If you owe the IRS but have been putting off getting resolution for your past due tax debt, now is a great time to see if you may be eligible for a settlement, or Offer in Compromise. The Offer in Compromise program is where the IRS agrees to accept a smaller amount than what you owe, based on your financial situation and ability to pay.
Why is now a better time than ever? Recent reports show that as a result of the home buyers’ tax credit that was being offered, the housing market has finally started to show some signs of improvement, and that means home prices are beginning to pick back up. What does this mean in relation to your tax bill? The IRS uses a number of factors, such as the value of your assets, to determine what you can afford to pay them. That is why it is to your advantage to look into settling now, while home values are still relatively low, so that your assets will total at a lower amount.
Don’t own a home? Now is still a great time to try to get a settlement- the IRS has recently stated that they are loosening the guidelines for the OIC program due to the state of the economy. Those who wait until the economy picks back up may find themselves in a situation of having to pay back their taxes in full due to a change in job status, a raise in income, or other financial change that would then put them in a fully collectible status.
To find out whether the Offer in Compromise program or some other option would be right for you, schedule a consultation with a tax professional.
May 4th, 2010
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Another tax season has come and gone. Most people at this point are sitting back, anxiously awaiting their refund checks. For others, this time of year is just a stressful reminder that they are now one more year delinquent with unfiled returns.
There are a variety of reasons why people stop filing. Often time it’s because they know they’ll owe, and don’t have the money to pay. Other times, something as simple as a missing document can lead someone not to file; then the following year they falsely believe they cannot file the current year without filing the prior year, so they get further behind. Other folks simply find doing their taxes to be a headache, and put it off for that reason.
Whatever a person’s reason for not filing, it is important to know that regardless of whether you owe or get refunds, filing your back taxes (and filing on time going forward) can benefit you. If you haven’t filed because of something as simple as a missing document, you can get copies of wage & income transcripts at E-Tax Resolution. If you think you may have refunds, it’s crucial to file your returns before those refunds expire (three years from the date the return was due).
If you owe, it is also beneficial to file on time, for several reasons. Obviously, by filing on time you will avoid late filing penalties. Also, the IRS will not work with you on any kind of payment arrangement or reduction of your tax bill unless you have your returns filed. Filing your returns prevents the IRS from filing them on your behalf and charging you more tax than what you’d owe (they do not take into account any deductions). Last but not least, the 10-year collection period starts from the time the returns are filed, not when they were due. So if you file late, you are extending the time period the IRS has to collect those taxes from you!
To get caught up with your unfiled taxes and get on the right track going forward, contact us for a free consultation.
April 21st, 2010
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According to a recent article in the Washington Post, right now could be the best time in recent history to resolve your past due IRS tax bill. The IRS has recently announced changes to their collections guidelines, in an acknowledgment of the fact that many taxpayers are struggling in the current economy.
The IRS has announced it will host a series of open houses, where people who are behind can sit down with an IRS agent to attempt to work out a payment schedule that fits with the taxpayer’s budget. To see times and locations of the open houses, you can visit the IRS website. If you do choose to attempt to work directly with the IRS, be prepared to answer detailed questions about your income, assets, and regular monthly expenses. This information is used to determine the amount they feel you should be able to pay monthly.
In addition to having greater flexibility with payment plans, the IRS has also announced it will slightly loosen the standards for the Offer in Compromise program. Rather than taking an average of your last three years of income to determine your collectability, they will consider your current income and potential for future income. However, you may be required to sign an agreement requiring you to pay an additional amount if your income goes back up.
While it is generally a good thing that the IRS is being more sympathetic to taxpayers, they typically will not explore ALL of the options open to you to resolve your tax bill (for example, filing a Chapter 13 bankruptcy to reduce your tax bill). That’s why it can be beneficial to meet with a tax professional to review these options. Offer and compromise
March 31st, 2010
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Have you ever wondered, “Should I file bankruptcy?” When a person has a back tax issue, there are many different paths towards resolution. For those who make too much money to qualify for an Offer in Compromise, or for those unable to come up with the funds to pay a lump sum settlement, filing a Chapter 13 bankruptcy can be a very effective way to put your financial house in order, and to reduce the total tax liability owed.
In a bankruptcy, the IRS distinguishes between priority and non- priority debt. Priority debt is generally your most recent three tax years owed, while anything older is considered non-priority. Any unpaid balances of the non-priority debt will be fully discharged upon completion of the bankruptcy. Clients have been able to go through a Chapter 13 and come out with a totally clean slate with the IRS, effectively paying “pennies on the dollar” for their tax bill.
There can be other advantages of a Chapter 13 as well. For example, if someone could afford $500 a month to pay their IRS bill, but the IRS is demanding $1,000 per month, a bankruptcy can be a means of forcing the government to accept lower payment terms based on your actual ability to pay. Also, all interest and penalties cease to accrue during the bankruptcy period, allowing you to keep the debt from spiraling out of control.
Most national tax relief firms attempt to steer all clients towards an Offer in Compromise or payment plan, and do not look at bankruptcy as a potential solution because they do not offer that service. At Lothamer, we will analyze ALL your options to offer you a comprehensive plan that will make the most financial sense for you. If you’d like to find out your best option, you can contact us here.
March 4th, 2010
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Have you ever heard friends brag about the size of their income tax refunds, claiming that they have some “great” accountant who always managed to get them an unusually large refund? Or have you ever had an accountant or CPA try to win you as a client by claiming that he or she can get you more money back than anyone else?
When it comes to your tax returns, if a tax refund seems too good to be true, it very well may be. Although the vast majority of the accounting profession is honest, a small number of tax preparers attempt to lure in prospective clients by promising huge refunds. In a recent example, Lansing area tax preparer Darryl Stanley Horton was just indicted by a federal grand jury for filing false and fraudulent income tax returns, and all of his clients face potential audits. (To be clear, Horton was neither a CPA or even a licensed accountant.)
When you sign your tax return, you are taking responsibility for the accuracy of the return, regardless of whether you prepared it. You, not your accountant, would be held liable for any additional tax, penalty and interest owed. In addition, it may take years for the IRS to realize any error; meanwhile, they will backdate the penalty and interest to the date when the tax should have originally been paid. This can mean huge tax liabilities for individuals being audited.
When the IRS discovers a tax preparer committing fraud, they often audit ALL the returns prepared by that individual. We have had clients come to us because their CPA had been targeted, and as a result, they were being audited for several thousand dollars in additional taxes.
How do you know what to look for in a CPA or accountant, and what to be wary of? Here are some tips from the IRS:
Helpful Hints When Choosing a Return Preparer
- Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
- Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
- Avoid preparers who base their fee on a percentage of the amount of the refund.
- Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
- Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
- Review your return before you sign it and ask questions on entries you don’t understand.
- No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
- Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
- Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
- Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
February 16th, 2010
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Do you have a tax bill you can’t pay off? Have you been receiving notices, but ignored them because you didn’t have the money to pay? When a back tax bill is ignored, the IRS or State has the right to levy, or garnish, your wages as a means of getting payment. When this happens, they sometimes leave a taxpayer with so little to live on that they are unable to even pay for their basic housing and bills.
Obviously it is in your best interest to avoid this situation by addressing the tax problem before it gets to that stage. However, if you find yourself with a tax-related wage garnishment, there are some things you can do.
Most importantly, you need to have all your back tax returns filed. The IRS will generally not work with a taxpayer to remove a levy until all returns are filed, so if you have back returns that need to be submitted, that is the first step. Once all returns are filed, if your balances are not too large, the IRS or State may be willing to work with you to set up a voluntary payment plan rather than taking the money out of your check. If the task of filing your back taxes seems too overwhelming, Lothamer can help. We have the experience to file your back returns even if you are missing records.
If you are unable to work with the IRS or State on your own to get them to lift a levy, you may choose to seek professional assistance. Lothamer realizes that people who have wage levies are in a tight financial situation, so we offer free financing that allows you to get immediate help and spread the payments out over time.
The best way to avoid a wage garnishment, of course, is to stop it before it starts by getting your back taxes filed and making arrangements to deal with your balances due, whether it be through a payment plan, Offer in Compromise, bankruptcy, etc. Lothamer can assist you to determine which of these options is the right choice for you.
January 26th, 2010
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Lothamer has seen an especially tough year for our clients, whose challenging circumstances are sometimes hard to imagine. We admire their strength and courage as they come together with us to tackle difficult personal and financial issues, and we are proud to work as a team with our clients to help them put those issues behind them.
As the year comes to a close, we are happy to be able to report some extraordinary success stories. One client was scammed out of a large sum of money by an overseas con operation. She had taken money out of her 401k to pay the scammers, and was looking at owing a large tax debt in relation to the penalty on the withdrawal. We were able to convince the IRS to completely write off her $40,000 tax bill.
Another client who is self-employed ran into tax troubles that left him with a staggering $85,000 tax bill. We were able to settle out the debt for $1,000 so he can keep his business and move forward with his life.
Offers in Compromise like the example above are just one way we assist clients. There are hundreds more “everyday” stories of people who were several years behind in filing, who can now sleep at night without worrying if the IRS is going to knock on their door at any time. There are others who qualify for penalty abatements based on hardships they have experienced, such as a severe illness or death of a spouse. Whatever the tax matter, we have the expertise and commitment to find relief for our clients.
Lothamer looks forward to continued growth in 2010 so that we may help an even greater number of people to put their tax problems to rest.
December 20th, 2009
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Chances are, you or someone you know has been looking for a job this year. With businesses “right-sizing” and looking to cut costs, employment opportunities are scarce. Those who are hiring usually have their pick of a wide range of qualified applicants. So how do these employers narrow the field?
Some potential employers have been using credit checks as a means of screening applicants. From their point of view, it is a way to find out if someone is responsible; it is also a red flag to an employer that a person with financial difficulties might be more likely to steal or embezzle.
Whether or not these are legitimate reasons to do a credit check, the fact remains that employers do use them to screen out “undesirable” candidates. If you have a tax problem, there may be a lien on your credit. This would let the employer know that you owe back taxes to the IRS or State. In fact, any lien against your credit or property is a matter of public record. Technically, an employer could discover your tax problems even without pulling your credit report. If you owe back taxes, you could have a lien on you and not even know it, if you have changed addresses since you last filed a tax return.
Of course it is difficult to find the means to address a tax problem if you are struggling or unemployed. But clearing up your back taxes can lift barriers that may stand in your way of getting a good job. We offer a free consultation to those with a tax problem so that you can see what your options are. If you’re unsure whether you have a lien, you can check your credit report at AnnualCreditReport.com (this is an official government-sponsored website and the only truly free credit report service, not to be confused with the one in the TV ads).
November 13th, 2009
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We got a call the other day from a man whom I’ll call Al, who had an all-too-familiar tax problem. He hadn’t filed in about 5 years, and had substantial balances due. When I asked Al how he got into this predicament, he said that he had followed some “bad advice” from a friend at work.
Al works on the line at GM, and a co-worker had told him that by increasing your exemptions, you could take home a much larger paycheck. It sounded like a good idea at the time- who wouldn’t be tempted by some extra money each week? Al followed his friend’s advice and switched his exemptions to the maximum of 9, and his checks did indeed go up because practically nothing was being taken out for taxes.
Al only meant to do it temporarily to “catch up” on some things, but he began to get used to the larger checks, and before he knew it, years had gone by and he had never switched his witholdings back to the correct amount. Meanwhile, the IRS finally caught up to him and began sending him letters stating that he had huge tax balances due. Not only was he required to pay back the tax he owed, but the IRS imposed large amounts of interest and penalty, making the debt almost double the original amounts.
Al was stressed out beyond belief. He never intended to let things go this far, but he was afraid to address the issue because he knew he didn’t have the money to pay off the IRS. He ignored the certified letters because he just didn’t know what to do- he felt he was in over his head. Finally, when he received a Notice of Levy from his employer, he gave us a call to see what his options might be. We were able to figure out a solution to his problem that will allow him to get out from under the debt and start over with a clean slate.
It is never a good idea to claim exempt as a way to “catch up” on things or put extra spending money in your pocket. Eventually the IRS will discover the discrepancy and you will have a much larger problem on your hands. However, if you or someone you know is already in this situation, there are options, and you can start over. Don’t wait until the IRS places a levy on your wages- it is much better to address the issue yourself, before it gets to that point.
To set up a consultation to speak to a tax professional, please visit our website.
October 22nd, 2009
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Congressman Charles Rangel, chair of the House Ways and Means committee, has been in the news recently for ethics investigations related to, among other things, neglecting to report income from a rental property in the Caribbean on his taxes.
According to an article in the Washington Post, Rangel’s explanation was that he didn’t “realize” the money was income, because the rental proceeds were credited directly to his mortgage and he rarely got any financial statements from the resort managers. He has since paid back the taxes owed (about $10,000), but allegedly was not charged any interest or penalties.
The average taxpayer who has fallen behind probably feels great frustration knowing that a politician can receive special treatment or get a “break” on late fees. However, it’s worth pointing out that the IRS does have the power to make exceptions, and will sometimes do so for ordinary citizens. We have seen the IRS grant one-time penalty abatements for clients whose tax problem was isolated to a single year and who never had any other tax issues. For example, one client had to withdraw a large sum from a 401k because of a job loss, and had a huge tax bill for that year because of the withdrawal. They were having difficulty catching up, but the IRS waived the penalties on the basis that they had always been responsible taxpayers up to that point.
If you’re facing a back tax bill, the important thing to realize is that nothing is set in stone, and it is possible to get tax balances lowered under certain circumstances. It’s always worthwhile to contact a local tax resolution specialist to see what your options are; there may be solutions that you are unaware of that could help you reduce your tax bill.
October 15th, 2009
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Lothamer is a professional firm of Certified Public Accountants, and was founded by Jesse I. Lothamer, J.D., C.P.A. in 1978. The firm specializes in Tax Representation and Tax Problem Resolution, and has helped thousands of clients settle their tax problems with the IRS and State of Michigan. We not only solve tax problems, but we also show clients innovative ways to get current. With offices across the State of Michigan, Lothamer is Michigan’s leading Tax Resolution Firm, and will continue to provide the general public with tax representation and tax problem resolution for a wide variety of tax problems.