By Attorney Steven A. Leahy

Most business professionals facing IRS problems have been battling the IRS for years.  There are many reasons for this – taxpayer procrastination, and ignorance of IRS collection practices are chief among them. They fear their IRS problem will NEVER go away.   The good news is – if taxpayers focus on the future, rather than their existing tax problems, there may be a predictable end to their IRS problem.  Many taxpayers have heard of some sort of “Statute of Limitations.”  But are unsure how that may help them,

Let me explain.  The IRS defines a statute of limitations as “a time period established by law to review, analyze and resolve taxpayer and/or IRS tax related issues.”    There are really three IRS “Statute of Limitations.” Assessment Statute Expiration Date (ASED), Refund Statute Expiration Date (RSED), and Collection Statute Expiration Date (CSED). Each referred to by their acronyms (the IRS LOVES acronyms).  When the ASED expires, the IRS can no longer assess an additional tax.  When the RSED expires, taxpayers can no longer claim a refund.  And, when the CSED expires, the IRS can no longer taken collection actions against a taxpayer. 

This article focuses on the “Collection Statute Expiration Date” (CSED).  Before the IRS can collect a tax, the tax must first be assessed.  Each assessed period has a CSED.  For example, if I filed my 2017 return on time, the date of assessment would be the due date April 17, 2018 (notice the date is the 17^th and not the traditional date of April 15^th).  Then, if I were to file my 2018 return on time, the assessment would be the due date April 15, 2019.  Now, assume, I amended my 2017 tax return on September 29, 2019, and incurred an additional tax obligation.  That additional tax obligation would be “assessed” on the date I filed the amended return, September 29, 2019. 

Each “assessment,” each tax return, and the additional tax from the amended return, would have a different CSED. Generally, the CSED is 10 years from the date of assessment.  So, without more, the CSED would be April 17, 2028, for the 2017 return, April 15, 2029, for the 2018, and September 29, 2029 for the assessment for the amended 2017 tax return.

The key phrase here is “without more.”  There is often, something more.  What taxpayers do not understand is there are actions that suspend or eliminate the CSED.  First, the IRS may file a lawsuit to collect the assessed tax.  The IRS must file the case BEFORE the CSED.  If the IRS obtains judgment, the CSED is eliminated, and the IRS can collect until the tax liability or judgment is satisfied or becomes unenforceable.  The IRS doesn’t routinely seek a judgment against taxpayers.  But it does happen.

Next, whenever the IRS ability to collect is suspended, that time is added to the 10 years statute.  For example, an Offer-in-Compromise, Bankruptcy, entering a combat zone, moving out of the country and a Collection Due Process Appeal stay the tolling of the CSED, adding time for the IRS to collect.  The good news is these events run concurrently.  Meaning, if more then one event is happening at a time, they overlap, rather than add time independently.

A few events even add time beyond the activity itself.  For example, if a taxpayer files for protection under the bankruptcy laws, the CSED is suspended while the IRS is prohibited from collecting, PLUS six months thereafter.  This can make calculating the CSED difficult.

By Attorney Steven A. Leahy

The IRS Tax Season officially begins Monday January 27, 2020.  That’s the day the IRS will begin accepting individual 2019 tax returns.  Now, I’ve been helping business professionals fight the IRS a LONG time and I’ve learned that this is the season that those with tax problems start having sleep problems again.  During the rest of the year, they have learned to put their tax problems aside, stop thinking about it. NOW, tax talk is EVERY WHERE and they can’t help but be reminded of that lingering tax problem.

Typically, here’s how a tax problem starts.  The business professional prepares their tax return (or has a tax professional prepare it) and calculates they owe a whole lot of money – money they just can’t pay right away.  It’s troubling, but quickly forgotten in the day to day.  The next tax season arrives – and they still owe from last year – so they don’t file the next tax return, then vow to tackle the problem over the summer.  Often, they even file an extension of time to file in successive years. Time goes by fast – life happens.  So, the spiral begins.

Their tax problem affects their sleeping habits.  It is hard to get a good night sleep when you are frustrated, afraid, and worried about your family’s future.  Not to mention the guilt often associated with failure to file or comply with tax laws.  The lack of sleep makes it difficult to maintain good health or build your body.

The lack of sleep begins to take its toll on motivation to move a business forward.  There is an old saying “If you aren’t growing, you’re dying.” It’s hard to grow a business when you’re playing catch up. The slow in business creates additional debt issues, which further accelerates the downward spiral.  Financial problems are the leading cause of divorce.  Interference in a marriage directly impacts family life.  And forget about romance.  The larger the IRS problem gets, the more likely the IRS will take public action – action that will alert your clients or customers about your IRS trouble.  Now, your reputation is at stake.

What to do?  First, get your head out of your ass!  As an entrepreneur, you have already shown you have more courage and guts than 99 percent of all the other guys. You need to retake control of your life and rebuild your succus.  You can only do that if you begin to fight back TODAY!  Don’t let the IRS steal your confidence.  You are not a fraud!  What you don’t know is there are answers to your IRS problems.  All is not lost.

You must act! Only in that way, can you begin solving your IRS problem so you can stop worrying about it. That will help you rest at night.  Less worry and better sleep will lead to better health and a stronger body.  Better health and a strong body will lead to more confidence.  You will be in a much better frame of mind to grow your business, increase your income, improve your marriage, strengthen your family and protect your reputation.  And, who knows, you may even enhance your love life.  

If you are facing IRS problems, I can show you the way out. I wrote the book “Deal With Your IRS Problem Today!” You can begin your journey by getting a FREE copy.  Simply go to FreeIRSBook.com right now!  Get a FREE copy of my book.  Or call me at   Opem Tax Advocates & The Law Office of Steven A. Leahy, PC (312) 664-6649.  If you call NOW, I’ll give you a FREE Consultation.

By Attorney Steven A Leahy

1. ​There are FREE options
2. You sign your tax return under penalty of perjury.​
   
3. An extension of time to file is NOT an extension of time to pay. ​

First, there are FREE options. For 2020, taxpayers whose prior-year adjusted gross income was $69,000 or less, and that’s most people, can use IRS Free File. Generally, taxpayers must complete their federal tax return before they can begin their state taxes.

Over $69,000 – can still file free (fee for state tax preparation)

• Must know how to do your taxes yourself
• Does math; offers only basic guidance
• You must have your 2018 tax return

Free file companies include:

TurboTax

H&R Block

TaxSlayer

Several others

Each have different rules –

Use the Lookup Tool to help you choose a Free File offer to file your taxes for free online. Just answer a few simple questions about income, age, and state residence to find out which offer(s) is available for you.

tinyurl.com/freefile2020

There Are FREE options

Second, you should be aware that you are liable for all the information on your tax return under penalty of perjury  – even though you didn’t prepare the return yourself.

So I have had many clients who got into trouble because of unscrupulous tax preparers.  The scheme goes like this:  A friend or co-worker tells you that their tax preparer got them a HJGE refund and recommends you use that tax preparer.  They generally charge a little more – but that is more than offset by the huge refund you get.  So, you tell your friends, family and coworkers about this GREAT tax preparer.  And then they sign up with that preparer.

They get you that refund by falsely claiming that you run a business.  And then make lots of business deductions.  Deductions you really aren’t entitled to.

Most people don’t really review their tax return, they simply sign it and count the money!

Sometime later – sometimes years later – the IRS notices that all this tax preparers returns include big refunds.  This is a red flag.  So, the IRS audits all the tax returns the tax preparer has prepared over at least the last 3 years.

When you get audited, along with all your friends, family and co-workers – the IRS will demand the refunds back and may come after you for fraud and filing a false return.   

Just because a tax preparer files your tax return, doesn’t mean you aren’t responsible for the information that is in it. 

So, ALWAYS review your return.  If you don’t understand something.  ASK about it.

You sign your tax return under penalty of perjury.

Finally, An extension of time to file is NOT an extension of time to pay.

Often, when taxpayers don’t have the money to pay their taxes on the April 15^th deadline, they simply file an extension (IRS Form 4868 “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.”)  What they don’t understand is, the extension does NOT extend the time to pay the taxes due. 

Often, I hear the objection, “I don’t know what I owe until I complete my return!”  The answer is – estimate the tax due.  If you overpay, you will get a refund.  If you underpay, you will have to pay PLUS failure to pay penalties and interest.  The penalties are based on how much you owe.  So if you make an estimated payment, you will reduce the penalty

If you can’t pay, you should still file your tax return on time, or with a timely filed extension.

An extension of time to file is NOT an extension of time to pay.