Reasons to Hire an Enrolled Agent for Tax Representation

Reasons to Hire an Enrolled Agent for Tax Representation
Tax representation, defined as paying a Enrolled Agent to represent you before the IRS or other state agency, is not for everyone, and in many instances, may be an unnecessary waste of money. But when is it necessary?

• You are reluctant to deal with the IRS on your own. There is a "reluctance factor" to pay an Enrolled Agent for taxpayer representation.  Reluctant people get themselves into deeper trouble by procrastinating. The objective of an Enrolled Agent, or Power of Attorney third party, is sometimes essential for resolving a tax case. Furthermore, you never underestimate the PEACE OF MIND of having a qualified individual handle your dealings with the IRS.
• You owe a lot of money to the IRS. The more you owe the IRS, the higher the stakes are, and the more aggressive the IRS will get. You will benefit by having an Enrolled Agent defuse the situation as well as negotiate and handle the matter for you. 
• Your are being levied by the IRS or on the precipice of aggressive collection action. Levy release/reductions require a lot of work in a very short period of time. A Enrolled Agent will know the ropes to get the levy released quickly.
• You haven't filed for many years and/or the IRS filed returns for you (SFRs). The tendency of a non-filer is to overestimate the task of resolving their tax situation -- thinking it to be a monumental task -- due to information lost in their flooded basement.  However; most non-filer situations are NOT as a bad as the taxpayer thinks. An Enrolled Agent can clear the air by researching the taxpayer's Individual Master File (IMF) transcript record and properly determining the MINIMUM needed to be done. Based upon my experience, "SFRs" do not always need to be fixed. In some cases, your representative will recommend that the returns STAND as they are while the debt is negotiated.
• Your case is assigned to ACS Revenue Officer. If your case is assigned to ACS, the situation is deemed serious and you are in jeopardy of aggressive collection actions such as levy or garnishment of wages. ACS workers are HUMAN and capable of error and OVERSTEPPING their powers. Tax examiners use judgement when working cases.  This is the people part of the process.  Correspondence exams and ACS tax examiners work on ten different campuses.  One examiner may ask for different documentation.  And no two cases have the exact same facts and circumstances.  Having a representative automatically defuses the situation -- making sure your taxpayer rights are upheld, preventing unnecessary levy or distraint.
• You run a business that owes 941 - payroll tax or State withholding tax.  Falling behind on 941 taxes is a "red flag" for any business' "going concern" and when more than two quarters delinquent pass you are guaranteed to have your case assigned to a field officer where a Trust Fund Recovery Penalty (TFRP) may be assessed for any balance due before or after business assets have been liquidated.  The IRS can assess a Trust Fund Recovery Assessment—also known as a 100% penalty—against every “responsible person.” Under Section 6672, the penalty equals the entire amount of trust fund taxes. The IRS can seek to collect 100% from the business and 100% from each responsible person.  Payroll taxes and TFRP (which is a "vestige" of the payroll tax) cannot be discharged in bankruptcy.
• You are being audited by the IRS on your 1040 or Business Tax returns.  If your return has been selected for examination by a field agent or vis-a-vis a "correspondence" audit by the IRS -- you might benefit by having an Enrolled Agent utilize his/her skills and knowledge of the trade to insure that you are getting the best deal.   

 If you have any kind of IRS tax liability (large or small) and would like to be considered for an streamlined Installment Payment Plan (liabilities under $50,000), Offer in Compromise, partial payment plan for existing life of statute or noncollectable status) contact us for a FREE confidential consultation regarding your options please call Stephen B. Jordan EA at 603.893.9336 or go to our website Stephen B Jordan EA

• Your case will be reviewed by an Enrolled Agent
• You compare the cost/benefit of tax relief, then decide what’s best
• With your approval, your case will be settled with the IRS
• You are kept up-to-date each step of the way

Courtesy: Nukomus Armstrong, EA at Renaissance Financial Solutions, Inc.in Detroit, MI

First-class fathering

 First class fathering
Being an involved father involves more than changing diapers and meting out discipline, experts say.  It means:

• Establishing a close emotional bond with your child from the day of birth.
• Learning the stages of a child's life so you can better care for his or her physical and emotional needs.
• Not assuming that any task, except breast-feeding, is the sole domain of your spouse.
• Being willing to sacrifice your time and energy to nuture the child.
• Being strong but not rigid, a teacher but not a task-master.
• Remembering that your child will learn more from your example than from the words you speak.

New IRS Offer In Compromise Policies

New IRS Offer In Compromise Policies
Courtesy:  Robert McKenzie Contributor   
On May 21, 2012 the Internal Revenue Service announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program. This newest program promises to enable some of the most financially distressed taxpayers an opportunity to clear up their tax
problems, and in many cases, more quickly than in the past.

Over the years the IRS offer in compromise program has been the subject of a great deal of criticism by Congress, the National Taxpayer Advocate and taxpayer representatives. The new initiative represents the most dramatic liberalization of IRS settlement policies ever announced. It represents a welcome change from an agency which has always placed substantial roadblocks to those seeking to compromise their tax obligations.

The announcement focused on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.
The changes include:

• Revising the calculation for the taxpayer’s future income.
• Allowing taxpayers to repay their student loans.
• Allowing taxpayers to pay state and local delinquent taxes.
• Expanding the Allowable Living Expense allowance category and amount.

In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.

In the past the IRS strictly applied its rules with respect to taxpayers’ budgets and valuation of assets. As a result, most taxpayers who sought a compromise received a rejection. Below are the statistics for offer acceptances during the past several years:
      Offers                 2007          2008           2009          2010          2011
Received by IRS    46,000       44,000        52,000       57,000       59,000
Accepted by IRS   12, 000       11,000        11,000       14,000       20,000
Percent Accepted     26%           25%             21%          25%          34%

Under the new policy when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The prior policy resulted in IRS demands for very large compromise payments even when the taxpayer had few assets. The revisions will result in a 75% reduction in the amount required to settle tax obligations in five or fewer months. They will result in a 60% reduction in the amount required to be fully paid within 24 months.

Other changes to the program include narrowed parameters and clarification of when a dissipated asset (one they no longer have) will be included in the calculation of reasonable collection potential. Over the past several years the IRS’s used the concept of dissipated assets to demand substantial amounts in compromise of taxes even after the taxpayer had lost the assets. For example, in one matter a taxpayer had lost substantial amounts of money in the 2008 and 2009 stock market collapse. Notwithstanding that loss the IRS offer in compromise examiner took the position that the taxpayer would have to include the value of those losses in his total assets in order to receive a compromise. The IRS also aggressively claimed that taxpayers who lived an upper-middle-class lifestyle after their tax problems arose would be subject to its draconian dissipated asset theory.

The IRS also announced that equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.

Allowable Living Expenses
When reviewing a taxpayer’s budget the IRS applies Allowable Living Expense standards to determine a taxpayer’s ability to pay. The standard allowances impose strict budgets upon a taxpayer in collection determinations by incorporating average expenditures for basic necessities. Notwithstanding substantial criticism of the IRS over the years it has insisted upon applying the same standards for food and clothing in all areas of the country whether high cost locales like Alaska,Hawaii, andNew York City or lower cost Midwestern areas. These standards are used when evaluating offer in compromise requests.

In response to criticisms from the national taxpayer advocate and taxpayer representatives, the IRS expanded the National Standard miscellaneous allowance to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments, bank fees and charges.

In the past the IRS refused to recognize very real taxpayer obligations to pay student loans and state tax delinquencies. The new guidance now allows payments for loans guaranteed by the federal government for the taxpayer’s post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.

The new offer in compromise policies should dramatically expand the universe of taxpayers eligible to compromise their outstanding tax obligations. In the past taxpayers generally had to pay the IRS the total value of all their assets plus 60 times their net monthly income after using the IRS strict allowable expense standards. The greater flexibility of the new policies will reduce the valuation of taxpayer assets and reduce the value of the future income component used to determine acceptable offers.

Over the past several years the IRS has announced a softening of its collection policies under its Fresh Start Program.

In 2008, IRS announced lien relief for taxpayers trying to refinance or sell a home. The IRS added new flexibility for taxpayers facing payment or collection problems in 2009. The IRS made changes to lien policies in 2011 and expanded the threshold for small businesses to resolve tax issues through installment agreements. And, earlier this year, the IRS increased the threshold for a streamlined installment agreement allowing individual taxpayers to set up an installment agreement without providing a significant amount of financial information.
If you have any kind of IRS tax liability (large or small) and would like to be considered for an streamlined Installment Payment Plan (liabilities under $50,000), Offer in Compromise, partial payment plan for existing life of statute or noncollectable status) contact us for a FREE confidential consultation regarding your options please call Stephen B. Jordan EA at 603.893.9336 or go to our website Stephen B Jordan EA

Homemade Power Oatmeal & Protein Pancake Recipe

Homemade Power Oatmeal & Protein Pancake Recipe

Ingredients:

▪ 1 1/2 cup raw one-minute oatmeal
▪ 1 tsp baking soda
▪ 1/2 cup whole wheat flour
▪ 1 cup vanilla protein powder
▪ 3/4 tsp salt
▪ 1 cup skim or soy milk
▪ 1 cup plain yogurt
▪ 2 large eggs (beaten)
▪ 1 tsp honey

▪ Add crushed nuts, berries or bananas to mix once mixture is in skillet (use Pam to coat pan between each pancake)

▪ Makes about (12) 4 1/2" pancakes
▪ For extra taste add jam or jelly (make sure to add the calories in total)
▪ Protein: 16 grams
▪ Calories: 188
▪ Carbs: 20
▪ Fat: 5 grams

Payroll Mishaps to Avoid

Payroll Mishaps to Avoid
1.  Classification of Employees as Independent Contractors

Workers are generally classified as either employees or independent contractors. Getting this classification right is a big deal. Depending on the classification, how compensation gets reported to the IRS is different (Form W-2 vs. Form 1099). Whether the worker is entitled to benefits (like medical insurance coverage, retirement plan benefits and grants of equity compensation) can hinge on the worker's status as an employee. Whether a worker is subject to federal income tax and employment tax withholding is also contingent on status. If there has been an improper classification, the Voluntary Classification Settlement Program (VCSP) allows eligible employers to voluntarily reclassify workers as employees on a prospective basis and get into compliance by paying 10 percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year.

2.  Failure to Subject Vendor Payments to Backup Withholding

If a company issues a payment to a vendor without first obtaining a Form W-9, the payment could be subject to mandatory backup withholding at a 28 percent rate. Even when it is later determined that the vendor is not subject to backup withholding (for example, the vendor is later determined to be a corporation), if the company did not obtain a Form W-9 prior to issuing payment, there may still be an issue: on audit, the IRS has pursued the collection of a failure-to-deposit penalty on the amount that should have been withheld—because at the time of payment, the company did not know that the vendor payment was exempt from backup withholding.

3.  Failure to Issue Form 1099s

A Form 1099 must generally be issued to vendors, including independent contractors, who provide more than $600 in services. Some entities, such as corporations, are not required to be issued a Form 1099. If a company fails to timely furnish a Form 1099, it can be subject to penalties.

4.  Not Including the Fair Market Value of Gift Cards, Prizes and Awards in Employees' Income

For federal income tax purposes, most prizes and awards are considered taxable fringe benefits subject to federal income and employment tax withholding. Gift cards are the equivalent of cash and should always be included in taxable wages regardless of amount. Certain items can be excluded from wages if they are de minimis in nature. However, cash equivalents are never de minimis.

5.  Failing to Timely Deposit Withheld Taxes

Generally, a company is required to deposit taxes on a monthly or semi-weekly basis. When taxes reach certain amounts, they must be deposited the next business day. If a company doesn't timely deposit these taxes, the company may be subject to late deposit penalties and interest. Penalty rates range from 2 to 15 percent, depending on how late the deposit is.

6.  Failure to Timely Deposit Withholding Taxes on Vested Restricted Stock and Exercise of Stock Options

When an individual exercises stock options, employment taxes should be deposited within one day of the settlement date. The settlement date should not be more than three days after the date of exercise. However, when an employee is granted restricted stock, he or she generally recognizes income upon vesting. Income and employment taxes are required to be withheld on the fair market value of the shares less any amount the employee paid for such shares on that date. The income and employment taxes may be required to be deposited the next business day.

7.  Incorrectly Excluding Expense Reimbursements from Reportable Wages

Whether expense reimbursements can be excluded from an employee's wages depends on whether he or she is reimbursed pursuant to an accountable plan. An accountable plan is generally one under which expenses are reimbursed only if there is a business connection to the expenditure, there is an adequate accounting of the expenditure and any excess reimbursements are returned to the employer. If expenses are reimbursed under a policy or plan that does not meet these requirements, they must be included in taxable wages.

8.  Failure to Include Nonqualified Deferred Compensation in Executives' Incomes

If nonqualified deferred compensation plans have not been amended to comply with Internal Revenue Code Section 409A or have provisions that do not comply with 409A, the executives could have an income recognition event prior to the payment of the deferred amounts and could be subject to an excise tax. The Service has also established a correction program where taxpayers can obtain some relief with respect to certain operational failures. Only certain types of failures are eligible for correction, but taking advantage of this program can reduce the total amount of income inclusion and excise taxes.

9.  Not Including the Appropriate Value of Taxable Fringe Benefits in Employees' Income

Taxable fringe benefits can also include spousal travel, company-provided automobiles, country club dues and housing benefits. How a company values these fringe benefits for purposes of income and employment tax reporting and withholding can be a complicated issue. For example, there are three valuation methods for calculating the value of personal use of company-provided vehicles. Is your company calculating this correctly?

10.  Excluding Travel and Commuting Expense Reimbursements from Employees' Income.

Most of the time, travel and commuting expenses are not taxable income to an employee. However, if what started out as a short-term assignment is extended beyond a year, or if an employee is traveling to a permanent work site that is not in the same place as his or her permanent residence, those company-provided travel and commuting benefits may need to be included in the employee's income.

Source: Brian Cumberland, a managing director with Alvarez & Marsal LLC in Dallas. 

IRS Expands Offers in Compromise!

IRS Expands Offers in Compromise!
The IRS has completely revamped its offer in compromise guidelines to greatly increase the number of taxpayers who will be able to qualify. The new guidelines are announced in a news release by the IRS (IR-2012-53, May 21, 2012)

The most revolutionary change is the methodology of calculating the offer amount. The amount of the offer in compromise has always been determined by the amount of the reasonable collection potential (RCP). RCP is determined by adding the realizable value of the taxpayer's assets to his Future Income (FI). Thus Offer amount = RCP +FI.

Future income is defined as an estimate of the taxpayer's ability to pay based on an analysis of gross income, less necessary living expenses, for a specific number of months into the future. In the past a taxpayer who could pay the offer amount in 5 monthly payments would multiply his monthly available income by 48 months to arrive at Future Income. A taxpayer who wanted to pay the offer amount over a 24 month period was required to multiply his monthly available income by 60 months to arrive at his Future Income. In both cases Future Income was added to the realizable value of the taxpayer's assets to arrive at RCP, or the offer amount.

Under the new offer in compromise guidelines Future Income will be arrived at by multiplying the monthly available income by 12 if the offer can be paid in 5 monthly payments or less. If the taxpayer needs 24 months to pay the offer amount in full then the Future Income will be determined by multiplying the monthly available income by 24. The deferred payment option which allows payment over the life of the statute is no longer available.

Example:  A taxpayer who has $50,000 in realizable equity in assets, and monthly future income of $2,000 will pay $74,000 if the offer amount can be paid in 5 months or less, and $98,000 if the offer will be paid over a 24 month period. This compares to offer amounts under the old guidelines of $146,000, or $170,000, respectively. The higher the monthly future income, the greater the discrepancy.

The new guidelines also include changes to the necessary living expenses:

1. Payments on delinquent State taxes may be allowed in full or in part.

2. Minimum payments on student loans guaranteed by the federal government will be allowed for the taxpayer's post-high school education (note it says nothing about loans incurred by parents to pay for their children's' tuition).

3. When the taxpayer owns a vehicle that is six years or older or has mileage of 75,000 miles or more, the IRS will allow additional operating expenses of $200 or more per vehicle.

4. The first $400 per vehicle of retired debt will not be added back to monthly available income.

Another welcome modification; the calculation of so-called "dissipated assets" has been radically altered. While the exact details are subject to numerous exceptions, and clarifications, in general assets which have been dissipated three years or more prior to the submission of the offer in compromise will not be included in the RCP. For example, if the offer is submitted in 2012, any asset dissipated prior to 2010 should not be included.

If you have any kind of IRS tax liability (large or small) and would like to be considered for an streamlined Installment Payment Plan (liabilities under $50,000), Offer in Compromise, partial payment plan for existing life of statute or noncollectable status) contact us for a FREE confidential consultation regarding your options please call Stephen B. Jordan EA at 603.893.9336 or go to our website Stephen B Jordan EA

Source:  Ronald A. Marini, JD, LLM in Taxation - Marini & Associates, PA - Attorneys at Law in Miami, FL  

IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start

IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start
IR-2012-53, May 21, 2012
The Internal Revenue Service today announced another expansion of its "Fresh Start" initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers clear up their tax problems and in many cases more quickly than in the past.

"This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years," said IRS Commissioner Doug Shulman. "It is part of our multiyear effort to help taxpayers who are struggling to make ends meet."

Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.

In certain circumstances, the changes announced today include:

• Revising the calculation for the taxpayer’s future income. 
• Allowing taxpayers to repay their student loans. 
• Allowing taxpayers to pay state and local delinquent taxes. 
• Expanding the Allowable Living Expense allowance category and amount. 

In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.

When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.

Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.

Related Items:
Interim Guidance Memorandum for Offer in Compromise
Internal Revenue Manual 5.8.5.5.1, Income-Producing Assets

If you have any kind of IRS tax liability (large or small) and would like to be considered for an streamlined Installment Payment Plan (liabilities under $50,000), Offer in Compromise, partial payment plan for existing life of statute or noncollectable status) contact us for a FREE confidential consultation regarding your options please call Stephen B Jordan EA at 603.893.9336 or go to our website Stephen B Jordan EA

Courtesy:  Ronald A. Marini, JD, LLM in Taxation - Marini & Associates, PA - Attorneys at Law in Miami, FL Marini & Associates, PA

Massive Tax Loophole - Eyewitness news: nbc 13 Indianapolis wthr.com

Terms in OIC agreement take meaning from Code, court holds

Terms in OIC agreement take meaning from Code, court holds
By ALISTAIR M. NEVIUS
The Second Circuit Court of Appeals held on Wednesday that the terms “refund” and “overpayment” in an offer-in-compromise (OIC) agreement are specialized tax terms that take their meaning from the Internal Revenue Code and are not given their “plain English” meanings, despite the colloquial tone of the agreement (Sarmiento, No. 11-3752 (L) (2d Cir. 5/2/12), aff’g in part and rev’g in part 812 F. Supp. 2d 137 (E.D.N.Y 2011)).

In 2007, the plaintiffs, a married couple, entered into an OIC agreement with the IRS under which they would pay $2,000 to compromise their approximately $30,000 in outstanding tax liabilities. The agreement also contained a provision that, as additional consideration, the IRS would “retain any refunds or credits that you may be entitled to receive for 2007 or for earlier tax years” and any “refunds you receive in 2008 for any overpayments you made toward tax year 2007 or toward earlier years.”

On their 2007 joint tax return filed in 2008, the couple claimed a Sec. 32 earned income tax credit (EITC) of $2,831 and a Sec. 24(d) additional child tax credit (ACTC) of $864. They also claimed a $900 refund under the Economic Stimulus Act of 2008, P.L. 110-185.

The IRS withheld payment of the taxpayers’ refund under the additional consideration terms of the OIC agreement. The couple filed an administrative claim with the IRS, which was denied, and then filed suit in federal district court, which dismissed the complaint in part.

On appeal, the taxpayers argued that neither the refundable tax credits nor the Economic Stimulus Act payment were “refunds” for “overpayment” of tax within the plain-English meaning of those terms. Taxpayers who are eligible for refunds based on the EITC or ACTC do not actually “overpay” their income taxes; instead, these credits create a legal fiction that the recipients have overpaid, thereby entitling them to “refunds.”

However, the Code specifically states that amounts of refundable credits in excess of the taxpayer’s liability “shall be considered an overpayment” and the taxpayer is eligible for a “refund” (Sec. 6041(b)(1)).

The couple argued that because the OIC agreement was drafted in colloquial English, its terms should be afforded their “plain English” meaning, rather than their meaning under the Code.

The court held that “[a]ny reasonable contracting party would understand” that Form 656, Offer in Compromise, which the taxpayers used to make their offer, is “a specialized tax document whose terms and conditions take their meaning from the Internal Revenue Code” (slip op. at 10). The court decided that a reasonable taxpayer understands, from the language used in the form, that “when she enters into a contract with the IRS to compromise her outstanding tax liabilities . . . she does so against the backdrop of the definitions given to those terms in the Code” (slip op. at 11).

The court also said that “[a]dopting a ‘plain English’ interpretation of the OIC agreements . . . would have the undesirable effect of injecting unnecessary uncertainty into the judicial and administrative interpretation of IRS standard forms” (slip op. at 12).

The court held that the 2007 refund, from both the refundable credits and the Economic Stimulus Act payment, constituted refunds due because of overpayment under the terms of the OIC agreement and that the IRS correctly withheld those refunds under the terms of the agreement.

Courtesy:  Alistair M. Nevius (anevius@aicpa.org) is the JofA’s editor-in-chief, tax. May 03, 2012

If you have any kind of IRS tax liability (large or small) and would like to be considered for an streamlined Installment Payment Plan (liabilities under $50,000), Offer in Compromise, partial payment plan for existing life of statute or noncollectable status) contact us for a FREE confidential consultation regarding your options please call Stephen B. Jordan EA at 603.893.9336 or go to our website Stephen B Jordan EA