Is Maryland ready for another tax amnesty?

Senate Bill 763 (SB763)

As we all have heard many times: History has a way of repeating itself. Too many times this has an ominous undertone. But today, I am rejoicing at the possibilities this cyclical occurrence may bring to my fellow Maryland Taxpayers.

Many of us can recall the most recent Tax Amnesty of 2009. Fortunately it’s back again. You may now be eligible to participate in Maryland’s 2015 Tax Amnesty. Bill 763 was signed in April 14, 2015. It is set to become law June 1, 2015. The State of Maryland will start accepting eligible Amnesty applicants as early as the fall. The new amnesty applies to individuals as well as corporate taxpayers. You may be eligible to take part in this fantastic opportunity and drastically reduce the penalties and interest you owe, as well as avoid criminal prosecution. Read more

What does it cost to hire a Tax Attorney?

In today’s world most of us have run into the need for an attorney at one time or another, or at least know someone who has. Maybe you received a speeding ticket you need to fight, or help with preparing your will, perhaps you were starting a new company and needed the paperwork prepared. These days there are attorneys who offer a multitude of services. What people have come to know is, when you want something handled the right way you need a professional. Not just a professional but someone who is skilled in the area you are seeking assistance. An attorney that specializes in one particular type of law and practices in it day in and day out. Would you hire a dentist to represent you in court, or a plumber to fix your roof? Well Taxes, Tax Problems, and Tax Controversies are no different. You want an experienced attorney that knows all the ins and outs, all the rules, and regulations. Read more

Should I hire a professional to help resolve my IRS problems?

Sometimes taxpayer’s with IRS tax problems decide to face the IRS on their own. Sometimes they hire a professional like a CPA, Attorney, or EA; but not someone who specializes in tax resolution. The best thing to do when faced with an IRS Problem is to hire an experienced tax resolution professional so you can get the best result possible.

Even if you owe $10,000 or less, have all your income tax returns filed, and are able to pay the amount due over 36 months with a guaranteed monthly Installment Agreement (payment plan), it’s good to pay a small fee to have a professional set it up for you.

Here are the top 4 reasons why hiring an Attorney is the smart thing to do

  1. Contrary to popular belief, you DO have rights as a taxpayer you probably don’t even know exit. One of those rights is the right to representation. If an IRS revenue officer or revenue agent calls or “visits” you, did you know you are under no obligation to answer any of their (very intrusive and condescending) questions? You politely respond by asking for their contact information and telling them you are in the process of hiring an attorney to represent you and that this person will contact them directly. An Attorney that deals with IRS problems for a living knows the ‘ins” and “outs” and how to deal with the IRS so that your rights are protected. A tax resolution specialist also knows how to get you the lowest possible settlement. Generally, our clients never meet or speak with the IRS once we’re on the scene!
  2. If you owe between $10,000 and $200,000 plus, the IRS has many NEW flexible programs available to taxpayers such as Offer in Compromise, Partial Pay Installment Agreements, Payment Plans, Penalty Reduction, and Currently Non Collectible Status to name a few. Each carries with it its own unique process, procedures and qualifications. Having an experienced Tax Pro in your corner ensures you are taking advantage of the best options available to you.
  3. Having unfiled returns (on average our clients have more than 3 years of unfiled returns) qualifies for getting professional help. Not filing legally required returns when due is considered a federal misdemeanor, which carries with it a $10,000 fine and potential jail time. Generally the IRS won’t throw you in jail unless the taxpayer is deemed to owe a lot of money and is uncooperative about getting the returns filed. Hiring a professional to represent you is the smartest move you can make here!
  4. If you are being audited or about to be – The IRS will ask you about 50 very intrusive questions in the initial interview with them. How you answer these questions will dictate the fate of your case. Having a tax resolution specialist conduct these meetings, WITHOUT you is the best course of action I can recommend. Half of the referrals to the IRS’s criminal investigation division (CID) come from the “nice” guy or gal you’re sitting across the table from at the audit.

One last thing. Ask yourself this question” Would you go to court without a lawyer? If you answered “yes” hopefully you know the law inside and out concerning your case, but if representing yourself doesn’t seem like a good idea, it’s best to hire somebody who is well versed in the subject matter. Well, it’s the same thing with the IRS. Having someone who knows how to negotiate and deal with the IRS may be the best money you’ve ever spent!

Preparing for the 2015 tax season – How will the ACA change things?

Preparing for this tax season: How will the ACA change things?

As we start receiving our tax documents in the mail, many of us begin to compile the tax history for the past year. We know we need to get our W-2s, 1099s, 1098s, etc. However many taxpayers are not aware of the new tax document this tax season, the 1095A. If you or someone in your family purchased healthcare through the Healthcare Marketplace you should receive a 1095A.

If you or your family had coverage through the Marketplace, they will send your 1095A in the mail. The forms should be mailed out in early February 2015. It will show the finer details of your insurance and most importantly (for tax purposes) the advanced payments made on your behalf. Once you have received your 1095A, you will be then able to complete your tax return. Also new to this tax season is Form 8962. Preparers will be using new form to reconcile your advanced healthcare payments for the tax year. Keep in mind if you switched plans during the year you may receive more than one 1095A.

Taxpayers who receive a Form 1095A from the Marketplace should check to verify the information matches their records. Make sure the form reflects the appropriate start and stop dates of your coverage, and the number of members in your household. If for any reason you believe the information on your 1095A is incorrect, you should contact the Marketplace immediately and try and get a corrected form.

You may be wondering, what types of changes will I notice during my tax preparation appointment this year? This year will be the first year taxpayers will be asked questions about their healthcare coverage. It may seem intrusive but you must be open and honest with your trusted tax representative and their questions.
Below are the types questions your preparer may ask:

  • Did you have “qualifying” healthcare coverage for all 12 months during the year?
  • Did everyone in your household have “qualifying” healthcare coverage all 12 months of the year?
  • Did you or anyone in your household have marketplace or government healthcare?
  • If you did not have “qualifying” healthcare coverage, are you exempt?
  • Did anyone in your household have CHIP?

After your Form 8962 is finished, you may find that too many advance payments were made on your behalf. Reasons this may have happened could be as simple as you underestimated your financial compensations for the year, or more complex and require additional investigation.

If you find you owe after the reconciliation, here are some things you should keep in mind for next year. Never underestimate your income when applying in the Marketplace. Underestimation of income may result in higher advance payments being made on your behalf. If your advance payments are greater than you actually qualify for, this will result in a balance needing to be recouped. Make sure you are not penalized as a result of no or inadequate insurance. Taxpayers, please be aware that once you apply for the Marketplace insurance, circumstances may change. Always be open and honest with the Marketplace and contact them in the case of a life changing event. A life changing event would include getting married, having a baby, loss of a job or promotion.

It is estimated that a very large number of taxpayers will be impacted by the Affordable Care Act (ACA) this tax season. If you or someone you know did not have what IRS deems qualified healthcare for all 12 months of the tax season, there may be penalties involved. For questions on this or any other tax matter please feel free to contact our office at 410-727-6006.

Is IRS Enforcement of Small Business Delinquent Payroll Tax Problems Treasonous?

How the IRS strong-arms small business delinquent payroll taxes is almost treasonous.  They can even go after you personally for payroll tax debts of a business.  Every day it enrages me that about a third of my tax relief clients are small businesses with tax problems. Small firms are vital to this country. According to the Small Business Administration, small businesses:

Represent 99.7 percent of employer firms. Employ about half of all private sector employees. Pay nearly 45 percent of total U.S. private payroll. Have generated 60 to 80 percent of net new jobs annually over the last decade. Create more than half of nonfarm private gross domestic product (GDP). Hire 40 percent of high tech workers (such as scientists, engineers and computer workers). Are 52 percent home-based and two percent franchises. Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006. Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.

Source: U.S. Dept. of Commerce, Bureau of the Census and International Trade Administration; Advocacy-funded research by Kathryn Kobe, 2007 and CHI Research, 2003; Federal Procurement Data System; U.S. Dept. of Labor, Bureau of Labor Statistics

Despite small businesses’ importance to America, if the IRS thinks your small business owes delinquent payroll taxes, you are guilty until proven innocent. When it comes to payroll tax debt, the IRS has unyielding power and authority to collect. They have the power to padlock your front doors, putting you out of business, without obtaining a court order. There are lots of people in this economy starting new businesses. And there are a lot of small businesses with IRS problems who fall behind on their payroll taxes (using this money to keep the lights on instead of making payroll tax deposits).

Just when you thought the small business tax problem was bad, here’s even more horrific tax news. Uncle Sam is gunning for small businesses with delinquent payroll tax problems.  Because small businesses are the largest contributors to the annual tax gap, the IRS is cracking down on them!  If you’re a small business with delinquent payroll tax problems, today it is even more mission critical to fix those payroll tax problems fast.

Since payroll tax penalties can be the kiss of death to many small businesses, the best way to dodge delinquent payroll tax penalties is by avoiding payroll tax problems in the first place. When your business is starving, dipping into the payroll tax cookie jar may be too tempting to resist. Save your business from yourself.

Here are a few small business payroll tax tips to stop delinquent payroll tax problems before they appear:

Plan ahead: Budget at least 10% of an employee’s annual salary for payroll taxes (Check with your accounting professional to make sure that number is high enough for your locale). Use a service to handle the payroll so you won’t be tempted to dip into the payroll tax fund. Use Electronic Federal Tax Payment System or EFTPS to automatically send payments. The computer won’t “forget” to send your payroll taxes. Look at your head count. Perhaps you can use independent contractors instead of employees. Check out the IRS web site for Independent Contractor (Self-Employed) or Employee test to see if this payroll tax slashing tip works for your small business. File your tax return on time, even if you don’t have the money to pay your tax bill. If you can’t afford to pay your taxes, you can still file your return on time and save 25% on the failure to file penalty right off the bat. What many people don’t understand is that filing an extension just puts off the inevitable, because it’s not an extension of time to pay, it’s just an extension of time to file. So what we tell our clients is that no matter how much is owed, if they enclose a check for $5 or $10 with the return and file it on time, it will reduce their filing penalties. Additionally, it creates a computerized record of account at IRS showing that you sent in a payment with your income tax return (reflecting good faith and credibility on your part).

But say you’re already in trouble with the IRS for delinquent payroll taxes, what do you do next? Don’t panic. Just keep in mind that there’s a solution to every payroll tax problem. Whether you owe $700 or $7 million in payroll tax debt, you can find a way out, sometimes for a small fraction of what you owe, sometimes without paying a dime. The key is contacting a tax resolution professional as soon as you can. A consultation with a good tax attorney or tax resolution specialist can turn your delinquent payroll tax nightmare into a distant memory so you can go back to the business of your small business, creating the American dream.

Unfiled Tax Returns Hinder Your Chances

Do you think you’re doing yourself justice by living underground and not filing your past year’s tax returns? Think again! You may be doing yourself more harm than good. This article explains why you’re better off staying current and in compliance with tax tiling requirements and the consequences one faces if one doesn’t timely file their income tax returns.

Let’s say you want to file but know you owe the IRS and for various reasons cannot pay the tax due with your returns. By not filing timely, you automatically subject yourself to the late filing penalty, IRC 6651(a)(1), unless you have reasonable cause for filing late. The late filing penalty is 5 percent of the amount of the tax required to be shown on the return for each month or fraction thereof, that the failure continues, not to exceed 25 percent. By filing late, you’ve just added to the taxes you know you already owe.

In general. interest on penalties will only be imposed if the penalty or addition to tax is not paid within 10 days after notice and demand, and then only for the period from the date of notice and demand to the date of payment. Most people who procrastinate and file late usually can’t pay their taxes and penalties within 10 days of notice and demand to do so. Now in addition to the taxes owed and late filing penalty, you are assessed interest on penalties. This is in addition to regular interest on the balance of taxes due.

What are one’s payment options when they can’t pay their taxes after filing them? Requesting and obtaining an installment plan is one. An Offer In Compromise is another. Another is discharging the taxes through bankruptcy.

In order to obtain an installment plan all of one’s tax returns must be filed. So if you receive a wage levy at work and want to obtain an installment plan in lieu of the IRS grabbing up to 25 percent of your take home pay. You must have all of your past taxes filed. If not, the IRS won’t deal with you because you are not showing -Good Faith” and are not in “compliance.”

An Offer In Compromise (0IC) is an offer to pay the IRS in settlement of tax liabilities less than 100% of the debt owed, but as much as they otherwise would expect to collect, calculated by income and allowed expenses.

The recent IRS Restructuring And Reform Act of 1998 includes provisions making the IRS more receptive to and even encouraging Offers In Compromise (OIC) in settlement of tax liabilities. However, all tax years must be filed or the IRS won’t consider an OIC. By not filing past year’s tax returns. you may be missing a great opportunity to settle with the IRS, depending on your current financial position, for substantially less than the total taxes, interest, and penalties you owe them. People think the best time to make an Offer is when they’re financially sound. Actually, the best time to make an Offer is when they’re financially distressed because the IRS usually accepts OIC’s when they otherwise could not expect to collect the full amount owed. One other caveat, if the IRS accepts your OIC, you must remain current for five years by filing on time and paying timely otherwise the IRS can revoke your OIC.

In general, you can discharge personal income taxes through bankruptcy if all of the following rules are met:

1. The Three Year Rule — The tax return due date, including extensions, must be more than three years old before the bankruptcy petition date.

2. The Two Year Rule — no discharge will be allowed if a tax return, including extensions, was not filed or a delinquent tax return was filed within two years of the date of the bankruptcy petition.

3. The 240 Day Rule — Any tax must be assessed more than 240 days before the bankruptcy petition date to be dischargeable.

If a Chapter 7 is filed and the three rules above are met for each tax year, one can discharge individual income taxes completely. The rules vary for a Chapter 13. In certain circumstances a taxpayer may completely discharge his/her taxes for a given tax year even though no return was filed for that year. For the most part, in order to completely discharge individual income taxes through bankruptcy, tax returns need to be filed.

I had a client engage me to prepare seven years back tax returns. Four of the seven years he was due refunds totaling $10,000. He lost those refunds because he filed them too late. Yes, there is a statute of limitations on collecting tax refunds. Generally, if no return was filed, the claim for refund must be filed within two years from the time the tax was paid.

Criminal penalties may be incurred when a taxpayer: willfully fails to file a tax return, fails to keep records, fails to supply required information, or fails to pay any tax or estimated tax. You don’t want to risk the IRS construing your not filing as being willful. The cost of hiring a criminal tax attorney is expensive and the mental anguish of undergoing a criminal investigation can be devastating.

The bottom line is, if you have unfiled tax returns, stop procrastinating. You may be hurting yourself and ruining your chances of getting an installment agreement, obtaining a refund, getting an Offer In Compromise or having your taxes discharged through bankruptcy. Why live in hiding? It’s not pleasant to live without a bank account. If you can’t locate income records, you can hire a tax professional, give them a Power of Attorney, and they can request your income records from the IRS. There’s no better time to get your unfiled tax returns filed and get current. Once you start the process. you’ll feel better. Once your returns are filed, your chances of settling your tax liabilities will be enhanced.

New Year’s Resolution: No More Tax Problems

With an Internal Revenue Service now more aggressive than ever, it’s not a good time to be cheating Uncle Sam or living with tax problems. Fortunately, you don’t have to have IRS problems.

Are you scared of the Tax Man?

Well, if you have any tax problems or are cheating Uncle Sam in any way, you should be.

The Internal Revenue Service, once the butt of late-night television jokes, has changed. It’s now an aggressive agency with the tenacity and bite of a pit bull.

The IRS’s enforcement numbers in 2005 were up substantially compared to the year before — 20 percent more people were audited, including 221,000 taxpayers who earned more than $100,000 per year. All across the board, audits were up and enforcement was iron-fisted.

It’s not a good time to be cheating on your taxes. Just ask a few of these folks:

Singer-songwriter Ronald Isley, of the Isley Brothers, was convicted on five counts of tax evasion and one count of willful failure to file a tax return. He faces up to 26 years in the Big House.

Richard Hatch, the first winner of the reality television show Survivor, was charged with a 10-count indictment that alleges fraud and tax evasion. Prosecutors claim Hatch tried to avoid paying taxes on the $1,010,000 he won on the 2000 TV show. If convicted, he faces up to five years in the hoosegow.

Adrian K. Karsten, a former ESPN sportscaster and winner of a 1991 Emmy Award, received 11 months of home confinement after pleading guilty to two counts of failing to file income tax returns.

Lee Mroszak, a Gulf War veteran who is best known as “Crazy Cabbie” on the Howard Stern Show, received one year behind bars after pleading guilty to tax evasion.

And the list goes on and on and on.

Get the picture?

Uncle Sam means business, and for the past three years, the IRS has been getting more and more aggressive. There’s no tolerance for tax cheats and tax-avoidance schemes.

What’s more, 2006 will likely bring even more activity. Congress has already approved funding to allow the IRS to be as aggressive as it was in 2005, if not more.

If you’re one of the thousands of Americans with tax problems, you now have an ultimatum: consult with a qualified tax professional and resolve your problems once and for all or the roll the dice and take your chance.

You might not get caught this year. You might not get caught next.

But you will get caught. This year, make a wise New Year’s Resolution.