to grant an automatic extension of time to file. The IRS does not grant an extension for payment, the IRS only grants an extension for time to file.

Form 7004 grants an automatic 6 month extension. Therefore, in the example above, if the corporation had timely filed Form 7004, there would have been no penalty charged.

The facts of my client’s case are as such. The client timely filed Form 7004, but did not file the corporation’s income tax return until November 15th. The IRS assessed the penalty under IRC 6699 from the original due date of the return. IRC 6699 clearly states, “with regard to any extension of time for filing”; therefore, the IRS has inappropriately applied IRC 6699.
I have filed an appeal with the IRS and I am awaiting their ruling. I will update the blog with the outcome of the case.

Charles Irby, 46, of Laurel, MS will serve 54 months in federal prison for tax evasion convictions on six separate counts. Irby was also ordered to pay $1.06 million in restitution to the IRS and a $15,000 fine in addition to serving eight years of post-supervision release. Irby was convicted by a jury in August and will serve time for four separate counts of failing to file a tax return, one count of obstruction of administration of tax laws and one count of evading “through acts designed to conceal.”

Irby entered the U.S. District Courthouse in Hattiesburg, MS in leg irons and wearing an inmate jumpsuit. He carried two large trash bags stuffed with documents to his sentencing then fired his attorney, public defender John Weber, in open court less than five minutes into the hearing. Irby argued with U. S. District Judge Keith Starrett, raising dozens of objections to his pre-sentencing investigation report, stretching the hearing to last all day. Irby asserted that tax laws are written properly but incorrectly applied by the IRS.
“Me as a living, breathing man – no, they do not apply,” Irby declared in court. The Judge did not agree.

Mr. Irby is a protestor. He feels the need to protest the government’s actions regarding taxes. Whether it is the actual tax law, the application of his personal belief, Mr. Irby is not participating in taxes the way the rest of the country does. Mr. Irby is sacrificing a million dollars, and 54 months of his life for his protest. That seems to me a steep price. I am not faulting the government, Mr. Irby’s actions cannot continue. I don’t understand Mr. Irby’s actions. There would have been a point where Mr. Irby’s case could have deescalated, but that is not the path that Mr. Irby chose.

Can the IRS take my retirement accounts because I owe unpaid taxes?

Many of us find after doing all the necessary calculations that we still owe the IRS because not enough was withheld from our earnings throughout the year – so we pay the balance. If you find you cannot afford to pay the remaining tax liability and are tempted not to file your taxes or not working with the IRS to establish a payment plan, be aware the IRS has powerful authority to collect the tax from you.

The federal government depends on taxes it collects to keep government going and when taxpayers do not pay their share, the IRS considers it a serious matter. The Internal Revenue Code grants the IRS broad powers to place a levy on the assets of a taxpayer who has shirked his/her taxpayer responsibilities. A levy gives the IRS authority to seize your assets-any and all assets, anything of potential value, including your retirement accounts.

In the case of retirement accounts, it does not matter whether it is your Social Security benefit, an IRA, your 401K, or your pension. If it has value the IRS can seize it to satisfy the payment of your tax bill. Yes, the IRS can levy your IRA, 401K and your Social Security; however, the team at Tax Matters Solutions has successfully defended hundreds of taxpayers that have IRA’s and 401K’s and receive Social Security benefits. In many cases we are able to get the IRS to exclude the full value of your IRA and 401K.

If you foresee issues in paying your taxes seek help from a tax specialist at Tax Matters Solutions. Do not wait get help today!

In today’s complex rules and regulatory environment it is vital business owners comply with laws and keeping accurate records. A Bloomfield, Michigan businessman with a checkered past found that out the hard way.

John Walter Kaber, owner of Merchant Processing, which installed credit card processing systems, learned what it means to feel the full weight and power of the IRS. After Kaber was found guilty of tax evasion and sentenced to 37 months in prison and ordered to pay more than $868,000 in restitution for unpaid income and employment taxes he was also taken to civil court where a judgment was returned against him for unpaid federal income taxes for the years 1991-1996.

According to court documents, Kaber, among other things, cashed checks instead of depositing them, deposited business receipts in his wife’s checking account, used his wife’s name to purchase a boat, boat slip, a vehicle and to refinance mortgages on two properties.

Kaber, who has a long record with multiple convictions of criminal fraud and intent to commit fraud represents an extreme case, but it underscores the importance of keeping accurate records and maintaining compliance with the laws and shows what can happen if the IRS decides to use its full weight against you.

Do you need help in thinking about offering a retirement plan to your employees? The Internal Revenue Service can help. The IRS has free resources on starting and maintaining retirement plans to help you make informed decisions for yourself and your employees.

For small business owners who want to start a retirement plan, the IRS is a good place to begin. Written in plain language, the IRS materials give an accurate and unbiased looked at the basics of various retirement plans and help the small-business owner learn the questions to ask and pitfalls to avoid in setting up and operating a plan.

Providing retirement benefits is a good way to attract and keep top talent to your company. Business owners also receive a tax break because contributions to a retirement plan are generally deductible.

Visit www.IRS.gov/retirement or email anita.m.bower@irs.gov to learn more about all the available retirement plan resources.

Even if your business is cash-strapped, don’t give in to the temptation that you can neglect paying payroll taxes. The IRS will come after you! Quite rightly they view this as government money and thinking you can keep the lights on or the warehouse stocked and pay the government later is not an option. First of all these problems have a way of snowballing; it’s best to keep payroll taxes current. Consider using a payroll service that pays the money directly to the IRS.

Another reason to be careful is personal liability. Business owners and other “responsible persons” have personal liability for these taxes and the IRS isn’t interested in excuses. The case history on the subject is rich in the courts refusing to take sympathy for any reason.

The IRS can assess a Trust Fund Recovery Assessment – also known as a 100 percent penalty – against every “responsible person.” In determining “willfulness,” courts focus on whether you had knowledge of the non-payment of taxes or showed reckless disregard whether they were being paid. But a person need not actually perform the withholding and payment functions to be considered “responsible.”

If you have signature authority but don’t exercise it, that can be enough to result in liability. Factual nuances matter, so one person may get stuck while another gets off scot-free. The IRS often makes an assessment against every officer, watching them turn on each other.

Huge numbers of businesses get caught in this no-win situation every year. Disputes are expensive and often don’t go well. Be careful! Pay your taxes! Make an appointment to talk to Tax Matters Solutions.

Be wary of any one selling you a scheme that suggests you may recoup any debt taken out in your name by attempting to use such things as a mortgage, loan statement, car payments, bank statements, credit card statements or other records of debt and spending by listing them on your tax return as investment earnings.

Gerald A. Poynter, 46, aka “Brother Jerry Love” and a group of co-conspirators in Kansas City, MO. attempted to receive over $96 million in fraudulent returns from the IRS, although 89% of the claims were rejected. It still resulted in refunds of nearly $3.5 million.

Federal prosecutors said, “Kansas City was the hub of a nationwide conspiracy that sought to receive nearly $100 million in fraudulent tax refunds.” Federal agents exposed the scheme and the indictments handed down to Poynter and his network of 13 “associates” and “branch managers” in eight states spread across the U.S. U.S. Attorney Beth Phillips said, “ These indictments serve as a warning to anyone who might consider engaging in a similar fraud that schemes won’t be tolerated and their perpetrators will be prosecuted.”

The scheme involved the use of 1099-Original Issue Discount forms, which typically are used by tax filers who must pay taxes on income they receive from bond investments. Prosecutors say Poynter and co-conspirators prepared and filed at least 284 tax returns, then received a portion of whatever money was refunded. Fees paid to Poynter were recorded as a “love donation”.

In his order resolving the government’s civil lawsuit against Poynter, U.S. District Judge Howard F. Sachs wrote Poynter’s scheme is a version of the repeatedly rejected ‘redemption’ scheme. “Proponents of commercial redemption claim that the United States government is in possession of money rightfully owned by the taxpayer..” Sachs went on to say Poynter’s scheme exemplifies a growing trend among tax defiers to rely on the frivolous redemption theory in order to evade tax obligations or obtain other wrongful financial benefits. Poynter still faces criminal charges in the case.