As Seen On TV

TV ads and TV Tax Relief Commercials claiming "Pennies On The Dollar" Tax Settlements - As Seen On TV

Mike Habib, EA

Many Tax Relief and Tax Negotiation firms advertise on TV claiming that they can settle your tax debt for "pennies on the dollar". Now, you, as a taxpayer must be informed of what options you have and should research these firms at the Better Business Bureau www.BBB.org

Here is our Customer BEWARE REPORT on certain Tax Negotiation Companies that advertise on TV claiming "pennies on the dollar" tax settlements.

Customer…Beware!

How To Keep From Getting Ripped Off?

Many “Tax Negotiation” companies out there will absolutely rip you off. These unscrupulous firms will take your money regardless of whether they can help you or not. They'll lie to you and tell you they can get all the penalties and interest wiped out. They'll lie to you and tell you they'll settle with the IRS for "pennies on the dollar" when they know damn well you don't possibly qualify for the Offer in Compromise program.

How do they get away with this? Easy, most of the people you talk to at these unscrupulous firms are sales representatives. They have NO license to protect. You don't actually speak to the EA (Enrolled Agent), the CPA (Certified Public Accountant) or the attorney that these firms claim to have. Nope, you speak to some slimy unlicensed salesman. Some of these firms make up titles like Tax Resolution Specialist, or Tax Consultant. What a scam! In fact, many of these unscrupulous firms aren't tax firms or law firms at all, they’re just sales organizations!

We NEVER take on any client that we don't believe we can truly help. But, I absolutely guarantee you that 90% of the unscrupulous tax negotiation firms that advertise on TV and the internet would take any client and their money regardless of whether they could help them or not. And that stinks!

So, what should you do?

1) Always speak with the “licensed representative” who is on the Power of Attorney, that will actually represent you, usually the principal / owner of the firm,

2) Stay away from any firm/website that doesn't clearly give the names and bios of the licensed representative (Enrolled Agents, CPAs & Attorneys),

3) Ignore guarantees, promises and so-called testimonials. They're nothing more than meaningless hype; instead check the Better Business Bureau rating – A MUST!

4) Ask tough questions. If the answers don't make sense, don't hire the firm. What kind of tough questions? Are you an EA, CPA or attorney? When they say, "I'm a tax resolution specialist", ask them, is that a State or Federal license?

5) Finally, use your good common sense. You know when something isn't right. You work too hard for your money to give it away to some slime ball that makes promises you know he can't keep. Only deal with someone who is “Licensed” and who “Specialize” is Tax Resolution.

Don’t get ripped off! Do the right thing-hire a Licensed Representative!

Compliments of: Mike Habib, EA http://www.myirstaxrelief.com/

Military Personnel Tax Benefits

Pension plan benefits for military personnel in the Heroes Earnings Assistance and Relief Tax Act of 2008

The recently enacted “Heroes Earnings Assistance and Relief Tax Act of 2008” (the 2008 Heroes Act) provides several important pension plan benefits for military personnel. Specifically, the Act makes the following pension plan liberalizations for members of the military and their families:

• Modifies the law which provides certain retirement plan protections for reservists who are called to active duty and who are able to return to their civilian employers after serving our country. The new law requires tax-qualified retirement plans to provide that if a participant dies while performing qualified military service, his or her survivors would be entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) that would have been provided had the participant resumed employment and then terminated employment on account of death. Similar rules apply to 403(b) annuities and 457(b) plans. Additionally, the new law provides that retirement plans can permit individuals who leave for qualified military service and cannot be reemployed on account of death or disability to be treated as if they had been rehired as of the day before death or disability and then had terminated employment on the date of death or disability. These changes apply to deaths or disabilities occurring after 2006.
• Makes permanent the expiring Internal Revenue Code provision that permits active duty reservists to make penalty-free withdrawals from retirement plans.
• Permits a military death gratuity or amount received under the Servicemembers' Group Life Insurance (SGLI) program to be rolled over to a Roth IRA or Coverdell education savings account, notwithstanding the contribution limits that otherwise apply.
  

Other military tax benefits in the Heroes Earnings Assistance and Relief Tax Act of 2008

The recently enacted “Heroes Earnings Assistance and Relief Tax Act of 2008” (the 2008 Heroes Act) contains a wide-ranging package of tax cuts for military personnel and veterans. While many of the military tax benefits are pension plan-related, several important changes are not. Specifically, the 2008 Heroes Act makes the following nonpension-related liberalizations for members of the military and their families:

• Clarifies that those in the active military who file a joint tax return are eligible for the stimulus rebate payment under the Economic Stimulus Act of 2008 even if one spouse does not have a Social Security number.
• Makes permanent the ability to include combat pay as earned income for purposes of the earned income tax credit (EITC) (under pre-2008 Heroes Act law this benefit was only available for tax years ending before 2008).
• Makes permanent an exception that permits qualified mortgage bonds to be issued to finance mortgages for qualified veterans who served in the active military without regard to the first-time homebuyer requirement (under pre-2008 Heroes Act law this exception only applied for bonds issued before 2008).
• Extends the limitations period for filing tax refund credit claims arising from Department of Veterans Affairs disability determinations. This provision is important because length-of-service-based military retirement benefits are included in income but veterans' benefits based on a service-connected disability are excluded. Where individuals receive includible retirement benefits and are later retroactively determined to be eligible for service-connected disability benefits, the retirement benefits attributable to the disability are retroactively excluded. Under pre-2008 Heroes Tax Act law, individuals may claim a refund of the tax paid on the retroactively excluded benefits, subject to the statute of limitations on filing a refund claim (generally, the claim must be filed within three years of the filing of the tax return or within two years of the payment of the tax, whichever expires later). Effective for claims filed after the enactment date, the Act extends the time period for filing a refund claim. For a determination after the enactment date, the period is extended until one year after the date of the disability determination (if later than the time periods allowed under current law). The change applies to any tax year which begins five years before the date of the determination or thereafter. For a determination after 2000, and on or before the enactment date, the refund period is extended until one year after the enactment date (if later than the time periods allowed under current law).
• Modifies the rules regarding differential pay. Some employers voluntarily agree to continue paying the compensation that service members would otherwise have received from the employer during their active duty. Under pre-2008 Heroes Act law, such “differential pay” isn't wages for federal income tax withholding purposes but under the new law is subject to withholding, effective for amounts paid after 2008. Additionally, effective for tax years beginning after 2008, differential pay will have to be treated as compensation for retirement plan purposes, and will qualify as compensation for purposes of the IRA contribution rules.
• Provides small employers with a 20% tax credit for differential wage payments made to employees who are on active military duty.
• Provides an exclusion for state or local payments of bonuses to active or former military personnel or their dependents on account of such military personnel's service in a combat zone.
• Allows members of the reserves who are called to active duty to withdraw unused amounts held in a health flexible spending account (health FSA).

Please keep in mind that this is only a summary of these changes in the new law. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to contact us.

Non US Person Tax Problem Resolution

IRS Begins Focus on Foreign Athletes and Entertainers

The IRS recently launched an Issue Management Team focused on improving U.S. income reporting and tax payment compliance by foreign athletes and entertainers who work in the United States. The initial focus is on those engaged in tennis, golf and music. These individuals and those associated with arranging their appearances in the U.S. and managing their financial affairs are typically high income individuals. Because of this, it is important to ensure proper tax reporting and payment. IRS is using a three pronged approach for this initiative: improving the availability of information and guidance needed to help this group comply with income reporting and tax payment requirements providing IRS enforcement personnel with information they need to identify and work compliance issues frequently encountered with this population and conducting direct compliance and enforcement activity. Artists and Athletes (Income Code 20) Because many tax treaties contain a provision for pay to artists and athletes, a separate category is assigned these payments for withholding purposes. This category may include payments made for performances by public entertainers (such as theater, motion picture, radio, or television artists, or musicians), athletes, or other persons as defined by the applicable treaty article. Note: As a general rule the tax treaty article dealing with artists and athletes must be applied before the articles on independent personal services and dependent personal services are applied to the income of the artists and the athletes. As a general rule Form W-8ECI may not be used to exempt withholding on a payment for personal services provided by a foreign individual. In addition, special rules apply to artists and athletes who have formed partnerships or corporations as the beneficial owners of the income accruing to them. Refer to Withholding Exemption on Effectively Connected Income for more information. Withholding Rate You must withhold tax at a 30% rate on payments to artists and athletes for services performed as independent contractors. Refer to pay for independent Personal Services for more information. You must withhold tax at graduated rates on payments to artists and athletes for services performed as employees. Refer to pay for dependent Personal Services for more information. However, in any situation where the nature of the relationship between the payor of the income and the artist or athlete is not ascertainable, you should withhold at a rate of 30%. Payments to a U.S. Agent of a Foreign Person Caution should be taken when payments are made to a U.S. agent of a foreign person. Withholding agents who have knowledge that the payee is an agent of a foreign person must treat the payment as made to a foreign person. An exception is made for a payee who is a "financial institution". Treasury Regulation 1.1441-1(b)(2)(ii) effective for payments made after December 31, 2000 Follows: §1.1441-1. Requirement for the deduction and withholding of tax on payments to foreign persons. (b)(2)(ii) Payments to a U.S. agent of a foreign person. A withholding agent making a payment to a U.S. person (other than to a U.S. branch that is treated as a U.S. person pursuant to paragraph (b)(2)(iv) of this section) and who has actual knowledge that the U.S. person receives the payment as an agent of a foreign person must treat the payment as made to the foreign person. However, the withholding agent may treat the payment as made to the U.S. person if the U.S. person is a financial institution and the withholding agent has no reason to believe that the financial institution will not comply with its obligation to withhold . . . Central Withholding Agreements Nonresident alien entertainers or athletes performing or participating in athletic events in the United States may be able to enter into a withholding agreement with the IRS for reduced withholding provided certain requirements are met. Under no circumstances will a withholding agreement reduce taxes withheld to less than the alien's anticipated income tax liability. Nonresident alien entertainers or athletes requesting a central withholding agreement must provide the following information. A list of the names and addresses of the nonresident aliens to be covered by the agreement. Copies of all contracts that the aliens or their agents and representatives have entered into regarding the time period and performances or events to be covered by the agreement including, but not limited to, contracts with: Employers, agents, and promoters, Exhibition halls, Persons providing lodging, transportation, and advertising, and Accompanying personnel, such as band members or trainers. An itinerary of dates and locations of all events or performances scheduled during the period to be covered by the agreement. A proposed budget containing itemized estimates of all gross income and expenses for the period covered by the agreement, including any documents to support these estimates. The name, address, and telephone number of the person the IRS should contact if additional information or documentation is needed. The name, address, and employer identification number of the agent or agents who will be the central withholding agents for the aliens and who will enter into a contract with the IRS. A central withholding agent ordinarily receives contract payments, keeps books of account for the aliens covered by the agreement, and pays expenses (including tax liabilities) for the aliens during the period covered by the agreement. When the IRS approves the request, the Associate Chief Counsel (International) will prepare a withholding agreement. The agreement must be signed by each withholding agent, each nonresident alien covered by the agreement, and the Commissioner or his delegate. Generally, each withholding agent must agree to withhold income tax from payments made to the nonresident alien; to pay over the withheld tax to the U.S. Treasury on the dates and in the amounts specified in the agreement; and to have the IRS apply the payments of withheld tax to the withholding agent's Form 1042 account. Each withholding agent will have to file Form 1042 and Form 1042-S for each tax year in which income is paid to a nonresident alien covered by the withholding agreement. The IRS will credit the withheld tax payments, posted to the withholding agent's Form 1042 account, in accordance with the Form 1042-S. Each nonresident alien covered by the withholding agreement must agree to file Form 1040NR or, if he or she qualifies, Form 1040NR-EZ. A request for a central withholding agreement should be sent to the address shown in the discussion found at Central Withholding Agreements at least 90 days before the agreement is to take effect. Refer to Revenue Procedure 89-47, C.B. 1989-2, 598 for more information. Tax Treaties Under many tax treaties, compensation paid to artists, entertainers, or athletes for services performed in the United States is exempt from U.S. income tax only when the services are performed during a limited period of temporary presence in the United States and the pay is within limits provided in the tax treaty that applies (Refer to Table 2 of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities (PDF)). Employees and independent contractors may claim an exemption from withholding under a tax treaty by filing Form 8233 (PDF). Often, however, you will have to withhold at the statutory rates on the total payments to the artist, entertainer or athlete. This is because the exemption may be based upon factors that cannot be determined until after the end of the year. References/Related Topics Withholding on Specific Income Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Trucker Tax Relief - Trucker Tax Resolution Service

Truckers Tax Relief - Are you a truck driver with tax problems?

If you're a truck driver and owe the IRS, you're better off resolving your tax debt now. As you know, tax problems do not go away by themselves! Stop your IRS wage garnishment today, stop your IRS bank levy today, and release your IRS tax lien today.

As you can see from the statement below by Mr. Douglas H. Shulman, the new IRS Commissioner, he will first concentrate on Enforcement, then secondly its Service! Are you saying where is the kinder and gentler IRS?

Contact us today to resolve your tax problems.

Statement of Commissioner Douglas H. Shulman

I want to extend my thanks to the members of the Senate and the Senate Finance Committee, especially Chairman Baucus and Senator Grassley. I also want to thank President Bush for nominating me and Treasury Secretary Paulson for his support.

The Internal Revenue Service touches virtually every adult, every business and every non-profit organization in America. It is an honor to assume the leadership of this critical agency. I recognize the great responsibility I have been given and will work to ensure that the IRS is fair, impartial and respects the rights of all taxpayers.

As Commissioner, I will concentrate on both enforcement and service. For the majority of Americans who pay their taxes willingly and on time, there must be clear guidance, accessible education and outstanding service. Our aim should be to make it as easy as possible for citizens to pay the correct amount of taxes in the most efficient and least burdensome manner possible.

For taxpayers who intentionally evade paying taxes, there must be rigorous enforcement programs.

I am looking forward to working with the dedicated and talented IRS workforce, along with the broader tax community and important stakeholders to continue to build an efficient, effective and respected IRS.

Contact us today to resolve your tax problems.

Don't compromise on your representation! We represent truckers and truck drivers before the IRS and any taxing authority.

Mike Habib, EA

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent truckers and truck drivers in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

IRS Tax Problems? Get Resolution today - here's why

If you owe the IRS, you're better off resolving your tax debt now. As you know, tax problems do not go away by themselves! Stop IRS wage garnishment today, stop IRS bank levy today, and release IRS tax lien today.

As you can see from the statement below by Mr. Douglas H. Shulman, the new IRS Commissioner, he will first concentrate on Enforcement, then secondly its Service! Are you saying where is the kinder and gentler IRS?

Contact us today to resolve your tax problems.

Statement of Commissioner Douglas H. Shulman

I want to extend my thanks to the members of the Senate and the Senate Finance Committee, especially Chairman Baucus and Senator Grassley. I also want to thank President Bush for nominating me and Treasury Secretary Paulson for his support.

The Internal Revenue Service touches virtually every adult, every business and every non-profit organization in America. It is an honor to assume the leadership of this critical agency. I recognize the great responsibility I have been given and will work to ensure that the IRS is fair, impartial and respects the rights of all taxpayers.

As Commissioner, I will concentrate on both enforcement and service. For the majority of Americans who pay their taxes willingly and on time, there must be clear guidance, accessible education and outstanding service. Our aim should be to make it as easy as possible for citizens to pay the correct amount of taxes in the most efficient and least burdensome manner possible.

For taxpayers who intentionally evade paying taxes, there must be rigorous enforcement programs.

I am looking forward to working with the dedicated and talented IRS workforce, along with the broader tax community and important stakeholders to continue to build an efficient, effective and respected IRS.

Contact us today to resolve your tax problems.

Don't compromise on your representation! We represent taxpayers before the IRS and any taxing authority.

Mike Habib, EA

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

IRS website provides guidance on S corporation election problems
Filing Requirements for Filing Status Change, on IRS website

Mike Habib, EA
myIRSTaxRelief.com

In a recent posting on its website, IRS explains the steps to be taken and forms to be filed by taxpayers requesting to change their filing status from a C Corporation (filing Form 1120) to an S Corporation (filing Form 1120S). In particular, IRS explains what to do if a taxpayer hasn't timely filed Form 2553, and either has or hasn't filed Form 1120S for the first year of the intended S corporation election.

Background. S corporations are incorporated entities with many of the same attributes as traditional C corporations, including limited liability, transferable ownership, and unlimited life. But unlike C corporations, S corporations are generally not subject to income tax. Instead, the business's profit or loss is passed through to the shareholders, who report it on their individual returns. To qualify, a corporation must elect S corporation status and meet a number of requirements. It can have no more than 100 shareholders, and only certain types of taxpayers can be shareholders. It can have only one class of stock.

Taxpayers elect S corporation status by filing Form 2553, Election by a Small Business Corporation, on or before the 15th day of the third month of the tax year for which the election is to be in effect.

Observation: Among other issues, the Tax Advocate's 2007 Report to Congress highlighted problems with the S corporation election process. If the election isn't timely filed or is incomplete, the S corporation return is converted to a C corporation return when filed. In past years, roughly 14% to 16% of total new S corporation filings were unpostable (i.e., the S corporation election was not approved). Approximately 20% of S corporation returns are unpostable for multiple years because of missing information or IRS processing errors.

C corporation requesting change to S corporation. A taxpayer requesting to change its filing status from a C corporation to an S corporation should timely fax or mail a paper copy of Form 2553 to the appropriate Service Center (as directed in Form 2553 instructions). The corporation will receive an acknowledgment and approval of the S corporation election. If it doesn't, it should follow-up with the Service Center where the Form 2553 was filed. The taxpayer should file (electronically, if required) its last C Corporation return (Form 1120) by the due date or extended due date.

Finally, the taxpayer should file (electronically, if required) an S corporation return (Form 1120S) by the due or extended due date. The filing of the initial Form 1120S return finalizes the change of the entity's filing requirement on IRS's records.

Failure to timely file Form 2553. If a taxpayer hasn't timely filed its election request to be treated as an S Corporation, it generally must request relief for the late election by requesting a private letter ruling and paying a user fee. However, certain relief provisions are available, as discussed below.

Where Form 1120S has been filed. If a taxpayer hasn't timely filed Form 2553, but has timely filed Form 1120S for the first year of the intended S corporation election, its Form 1120S can't be accepted and processed by the Service Center. When the Service Center notifies the taxpayer of the invalid S election, it should file a paper copy of Form 2553 with the Service Center, writing at the top of the form “Filed pursuant to Rev. Proc. 2003-43,” and attaching a statement establishing reasonable cause for the failure to timely file Form 2553. The Form 2553 and attached statement should be mailed to the Service Center separate from any other returns or information being submitted. (Taxpayers not eligible to use Rev Proc 2003-43, 2003-23 IRB , must generally request a private letter ruling and pay a user fee.) The taxpayer should file (electronically, if required) the last C Corporation return (Form 1120) by the due or extended due date.

Where Form 1120S hasn't been filed. If a taxpayer hasn't timely filed Form 2553 and also hasn't filed Form 1120S, it can choose one of two options. (Taxpayers not eligible to use either option must generally request a private letter ruling and pay a user fee.) Under the first option, the taxpayer files a copy of Form 2553 with the initial Form 1120S within 6 months of the due date of the Form 1120S (excluding extensions). On Form 2553, it provides a statement establishing reasonable cause for the failure to timely file Form 2553.

Under the second option, the taxpayer mails or faxes a paper copy of Form 2553 with the appropriate Service Center, writing at the top of the form “Filed pursuant to Rev. Proc. 2003-43,“ and attaching to Form 2553 a statement establishing reasonable cause for the failure to timely file Form 2553. The Form 2553 and attached statement should be mailed to the Service Center separate from any other returns or information being submitted. The Form 2553 should be filed before filing of the Form 1120S, and the Form 1120S should not be filed until the taxpayer is notified that the S election has been accepted.

Finally, under both options, the taxpayer should then file (electronically, if required) the last C Corporation return (Form 1120) by the due or extended due date.

Tax Negotiation Buyer Beware Report

How to compare tax relief and resolution service companies?

Customer…Beware!

How To Keep From Getting Ripped Off?

Many “Tax Negotiation” companies out there will absolutely rip you off. These unscrupulous firms will take your money regardless of whether they can help you or not. They'll lie to you and tell you they can get all the penalties and interest wiped out. They'll lie to you and tell you they'll settle with the IRS for "pennies on the dollar" when they know damn well you don't possibly qualify for the Offer in Compromise program.

How do they get away with this? Easy, most of the people you talk to at these unscrupulous firms are sales representatives. They have NO license to protect. You don't actually speak to the EA (Enrolled Agent), the CPA (Certified Public Accountant) or the attorney that these firms claim to have. Nope, you speak to some slimy unlicensed salesman. Some of these firms make up titles like Tax Resolution Specialist, or Tax Consultant. What a scam! In fact, many of these unscrupulous firms aren't tax firms or law firms at all, they’re just sales organizations!

We NEVER take on any client that we don't believe we can truly help. But, I absolutely guarantee you that 90% of the unscrupulous tax negotiation firms that advertise on TV and the internet would take any client and their money regardless of whether they could help them or not. And that stinks!

So, what should you do?

1) Always speak with the “licensed representative” who is on the Power of Attorney, that will actually represent you, usually the principal / owner of the firm,

2) Stay away from any firm/website that doesn't clearly give the names and bios of the licensed representative (Enrolled Agents, CPAs & Attorneys),

3) Ignore guarantees, promises and so-called testimonials. They're nothing more than meaningless hype; instead check the Better Business Bureau rating – A MUST!

4) Ask tough questions. If the answers don't make sense, don't hire the firm. What kind of tough questions? Are you an EA, CPA or attorney? When they say, "I'm a tax resolution specialist", ask them, is that a State or Federal license?

5) Finally, use your good common sense. You know when something isn't right. You work too hard for your money to give it away to some slime ball that makes promises you know he can't keep. Only deal with someone who is “Licensed” and who “Specialize” is Tax Resolution.

Don’t get ripped off! Do the right thing-hire a Licensed Representative!

Compliments of: Mike Habib, EA http://www.myirstaxrelief.com/

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

Payroll tax levy Employment tax levies Payroll Tax Problem

IRS provides guidance on new rules for employment tax levies

Mike Habib, EA

The IRS has issued interim guidance to its directors and collection area offices that explains when it is permissible to issue a levy to collect employment taxes without first giving the taxpayer a pre-levy collection due process (CDP) notice.

The IRS is authorized to take various collection actions in order to ensure the payment and collection of employment taxes, including issuing federal tax levies. Before a tax levy can be issued, however, the IRS must generally provide the taxpayer with notice and an opportunity for an administrative CDP hearing, and for judicial review.

The Small Business and Work Opportunity Tax Act of 2007 (the Act) modified the collection due process procedures for employment tax liabilities. The Act amended IRC §6330(f), effective for levies served after Sept. 21, 2007, to permit levies to collect employment taxes without first giving the taxpayer a pre-levy CDP notice, if the levy is a “disqualified employment tax levy” (DETL). IRC §6330(h) defines a DETL as a levy to collect the employment tax liability of a taxpayer (or predecessor) who requested a CDP hearing for unpaid employment taxes in the two-year period prior to the beginning of the taxable period for which the levy is served.

The guidance includes the following examples on the new rules:
Example 1. The taxpayer owes taxes on Form 941 for the 4th quarter 2005 (quarter ended Dec. 31, 2005). The taxpayer requested a timely CDP levy hearing. The taxpayer accrues additional employment tax liability on Form 941 for the second quarter 2006 (quarter ended June 30, 2006). The liability period for additional tax began on April 1, 2006. The additional liability for the second quarter 2006 qualifies for a DETL levy because the taxpayer requested a prior levy hearing for a quarter that ended (Dec. 31, 2005) within the two-year lookback period (April 1, 2004 through April 1, 2006).

Example 2. The taxpayer owes taxes on Form 941 for the 1st quarter 2006 (quarter ended March 31, 2006). The taxpayer requested a timely CDP levy hearing. The taxpayer was assessed additional employment tax liability on Form 941 for the quarter ended Dec. 31, 2005. The liability period for additional tax began on Oct. 1, 2005. The additional liability for the quarter ended Dec. 31, 2005 does not qualify for a DETL levy because the taxpayer requested a prior levy hearing for a quarter that ended (March 31, 2006) outside the two-year lookback period (Oct. 1, 2003 through Oct. 1, 2005).

If a DETL is served, the taxpayer must be given an opportunity for a CDP hearing within a reasonable period of time after the levy and may seek judicial review of the IRS ruling in tax court.

The new IRS guidance is effective March 3, 2008.

If you have a payroll tax problem and need professional representation CLICK HERE

Mike Habib, EA
myIRSTaxRelief.com

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Guam Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

Is an IRS Offer In Compromise right for you? Know your options!

Direct from the IRS

Mike Habib, EA

Is an Offer in Compromise Right for You?

Should the IRS determine that a taxpayer is unable to pay the liability in a lump sum or through an installment agreement and has exhausted the search for other payment arrangements the last option would be to file an Offer in Compromise (OIC).

An OIC allows taxpayers to settle their tax liabilities for less than the full amount. Taxpayers should use the checklist in the Form 656, Offer in Compromise, package to determine if they are eligible for an offer in compromise. The objective of the OIC program is to accept a compromise when it is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements. See IRS Policy Statement P-5-100 for the complete OIC policy statement.

Major Changes to the OIC Program

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), created major changes to the IRS OIC program as it relates to lump sum offers, periodic payment offers, and a determination as to when an offer is accepted. These changes affect all offers received by the IRS on or after July 16, 2006.

TIPRA, section 509, amends Internal Revenue Code section 7122 by adding a new subsection (c) “Rules for Submission of Offers in Compromise" which establishes the following:

* A taxpayer filing a lump sum offer must pay 20 percent of the offer amount with the application (IRC 7122(c)(1)(A)). A lump sum offer means any offer of payments made in five or fewer installments.
* A taxpayer filing a periodic payment offer must pay the first proposed installment payment with the application and pay additional installments while the IRS is evaluating the offer (IRC section 7122(c)(1)(B)). A periodic payment offer means any offer of payments made in six or more installments.

TIPRA Payments are Non-refundable

The IRS considers the 20 percent payment for a lump sum offer, and the installment payment on a periodic payment offer, as "payments on tax" and are not refundable regardless of whether the offer is declared not processable or is later returned, withdrawn, rejected or terminated by the IRS.

Taxpayers May Designate TIPRA Payments

Taxpayers may designate the application of the required TIPRA payments. The designation must be made in writing when the offer is submitted and must clearly specify how the partial payments are to be applied to a particular tax period(s) and to specific liabilities (e.g. income taxes, employment taxes, trust fund portions of employment, excise tax, etc.) Taxpayers may not designate how the $150 application fee is applied. The application fee reduces the assessed tax or other amounts due.

TIPRA and Application Fee Payment Exceptions

A taxpayer who qualifies for a low-income exception waiver or is filing a doubt as to liability offer is not required to pay the application fee, the 20 percent payment on a lump sum offer, or the initial payments required on a short term or deferred periodic payment offer. To determine low-income eligibility, refer to the section titled Application Fee Required for OIC.

Is Your Offer In Compromise "Processable"?

As a result of TIPRA, beginning July 17, 2006 in order to be considered for an OIC, a taxpayer must have met all of the following requirements:

* The taxpayer is not a debtor in an open bankruptcy proceeding.
* The $150 application fee, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.
* The 20 percent payment with the lump sum offer, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.
* The first installment payment on a periodic payment offer, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.

An offer that is received with a payment that is less than 20 percent payment on a lump sum offer will be deemed processable but the taxpayer will be asked to pay the remaining balance in order to avoid having the offer returned. Failure to submit the remaining balance will cause the IRS to return the offer and retain the $150 application fee.

Taxpayers filing a periodic payment offer (e.g. short term periodic, or deferred periodic offer) are required to submit the full amount of their first installment payment in order to meet the processability criteria. If the full amount of the first installment payment is not provided, the IRS will deem the offer not processable and will return the $150 application fee to the taxpayer.

If during the OIC investigation the initial offer amount is determined to be insufficient and not reflective of the taxpayer's ability to pay, the taxpayer will in most instances, be contacted and asked to increase the offer and submit the corresponding 20 percent payment if the offer was filed as a lump sum cash offer, or the periodic payment if the offer is a short term or deferred payment offer. The IRS may reject the offer if a taxpayer fails to increase the offer and provide the additional payment(s). The IRS will credit the taxpayer's account(s) with any payment(s) submitted with the original offer.

The IRS will deem an OIC "accepted" that is not withdrawn, returned, or rejected within 24 months after IRS receipt. If a liability included in the offer amounts is disputed in any judicial proceeding that time period is omitted from calculating the 24-month timeframe.

For additional information regarding TIPRA and its impact on the OIC program, refer to the following:

* TIPRA - Frequently Asked Questions
* TIPRA - Notice 2006-68
* TIPRA - News Release IR-2006-106
* TIPRA - Fact Sheet FS-2006-22

Application Fee Required for OIC - All taxpayers who submit a Form 656, "Offer in Compromise" must pay a $150 application fee except in two instances:

1. The OIC is submitted based solely on "doubt as to liability;" or>
2. The taxpayer's total monthly income falls at or below 250% of the Department of Health and Human Services (DHSS) poverty income levels.

The Form 656 Offer in Compromise (Revision 2/2007) package contains a worksheet titled “IRS OIC Monthly Low Income Guidelines Worksheet” designed to assist taxpayers in determining whether they qualify for the income exception. The worksheet also clarifies Item 2 to reflect Total Household Monthly Income, and now requires Self Employed individuals to adjust their total monthly income in Item 2. If income exception is met, a taxpayer is not required to pay the $150 application fee, the 20 percent payment on a lump sum offer, or the periodic payments required under TIPRA. Once eligibility for the income exception is determined, a taxpayer must complete Form 656-A (PDF) "Offer Certification for Offer in Compromise Application Fee and Payment." The worksheet, along with Form 656-A must be attached to the Form 656 application and mailed to the IRS for consideration.

The $150 application fee and the TIPRA payments must be paid using a check or money order made payable to the United States Treasury. Cash payments are not accepted. A taxpayer should submit two payments: one for the application fee and the other for the TIPRA payment.

Individuals Must File All Federal Tax Returns and Pay Required Estimated Tax Payments

The IRS expects a taxpayer requesting an OIC to file all delinquent tax returns and pay any required estimated tax payment. IRS will notify taxpayers and provide 30 days to file delinquent returns or make the required estimated tax payments. Failure to comply will cause the IRS to return the offer back to the taxpayer. The $150 application fee along with all TIPRA payments previously paid will be retained by the IRS and applied to the taxpayer’s liability.

Businesses Must File All Federal Tax Returns and Timely Pay all Required Federal Tax Deposits

The IRS is cautious to avoid providing financial advantages to operating businesses through the forgiveness of tax debt. This may create the appearance that the delinquent business has been able to profit from its failure to pay, giving it an advantage over other, fully compliant businesses.

Businesses that have employees are expected to have paid all required federal tax deposits for the current quarter in order for their offer to be evaluated. If the IRS determines that the required deposits have not been paid, the taxpayer will be provided with a reasonable amount of time to pay the deposits before the IRS proceeds with the investigation. In addition, the business will be expected to remain current on all filing and deposit requirements while the offer is being investigated.

Failure to either pay the deposits as requested, remain current with filing or pay all deposits that become due while the offer is under investigation will cause the IRS to return the offer back to the taxpayer. The $150 application fee along with all TIPRA payments previously paid will be retained by the IRS and applied to the taxpayer’s liability.

Statute of Limitations for Assessment and Collection is Suspended - The statute of limitations for assessment and collection of a tax debt is suspended while an OIC is "pending," or being reviewed.

The OIC is pending starting with the date an authorized IRS employee determines the Form 656 Offer in Compromise is ready for processing. The OIC remains pending until the IRS accepts, rejects, returns or acknowledges withdrawal of the offer in writing. If a taxpayer requests an Appeals hearing for a rejected OIC, the IRS will continue to treat the OIC as pending. Once the Appeals office issues a determination in writing to accept or reject the OIC then the pending status is removed.

Taxpayers Must File and Pay Taxes - In order to avoid defaulting an OIC once accepted by the IRS, taxpayers must remain in compliance in the filing and payment of all required taxes for a period of five years or until the offered amount is paid in full, whichever is longer. Failure to comply with these conditions will result in the default of the OIC and the reinstatement of the tax liability.

Federal Tax Liens are Not Released - If there is a Notice of Federal Tax Lien on record prior to filing Form 656, the lien is not released until the OIC terms are satisfied, or until the liability is paid, whichever comes first. A Notice of Federal Tax Lien may be filed during the course of an OIC investigation regardless of the type of offer being considered.

OIC Will Effect Refunds, Installment Agreements, and Levies - Refer to Contractual Terms in an Offer in Compromise Web page for the terms that are involved with an offer in compromise.

For professional tax representation CLICK HERE

Mike Habib, EA
myIRSTaxRelief.com

What is an Offer In Compromise OIC - Why you need professional representation

As per the IRS Offer in Compromise

Mike Habib, EA

If taxpayers are unable to pay a tax debt in full and an installment agreement is not an option, they may be able to take advantage of an offer in compromise (OIC). Generally, an OIC should be viewed as a last resort after taxpayers have explored all other available payment options. The IRS resolves less than one percent of all balance due accounts through the OIC program.

What is an Offer in Compromise?

An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

* Doubt as to liability - Doubt exists that the assessed tax is correct.
* Doubt as to collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax owed.
* Effective Tax Administration - There is no doubt the tax is correct and could be collected but an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

As the result of the issuance of the revised Form 656, Offer in Compromise (2/2007 revision), a taxpayer is now required to file a Form 656 – L, Offer in Compromise (Doubt as to Liability) when it is believed that the tax liability is incorrect, while Form 656, Offer in Compromise should be filed only when there is doubt as to collectibility that the tax liability could ever be paid in full, or under the basis of Effective Tax Administration (ETA). A taxpayer is no longer able to file offers concurrently claiming both that the tax liability is incorrect along with an inability to pay it.

Form 656, Offer in Compromise (2/2007 revision) also incorporates changes in the processing guidelines as the IRS will no longer investigate an offer for a tax year or tax period that has not been assessed. The IRS will return the offer back to the taxpayer if it is submitted solely for an unassessed tax year or tax period.

Taxpayers should beware of promoters' claims that tax debts can be settled for "pennies on the dollar" through the offer in compromise program. Check the OIC requirements to see if an offer in compromise is right for you.

You should read our BEWARE REPORT

Mike Habib, EA
myIRSTaxRelief.com

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

Wage Garnishment? Bank Levy? Save your paycheck and bank account

Want to stop a wage levy or a bank levy? Read on....

Mike Habib, EA

If you have not noticed, the IRS is getting more aggressive in their collection, and audit activities. Enforcement actions is at its highest level for years now!

Here is the scoop directly from the IRS

Fiscal Year 2007 Enforcement and Services Results

The IRS continues to make strong progress in a number of key enforcement areas. The IRS is showing consistent improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury. At the same time, the agency continues to improve service to taxpayers.

The IRS enforcement efforts increased again in fiscal year 2007. For instance, during 2007 the IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.

Highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:

Individuals

Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.

* Audits of individuals with incomes of $1 million or more increased from 17,015 during fiscal year 2006 to 31,382 during fiscal year 2007, an increase of 84 percent. One out of 11 individuals with incomes of $1 million or more faced an audit in 2007.
* Overall, the total individual returns audited increased by 7 percent to 1,384,563 in 2007 from 1,293,681 in 2006. That’s the highest number since 1998.
* Audits of individuals with incomes over $200,000 reached 113,105 returns, up 29.2 percent from the prior year total of 87,885.
* The IRS increased audits of individual returns with income of $100,000 or more, auditing 293,188 of these returns in 2007, up 13.7 percent from last year’s total of 257,851.
* The IRS filed 3.8 million levies and almost 700,000 liens during 2007, an increase from the previous year and a substantial increase from five years earlier.

Businesses

In the business arena, the IRS continued efforts to review more returns of flow-through entities – partnerships and S Corporations. Our business numbers reflect that we have placed more emphasis in the growing area of these flow-through returns. While large corporate audits are down slightly, we have increased our focus on mid-market corporations – those with assets between $10 million and $50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk.

* Audits of S Corporations increased to 17,681 during 2007, up 26 percent from the prior year’s total of 13,984.
* Audits of partnerships increased to 12,195 during 2007, up almost 25 percent from the prior year’s total of 9,777.
* Audits of mid-market corporations increased to 4,473, up 6 percent from last year’s total of 4,218.
* Audits of businesses in general rose to 59,516, an increase of almost 14 percent from the prior year’s total of 52,223.
* Although the audits of large corporations dipped slightly in 2007 to 9,644 audits, the number of audits is up 14 percent from the fiscal year 2002 level.

Taxpayer Services

* More taxpayers chose to file electronically in 2007 than during the prior year, with 57 percent of individual tax filers choosing to e-file in 2007, up from 54 percent in 2006.
* More people visited the IRS internet site, IRS.gov. The IRS site was accessed more than 217 million times in 2007, up more than 10.5 percent from the same period in 2006.
* The IRS helped more taxpayers find out about their refunds through the agency’s internet-based system ‘Where’s my Refund?’ The system was accessed 32.1 million times during 2007, up 30 percent from last year’s usage of 24.7 million.
* As in the prior year, the IRS accuracy was 91 percent on tax law questions answered through its toll-free telephone service.
* The agency held a 94 percent customer satisfaction rating for its toll-free telephone service.

For professional audit representation CLICK HERE

For a negotiated tax settlement CLICK HERE

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

Capital gain tax on disputed sale in shareholder's forced buyout

Tax problem with capital gain taxes, S Corp capital gain tax problem

Ninth Circuit holds that gain was recognized on disputed sale in shareholder's forced buyout

Glenn Hightower v. Comm., (CA9 2/12/2008)

The Court of Appeals for the Ninth Circuit, affirming the Tax Court's decision, has held that an individual who had been a 50% co-owner of an S corporation and who effectively was ousted by the other owner had to recognize gain on the forced sale of his stock in the year he received payment for it. This was so even though he continued to dispute the forced buyout in state courts after the payment was made.

Facts. Glen Hightower and Daniel O'Dowd each owned 50% of the stock of an S corporation known as Green Hills Software, Inc. Their shareholders' agreement provided that any dispute between them would be resolved through binding arbitration and either of them could compel a buyout of the other's stock at a formula price.

Relations between the two co-owners eventually deteriorated to the point that in '98 O'Dowd triggered the buy/sell provision of the shareholders' agreement by offering either to sell his shares to Hightower for $47 million or to buy Hightower's shares for that amount. Although Hightower didn't want to sell his stock, he couldn't obtain financing to buy O'Dowd's stock for $47 million. Accordingly, O'Dowd compelled a buyout of Hightower's stock.

Hightower demanded arbitration regarding O'Dowd's buyout, but the arbitrator ruled in O'Dowd's favor. Hightower received a check from O'Dowd in 2000 for $41,585,388, which Hightower deposited into an interest bearing account. Hightower, who used the cash method, didn't report this payment or any interest on it on his return. When Hightower later sought to have the arbitration award set aside in state court, he lost. He appealed all the way to the state's top court, which in 2003 declined to hear his case.

Tax Court's decision. The Tax Court, rejecting a wide variety of taxpayer's arguments, held that Hightower recognized gain on the forced sale of his stock in 2000, the year he received payment for it. The Tax Court found that Hightower wasn't holding O'Dowd's payment in trust in a segregated account nor had he involuntarily received the funds and unconditionally renounced his right to them by creating a separate account. Hightower, who voluntarily cashed the check for the payment, intended to return the funds only if he succeeded in rescinding O'Dowd's buyout. The Tax Court rejected his argument that the sale was incomplete because he tendered his shares without endorsing the certificates, noting that the arbitrator and state courts found that Hightower's stock was purchased in 2000. The Tax Court concluded that even if payment to Hightower violated state law, a later determination to that effect wouldn't absolve him from his tax liability in the year of the receipt. Further, the gain did not escape tax, as Hightower argued, under the claim of right doctrine—under which a payment is includable in income in the year in which a taxpayer receives it under a claim of right (even if that claim is disputed by another party) and without restriction as to its disposition.

Ninth Circuit finds forced sale resulted in gain. The Ninth Circuit held that the stock payment Hightower received for his share of Green Hills was taxable income in 2000 because it was received without restriction as to its disposition and because he had no fixed legal obligation to restore the funds to any other party. This conclusion wasn't altered by the possibility that the stock transaction could have later been unwound by a state court. Hightower's unilateral intent not to claim and exercise dominion over the funds didn't affect his tax liability. Similarly, for federal tax purposes, it was irrelevant that the transaction may have left Green Hills with a negative net worth in violation of state law. Further, because the stock payment was taxable income to Hightower in 2000, the interest which accrued on the principal was also taxable income in the year the interest was received.

The Court also held that Hightower had to report the pass-through distributive share of Green Hills's income allocated to him in 2000. Even though Hightower's role in Green Hills management may have been restricted, he still retained beneficial ownership of his shares through the sale date. The arbitration award didn't have the effect of divesting him of beneficial ownership of his Green Hills shares in '98, as Hightower claimed. Rather, it merely gave O'Dowd the financial benefit of the bargain retroactively once the sale took place in 2000.

Mike Habib, EA
myIRSTaxRelief.com

S Corporation Tax Problems, IRS S Corp Tax Issues, IRS S Corp Audit

S corporations tax challenges by the IRS and other taxing authorities

Tax Advocate's Report highlights S corporation issues

Despite the fact that Subchapter S corporations are the most common corporate entity (over three million S corporations filing returns in fiscal year 2006), the National Taxpayer Advocate's 2007 Annual Report notes that IRS is still struggling to develop an effective and comprehensive strategy to address noncompliance by S corporations. The Report focuses on some of the challenges in this area, including insufficient data to assess compliance risks and undue taxpayer burden because of the S corporation election process and Schedule K-1 matching errors. In particular, the Report examined the avoidance of employment taxes by means of treating shareholder wages as distributions.

Background. S corporations are incorporated entities with many of the same attributes as traditional C corporations, including limited liability, transferable ownership, and unlimited life. But unlike C corporations, S corporations are generally not subject to income tax. Instead, the business's profit or loss is passed through to the shareholders, who report it on their individual returns. To qualify, a corporation must elect S corporation status and meet a number of requirements. It can have no more than 100 shareholders, and only certain types of taxpayers can be shareholders. It can have only one class of stock.

The Report surmises that the continual growth in S corporation filings—which account for 65% of all corporate returns—may be due in part to the lower individual tax rates available, limited liability, and the perceived opportunity for sole proprietors to avoid self-employment tax.

Compliance data difficulties. IRS stratifies S corporation filings into three separate asset ranges (as compared with the 13 ranges for C corporations). This can make identifying returns with higher compliance risk more difficult, especially when 99% of all S corporation returns report assets of $10 million or less. In fiscal year 2006, an S corporation faced only a 4 in 1000 chance of being audited, compared to 8 in 1000 for C corporations.

The Report notes that IRS increasingly identifies S corporation returns for examination to address abusive tax schemes and avoidance transactions, but identifying compliance risk associated with multi-entity return groups is challenging. (IRS is also developing a high income taxpayer strategy to test the hypothesis that the highest income strata of Forms 1040, Individual Income Tax Return, are using a variety of tax products and entity structures to defer tax liability into future years, convert ordinary income into lower capital gain tax income, or offset income with sham losses.)

When IRS proposes changes to S corporation returns at the conclusion of an examination, it reports each shareholder's distributive share of the change as an adjustment to the individual shareholder's tax return. In addition to certain deficiencies with the audit process, IRS is unable to measure its effectiveness in S corporation examinations because it doesn't track the ultimate tax at the Form 1040 level. IRS records audit results at the S corporation level but never associates them with the tax assessment.

S elections and K-1 filings. Taxpayers elect S corporation status by filing Form 2553, Election by a Small Business Corporation, on or before the 15th day of the third month of the tax year for which the election is to be in effect. If the election isn't timely filed or is incomplete, the S corporation return is converted to a C corporation return when filed. In past years, roughly 14% to 16% of total new S corporation filings were unpostable (i.e., the S corporation election was not approved). Approximately 20% of S corporation returns are unpostable for multiple years because of missing information or IRS processing errors.

S corporations file Schedules K-1 each year to report profit and loss to their shareholders. IRS then matches income and loss information from Schedules K-1 to individual tax returns and generates notices when differences arise. Although returns are screened to eliminate unnecessary notices, the error rate is still high. IRS technicians who work discrepancies have limited accounting and tax training, while S corporation returns contain many complex issues that may go undetected where employees only address flow-through income. Further, since the K-1 matching program is part of the Automated Underreporter (AUR) program unit, which limits human involvement, many taxpayers are unable to reach a trained IRS employee to answer questions concerning mismatched K-1s because the AUR program's level of service is poor and the program has no dedicated line for practitioners.

The Report concludes that IRS needs to focus on reducing taxpayer burden associated with the S corporation election process and the K-1 matching program. Taxpayers and return preparers have identified the S corporation election process as one of the most difficult for eligible small business corporations. While efforts have been made to simplify the S-election process and reduce processing costs, the Report concludes that the best approach to reducing taxpayer burden is to permit the election to be considered timely filed with the first S corporation return. Taxpayers and practitioners need access to knowledgeable IRS employees to deal with the often complex questions regarding S corporation and K-1 matching issues.

Compensation vs. corporate distribution. The earnings of an S corporation are taxed as ordinary income to its shareholders. Unlike partnership or sole proprietor earnings, S corporation earnings are not subject to self-employment tax. This treatment gave rise to a tax planning strategy that recharacterizes shareholder compensation as distributions of profit to avoid payroll taxes. The S corporation owner pays employment taxes on only the portion of profits that he arbitrarily decides is “salary.” The S corporation officer or shareholders, who takes no salary or a nominal salary, receives the remaining compensation as tax-free distributions. The corporation saves payroll taxes, and the shareholder pays only income taxes on his share of the corporate profits, avoiding paying Social Security and Medicare taxes.

In tax year 2005, almost one million S corporations with one shareholder paid no officers' compensation. The Report calculates that if all profitable S corporations that reported no officers' compensation had been Schedule C businesses, they would have paid an estimated $4.9 billion in self-employment tax.

The Report notes that the wage-to distribution conversion strategy may reduce the shareholder's future Social Security benefits—an important part of most individuals' retirement income. A taxpayer's Social Security benefits depend on the amount of pre-retirement wages received and social security taxes paid.

Although IRS has repeatedly litigated this issue and has won, taxpayers continue to use it as a tax planning strategy. IRS acknowledges this issue as a special compliance problem, featuring it in corporate classification guidelines for Form 1120S and including a reference to it in its notice of acceptance of S corporation status. IRS continues to audit returns based on this issue and reclassify distributions as wages subject to employment taxes. But establishing a fair and reasonable wage is difficult and time consuming. IRS examiners must consider: the financial condition of the corporation; the time worked by the shareholder; the company's compensation policy for other workers; the salary structure in companies in similar industries; and the return on investment.

Observation: The easiest cases for IRS to litigate and win are those where a sole S corporation owner claims no or negligible salary subject to employment taxes despite the fact that he may serve in key roles in the business, providing management, sales, or service functions, controlling the day to day activities of the company and making decisions affecting its future. The much more difficult and thornier cases are those questioning whether a salary that is not negligible is sufficient, i.e., reasonable.

The Report concludes that actions are needed to reverse the trend of electing S corporation status to avoid Social Security taxes. The employment tax strategy has an economic impact on the tax gap and erodes the Social Security and Medicare tax base. While acknowledging the challenges faced by IRS in dealing with this compliance issue (while reducing taxpayers' burden), the Report concludes that IRS must find the right balance of research, training, outreach, and compliance activities to improve the quality of S corporation work.

S Corporation tax problem? Get professional tax resolution today!

Mike Habib, EA

Is the IRS knocking on your door? Don't let them in!!

How to handle the IRS at your Front Door? Is a Revenue Officer or a Revenue Agent visiting you soon?

If you find yourself face to face with an IRS Agent (Revenue Officer for collection issues, or Revenue Agent for audit and examination issues), at your front door you must remember to avoid these common mistakes:

1. Don’t invite them into your home or business.
2. Don’t answer any question. No matter how innocent they sound.
3. Don’t provide them paperwork or documentation.

What you should do is ask the IRS agent for their business card and the purpose of their visit.

Explain to them that your professional tax representative will contact them and that all future communications will go through them.

Be polite but firm. Do not let them intimidate you into talking about anything.

Your rights under the Taxpayer Bill of Rights allow you to have a Professional Tax Representative handle your IRS negotiations.

Often taxpayers become understandably nervous and invite the IRS Agent into their home or business and start telling them all kinds of things.

DON’T DO IT!

Usually you’re helping the IRS and hurting yourself. The IRS Agent is trained to prepare a mental inventory of all assets they see in your home or business.

Get professional representation TODAY.

Mike Habib, EA
MyIRSTaxRelief.com

Don’t get into an IRS payroll tax problem - Payroll Taxes forms 940, 941, and 944

Payroll Taxes forms 940, 941, and 944 update

Don’t get into an IRS payroll tax problem…

IRS has revised its instructions for Forms 940, 941, and 944 and will be sending out notices in February to employers that are eligible to file Form 944 for the 2008 tax year.

Form 940. The 2007 Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, and its instructions, are now on the IRS web site. The due date for filing the return is Jan. 31, 2008. However, employers that deposited all of their FUTA tax in accordance with IRS deadlines have until Feb. 11, 2008 to file the return.

There are no credit reduction states for tax year 2007, so lines 2 and 11 of the form, and part 2 of Schedule A, Multi-State Employer and Credit Reduction Information, do not need to be completed.

The Form 940 instructions note that, for tax year 2008 (generally due in January 2009), the FUTA tax rate is scheduled to decrease from 6.2% to 6.0%, but caution that there is pending legislation that would eliminate the reduction in the tax rate.

Note: The Senate-passed version of H.R. 6, the Energy Independence and Security Act, would extend the temporary surtax rate through Dec. 31, 2008. Thus, the FUTA rate would remain at 6.2% through the end of 2008.

Form 941. The instructions for Form 941, Employer's Quarterly Federal Tax Return, have been recently revised to include the Department of the Treasury (DOT) in some of the filing addresses. The first quarter 2008 return will reflect the increase in the Social Security wage base to $102,000.

IRS also reminds employers to use a minus sign when reporting a negative amount as a tax adjustment on line 7 of Form 941, and not a parenthesis. It requests this to enhance the accuracy of its scanning software.

Form 944. Certain employers whose estimated annual employment tax liability is $1,000 or less are eligible to file Form 944, Employer's Annual Federal Tax Return, rather than filing Form 941 on a quarterly basis. As with Form 941, IRS has changed some of the Form 944 filing addresses to add the DOT. The 2007 Form 944 is on the IRS Web site.

In February 2008, IRS will be sending out notices to employers who should file Form 944 for tax year 2008, rather than quarterly Form 941. Employers who receive this notice should immediately discontinue filing Form 941. Employers expecting to exceed the $1,000 Form 944 threshold (approximately $4,000 or more in wages) must contact IRS before Apr. 1, 2008 to request to remain a quarterly Form 941 filer. Employers already filing Form 944 will not receive the above notice from IRS.

Employers who prefer to e-file Form 941 quarterly (rather than file Form 944) must contact IRS by Apr. 1, 2008 to change their filing status. They should wait to receive confirmation from IRS before they start filing Form 941. The first quarter Form 941 is due at the end of April.

The due date for the 2008 annual Form 944 is Feb. 2, 2009.

Source: Federal Taxes Weekly Alert (preview) 12/20/2007, Volume 53, No. 51

For Payroll tax problem representation CLICK HERE

Mike Habib, EA
MyIRSTaxRelief.com

As an IRS licensed Enrolled Agent (EA) specializing in IRS Tax Problem Resolution, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C.. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola