Chicago IRS Tax Attorney

Chicago Tax Team - Helping People & Companies Resolve their IRS Problems

Free Consultation

Cash is King! IRS Form 8300

by

Steven A. Leahy

Cash is King – IRS Form 8300

By Steven A Leahy

Recently, I received a telephone call from a business owner in his accountant’s office. They wanted some information about large cash payments the business received 18 months prior. I immediately shut the conversation down and insisted they come to my office if they wanted to discuss this matter with me. I did that because, with the accountant privy to our conversation, the conversation conflicted with the traditional doctrine of attorney-client privilege. What they were discussing possibly involved illegal activity, and not something you want to talk about in mixed company.

Federal law requires that all cash payments more than $10,000.00 must be reported to the IRS with Form 8300. In general, the law requires that anyone engaged in a trade or business – “in the course of such trade or business, receives more than $10,000.00 in cash in 1 transaction (or 2 or more related transactions)” shall file the proper cash transaction forms. If Form 8300 is required, it must be filed within 15 days after the date the cash transaction occurred. Form 8300 must include “the name, address, and TIN of the person from whom the cash was received.”

Not only must you file IRS Form 8300, you must furnish a “written statement” to each person “from whom the cash was received.” That written statement must be provided “on or before January 31 of the year following the calendar year for which [Form 8300] was required to be made.”

A transaction could be the sale of a machinery, construction work for a home owner, or repair work for a vehicle. The cash payment can be a lump sum of $10,000.00 or more; Installment payments that cause total cash received within one year of the initial payment to total more than $10,000.00, or; Previously unreported payments that cause the total cash received within 12-month period to total more than $10,000.00.

For example, let’s say a customer agrees to buy a piece of equipment for $14,000.00. He pays you $9000.00 in a cashier’s check and the balance 10 days later with $5,000.00 cash. This is a cash transaction and must be reported. You have received more than $10,000.00 cash. Because “Cash” may include cashier’s checks, bank drafts, travelers checks and money orders with a face value of $10,000.00 or less. Confused yet?

Wait, there’s more. The law also requires that you report suspicious transactions. For example, if you suspect the customer is attempting to prevent a Form 8300 from being filed – you must file Form 8300. What you must NOT do – EVER – is help the customer structure the transaction to avoid the Form 8300 reporting requirement.

Failure to file Form 8300, when required, may result in civil penalties. The penalties can amount to millions of dollars. Worse, a person may be subject to criminal penalties. The criminal penalties are generally for willful behavior, and include fines up to $100,000.00 and/or imprisonment up to 5 years, plus the cost of prosecution. The criminal penalties apply to those whom attempt to structure the transaction in such a way that would make it seem unnecessary to file Form 8300.

Receiving cash payments in a transaction can cause BIG problems. Who must file Form 8300, when that form must be filed, what constitutes cash, the transactions that trigger the requirement and the penalties that follow non-compliance are often difficult to understand. Don’t play games – get advice!

So, if you receive large cash payments, you should work with a local law firm that will work with you to stay in compliance with these complicated laws. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Are You In A Vicious IRS Circle?

by

Steven A. Leahy

Are You In A Vicious IRS Circle?

By Steven A Leahy

Here is the problem I see all the time. Someone has an IRS problem. They work to solve the IRS problem themselves. While they work on fixing their problem, instead of going away, the problem grows. It grows because they fail to address their current IRS obligations.

I helped a family who owed the IRS more than $60,000.00. The father ran his own business. He was very good at his profession – but the paperwork got to be a problem. Several years ago, the April 15th deadline to file his tax return was approaching and he needed more time to complete his tax returns. So, he filed IRS Form 4868 – Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. As the name of the form indicates, the extension is automatic. The filing date is then extended to about October 15 of the same year (depending on the Washington DC holiday schedule).

Problem solved, right? Wrong. His first mistake was he failed to estimate his tax liability and send a check with Form 4868. His next mistake was he didn’t file his tax return by the October due date. Once he filed the extension, he forgot about his tax returns. The beginning of the next year, he realized his mistake, he sent a portion of the tax he thought he would owe and promised himself to complete last year’s tax return and that year’s tax return by the April 15th deadline.

Now, completing the previous tax return became a big task. Many of the records were now hard to locate. So, as the April 15th deadline approached – you guessed it – he filed IRS Form 4868 for an automatic extension. This went on for several years. He would send some money to the IRS every so often to pay his back taxes he knew he would owe had he filed his tax return, but those payments left him no extra money to pay his current IRS obligation.

This family was in the Vicious IRS Circle, or a cascading tax problem. Instead of going away, the problem was growing because of the penalties and interest were growing, and becoming a real danger to their financial future. The problem was growing because they didn’t know how the IRS worked, so they couldn’t come up with a strategy to solve it. That’s when they heard me on the radio and decided to visit my office for a free consultation.

I explained to them that the first step to solving any IRS problem is getting into compliance. In this case, compliance meant filing past tax returns and paying current quarterly estimated taxes as they came due. Those with IRS problems need to focus on the future, rather than worrying about the past. If a taxpayer allows their current IRS obligations to be put aside in favor of paying the older taxes, the vicious circle begins and it becomes nearly impossible for taxpayers to solve the problem by themselves.

If you feel trapped by your IRS problem and want to stop the Vicious IRS Circle, you should contact me right away. My name is Attorney Steven A. Leahy and I help people solve their IRS problems Call me at 312-664-6649. Call now!

Achieve Full Financial Recovery

by

Steven A. Leahy

Achieve Full Financial Recovery

By Steven A Leahy

I have been helping people resolve their financial problems for more than fifteen years. I started my practice helping consumers file Chapter 7 bankruptcies. I quickly added Chapter 13 bankruptcy help. As part of my marketing, in the early 2000’s, when loan modifications were almost impossible, I targeted home owners facing foreclosure. Chapter 13 was really the only way to save someone’s home once they fell behind in mortgage payments, short of paying the full amount due, plus legal fees (reinstatement).

I should mention, I did help one homeowner with a loan modification before 2008 – only one. That case involved a cancer patient, who missed six months of mortgage payments while she underwent treatment. Once her treatment was complete and she was recovering, the mortgage company agreed to take the full amount she was behind and add it to the principle amount, then add time to the end of the loan. Her payment did not change, but she would have to pay on the loan longer. It was a sad, and happy, story. The story, I believe, was the only reason the mortgage company agreed to modify her loan.

In 2008, with the mortgage meltdown, the number and nature of the clients facing foreclosures changed. Many high income people lost their jobs or business owners suffered from the loss of their business. While Chapter 13 remained an option – loan modifications became a better option – because a loan modification often reduced the home owner’s monthly payments, in addition to resolving the foreclosure problem. I targeted my marketing to this segment of the market.

What I found out rather quickly, is that these clients were often facing IRS problems too. Around this time – 2009, I got involved with a national tax resolution group of attorneys who supported and educated me on how to solve IRS problems. Solving IRS problems fit perfectly with my skill set. In addition, it allowed me to help my clients achieve full financial recovery – help them save their home, resolve their IRS problems and end other credit problems. I have helped hundreds (thousands?) of Chicago area families and business resolve their financial problems and move on with their lives

This is what I have learned: People, mostly men – but not always, allow embarrassment and pride to get in the way of seeking help. Most of us believe everyone else is financially sound – we are the only one facing financial trouble. Not true.

One of my favorite stories to emphasis the falsity of this view involves a client I had in Chapter 13. Under Chapter 13, the debtor (homeowner) pays a monthly payment to a Trustee under a plan approved by the courts. At the time, the only form of payments the Trustee accepted were cashier’s checks, money orders or payroll deduction (recently, some form of online payments have been approved).

Every month my client went to the local branch of his bank and purchased a cashier’s check made payable to his Trustee Tom Vaughn (one of two Chapter 13 Trustees for Cook County). He often purchased the cashier’s check from the same Teller. After some months, the Teller said, “Do you mind if I ask you a question?” He said “sure.” The Teller asked, “I have customers come in here every day asking for cashier’s checks for this guy, Tom Vaughn. What the heck does Tom Vaughn do?”

That’s how many people in his neighborhood were in an active Chapter 13 bankruptcy. It leaves out those with an active Chapter 13 with another Trustee, those who sought protection under Chapter 7 bankruptcy, those facing IRS trouble, or those simply having financial problems. So, you aren’t alone.

If you need help solving your financial troubles, you should contact me right away. My name is Attorney Steven A. Leahy and I help people achieve full financial recovery. Call me at 312-664-6649. Call now!

Unpaid Payroll Taxes?

by

Steven A. Leahy

Unpaid Payroll Taxes?

By Steven A Leahy

This week I had the pleasure of meeting a very nice couple. They ran a business that was started by his parents more than 30 years ago. The business has provided a comfortable living for this couple and their family – until last year. Last year they had a big contract that was completed, but their bill went unpaid. This is how financial problems of a customer can spill over to just about any business.

Well, to complete the project required lots of manpower. That manpower required a big payroll. When a business has a payroll, that business is required to deduct federal and state taxes, Medicare and social security obligations, union dues, insurance and perhaps other expenses. The business is then mandated to turn that money, and the business’ own contributions, over to the various government and other entities on behalf of their employees. When that money is not turned over, the IRS will take action to collect the tax portion of those funds.

What happens when the business goes under and is unable to pay the outstanding obligations? Well, if the business was a corporation, or other limited liability entity, the owner may have some protection from the business taxes. However, the portion of the tax obligations that was deducted from the employee’s paycheck was the employees’ property, and the business held that money in trust for the employee.

So, the IRS will look to the person or persons responsible for collecting, accounting and paying over the taxes to the IRS. The IRS defines a “responsible person” as:

One who had the duty to perform or the power to direct the act of collecting, accounting for, or paying over trust fund taxes.

The owner of a business is almost always a “responsible person.” These “trust” taxes include three components: Federal Income tax withheld from the employee; social security and Medicare taxes withheld from the employee; and, the employer’s contribution to social security and Medicare. The “trust” portion is that portion deducted from the employees’ pay check – Federal Income Tax and the employees’ contribution to social security and Medicare. The employer’s contribution to social security and Medicare is not part of the trust taxes, because this tax was not paid by the employee and held in trust by the employer.

When the IRS looks to a responsible person individually to recover this tax, it is referred to as the Trust Fund Recovery Penalty (TFRP). If there is more than one responsible party, the obligation is joint and several – that means the IRS can collect all or part from any or all of the parties. However, the IRS can only recover once. So if the TFRP obligation is satisfied by one responsible party, the obligation of the other parties is also satisfied. Complicated, right?

It gets more complicated, because TFRP are never dischargable in bankruptcy and are difficult to walk away from. But, sometimes, it can be done. If you are having IRS problems you should seek help early. Better yet, you should call me, Steven A. Leahy of Opem Tax Resolutions and The Law Office of Steven A. Leahy, PC. I will sit down with you and explain how this all works and what you can do to protect yourself. Call me today at 312-664-6649. Tell Bonnie I asked you to call to set up a FREE consultation.

My Ex Claimed the Child Deduction – Now What?

by

Steven A. Leahy

My Ex Claimed the Child Deduction – Now What?

By Steven A Leahy

It’s August, and the IRS is starting to go after taxpayers who listed a child as a dependent, when another party listed that same child as a dependent. Who gets the deduction? This is the most common question I get around this time of year.

Here is the typical scenario. Parent A and Parent B live apart. The child lives with Parent A, but Parent B has joint custody. Parent A claims a dependency exemption on their tax return. Later, Parent A discovers Parent B has already claimed a dependency exemption on their tax return. Because a child’s social security number is necessary to claim a dependency exemption, the IRS’ computer system flags both returns and sends a notice of deficiency to each parent. The question rises, “Which Parent is entitled to claim a dependency exemption for tax purposes?”

First, let’s talk about what is at stake. The IRS provides as a deduction an exemption from taxable income ($4,000 for 2015) for each “dependent.” A dependent is defined as either a “qualifying child” or a “qualifying relative” of the taxpayer. To be considered a “qualifying child” of the taxpayer, the child must (among other things) have the same principal place of abode as the taxpayer for more than one-half of the taxable year. In addition, a qualifying child may enable a taxpayer to claim other benefits. Benefits like Head of Household, the child tax credit, the child and dependent care credit, and an earned income tax credit. In total, these benefits amount to thousands of dollars.

Generally, when parents are legally separated or divorced, the dependency exemption is awarded to the custodial parent. The custodial parent is the parent with whom the child lived for the greater number of nights during the year. But there are exceptions. If the custodial parent “signs a written declaration” releasing his or her claim to the exemption and the noncustodial parent “attaches such written declaration to the noncustodial parent’s return for the taxable year” the non-custodial parent can claim the exemption. The declaration by the custodial parent must be made on Form 8332 or in a signed document substantially similar to Form 8332.

Often, the non-custodial parent has a divorce decree, separation agreement, or some other agreement that spells out the rights of the non-custodial parent to claim the deduction. If the decree or agreement went into effect before 2009, the non-custodial parent can attach certain pages to the tax return instead of Form 8332. However, if the decree or agreement went into effect after 2008, the decree or agreement can’t be attached and the non-custodial parent must use Form 8332.

You can see how this can become a problem – parents at odds with who gets the tax benefits. The IRS has sided with the custodial parent; even if the divorce decree or agreement says the custodial parent has agreed to waive the right to claim an exemption for the child. If the custodial parent released a claim to exemption and signed Form 8332 granting the right to the non-custodial parent, the custodial parent can complete Part III of Form 8332 and revoke that waiver, as long as they provide a copy of the form (or make a reasonable effort to provide actual notice) to the non-custodial parent and attach the revocation to their own tax return for each year.

Yes, I know it is complicated. Dealing with the IRS is ALWAYS complicated. If you need help with the IRS, you should work with a local law firm. Better, you should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Our Resources

Testimonials

Our Office

Our Office has represented Clients throughout Chicago & Northern Illinois. We represent many clients from Cook County; however, we have represented clients from:

DuPage County
Kane County
Kendall County
Grundy County

Lake County
McHenry County
Will County
LaSalle County

We have helped taxpayers in Wisconsin, California, Tennessee, and perhaps your state. No matter where you call home, we look forward to your telephone call for your FREE consultation.