Brotman Law Featured in Inc. Magazine - Fastest Growing Law Firm in California

Blog

IRS Financial Analysis

by
IRS audit defense guide — Brotman Law

IRS financial analysis is conducted by the IRS in order to both analyze and verifies financial information. When conducting an IRS financial analysis, the IRS evaluates the income and expenses of the taxpayer to calculate for disposable income. Disposable income is defined as gross income less all allowable expenses. During their IRS financial analysis, the IRS also analyzes assets to resolve balance due accounts. To do this, the IRS will request that the taxpayer makes full, immediate payment if their cash on hand is equal to the total liability. In addition, the IRS will identify key sources of funds, “liquid assets which can be pledged as security or readily converted to cash” (IRS.gov, “Part 5. Collecting Process, Chapter 15. Financial Analysis, Section 1. Financial Analysis Handbook,” 8/24/2013). Identification of key sources of funds is also extended to considering unencumbered assets, interests in estates and trusts, and lines of credit (“Section 1. Financial Analysis Handbook”). When analyzing assets to resolve balance due accounts, the IRS will also determine the priority of the Notice of Federal Tax Lien.

Key Takeaways

  • IRS financial analysis is conducted by the IRS in order to both analyze and verifies financial information. When conducting an IRS financial analysis, the IRS evaluates the income and expenses of the taxpayer to calculate for disposable income.
  • Part of the IRS financial analysis process, the IRS will also verify financial information by conducting interviews, asking pertinent questions, and documenting the results.
  • Under each major category, the taxpayer lists information concerning different types of assets.

Read more

IRS Form 433-A Breakdown

by

IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals is used to collect financial information about the taxpayer and the taxpayer’s ability to repay a current tax liability.

Key Takeaways

  • Section one of the IRS Form 433-A requests general information specific to the taxpayer. Request for information includes full name, marital status, address, and phone numbers.
  • Questions located in section three of the IRS Form 433-A center on other types of non-wage earning information.
  • In section five of the IRS Form 433-A , the taxpayer must disclose wages, salaries, pensions, and social security; net income from business; net rental income; other income (i.e.

Read more

Offer in Compromise Requirements

by

Offer in Compromise Requirements- Choosing Between the Types of Offers

Lump Sum Cash Offer

A taxpayer may choose the lump sum offer, which is defined as an offer where the taxpayer makes five or fewer installment payments within 24 months after the offer is accepted. “If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656, Offer in Compromise a nonrefundable payment equal to 20 percent of the amount. This payment is required in addition to the $150 application fee” (IRS.gov, “Topic 204 – Offers in Compromise,” 8/22/2013). Under the offer in compromise requirements, the nonrefundable amount cannot be returned to the taxpayer if the offer is either rejected or accepted. Instead, it will be applied to the taxpayer’s liability.

Key Takeaways

  • Offer in Compromise Requirements- Choosing Between the Types of Offers
  • Lump Sum Cash Offer
  • Periodic Payment Offer
  • Appealing a Rejected Offer in Compromise
  • Offer in Compromise Requirements – Collateral Agreements

Read more

Pros and Cons of Offer In Compromise

by

You must weigh the pros and cons of offer in compromise in light of the other options available to you. When considering whether to choose this option, you must also consider the advantages and disadvantages. The offer in compromise allows you the opportunity to reduce your tax liability relative to your current financial situation. However, settling with the IRS by way of offer in compromise might be the second-best option. For example, the requirements for accepting an offer in compromise are stringent. Taxpayers are required to have low monthly income and practically no assets. “Thus you may end up wasting time and money on trying to [settle] with the IRS when that effort could have been applied toward a better method of resolving your tax liability” (IRSSolution.com, “Pros and Cons of An Offer in Compromise,” 8/24/2013).

Key Takeaways

  • You must weigh the pros and cons of offer in compromise in light of the other options available to you. When considering whether to choose this option, you must also consider the advantages and disadvantages.
  • In addition, keep in mind several other keep in mind that the IRS cannot collect on your federal tax liability forever.
  • On the upside of the pros and cons of offer in compromise, choosing to pursue an offer in compromise may be worthwhile in terms of reducing your tax liability to a level that is consistent with your current ability to repay.

Read more

What is an Offer in Compromise?

by

An offer in compromise (OIC) is a type of agreement between both the taxpayer and the Internal Revenue Service outlining and settling the taxpayer’s tax liabilities for less than the current balance due owed. If the taxpayer’s liabilities can be fully paid through the utilization of an installment agreement or any other related means, then the taxpayer would not ordinarily be eligible for an OIC.

Key Takeaways

  • To be eligible for the offer in compromise program, the taxpayer must have already filed all tax returns, made the required estimated tax payments for the current year, and made also all required federal tax deposits for the current quarter (IRS.
  • The IRS provides all of the tools necessary for taxpayers to pursue multiple options with regard to settling taxpayer liability.
  • Taxpayers currently in an open bankruptcy proceeding will not be eligible for an offer in compromise. Tax liabilities and other financial debts are resolved through the process of bankruptcy only.

Read more

Abuses of the IRS Offer in Compromise Process

by

J. K. Harris

J. K. Harris is one such company plagued with the woes of consumer complaints and subsequent lawsuits. JK Harris & Company, LLC was a tax representation firm. Founded in 1997, the company specialized in solving IRS and state tax problems. The founder, John K. Harris, penned three books on the subject and grew his company to national recognition. Although the company grew from 450 sales offices to eight regional operations centers, it still suffered under the burden of battling lawsuits where customers complained about misleading business and advertising practices. Lawsuits from past customers claimed that J. K. Harris charged exorbitant fees for resolving tax problems only to discover that the company failed to deliver on its promises. The company was also charged with engaging in deceptive practices. The company’s founder ushered the company through bankruptcy and the company was later shut down.

Key Takeaways

  • J. K. Harris is one such company plagued with the woes of consumer complaints and subsequent lawsuits. JK Harris & Company, LLC was a tax representation firm. Founded in 1997, the company specialized in solving IRS and state tax problems.
  • Tax Masters is another company accused of committing fraud. A Texas jury found TaxMasters, a tax advisory firm, guilty of using deceptive practices in its bid to lure customers and . ..

Read more

What to Do If the IRS Rejects Your Installment Agreement

by

The IRS typically rejects an installment agreement for one of three reasons. For example, if the IRS determines that your living expenses do not fall under the category of necessary, your agreement will more than likely be rejected. The IRS considers extravagant expenses as those that include charitable contributions, private school funding, hefty credit card payments. In addition, if you fail to provide accurate information on Form 433-A, Collection Information Statement, you can expect your agreement to be rejected. Lastly, if you defaulted on a previous installment agreement, your new proposal may receive skepticism and be subsequently rejected.

Key Takeaways

  • The IRS typically rejects an installment agreement for one of three reasons. For example, if the IRS determines that your living expenses do not fall under the category of necessary, your agreement will more than likely be rejected.
  • To resolve this hurdle, contact the collection manager and speak with him or her directly. “Just making this request is sometimes enough to soften the collector up.
  • Taxpayers can appeal most collection actions. The main options for appealing collection actions include: Collection Due Process (CDP) and Collection Appeals Program (CAP).

Read more

Installment Agreement Default: What to do

by

The Internal Revenue Service defines default of an installment agreement as the taxpayer providing inaccurate information or the taxpayer not meeting the terms of their agreement. In this case, the agreement may be terminated. A taxpayer may appeal a proposed termination.

Key Takeaways

  • The Internal Revenue Service defines default of an installment agreement as the taxpayer providing inaccurate information or the taxpayer not meeting the terms of their agreement. In this case, the agreement may be terminated.
  • Taxpayers that do not meet the terms of the installment agreement “will be notified in writing and given 30 days to comply with the terms of the agreement before the agreement is terminated” (IRS.gov, “Part 5. Collecting Process, Chapter 14.
  • The IRS will first make a lien determination before considering the request for reinstatement. Default and reinstatement terminations due to the taxpayer missing and/or skipping payments will require manager approval.

Read more

Form 9465 and Form 433-F

by

Form 9465

Taxpayers can use Form 9465, Installment Agreement Request to request consideration for a monthly installment plan if they cannot pay the full amount shown on the tax return. Taxpayers making payments on a current installment agreement cannot use Form 9465.

Key Takeaways

  • Accounts and lines of credit also include reports of stocks and bond holdings. You must list all real estate you currently own and/or plan on purchasing. You will need the county description.
  • List all credit cards whether you have a balanced owed or not. In addition, you must list accounts receivables owed to your business as well as information about business credit cards. Section F requires that you include employment information.

Read more

More about IRS Installment Agreements

by

Partial Payment IRS Installment Agreement

Taxpayers are encouraged to pay in full and immediately all delinquent tax liabilities. However, “if full payment cannot be achieved by the Collection Statute Expiration Date (CSED), and taxpayers have some ability to pay, the Service can enter into Partial Payment Installment Agreements (PPIAs)” (IRS.gov, “Part 5. Collecting Process, Chapter 14. Installment Agreements, Section 2. Partial Payment Installment Agreements and the Collection Statute Expiration Date (CSED),” 8/21/2013). Before the PPIA can be granted, the equity in the taxpayer’s assets will have to be evaluated to determine if it can be used pay down the tax liability.

Key Takeaways

  • Partial Payment IRS Installment Agreement
  • Regular IRS Installment Agreement (over $50,000)
  • IRS Installment Agreement and Set-up Fees

Read more

Brotman Law Featured in Inc. Magazine - Fastest Growing Law Firm in California