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Three Tax Preparer Scams

February 4, 2015 by admin

Steven A. Leahy
Three Tax Preparer Scams

By Steven A Leahy

My last several posts addressed who should and shouldn’t prepare their own tax returns. Remember, for the majority of people, preparing your own return makes sense; it may save you money, allows you to maintain control and may increase your understanding of your financial situation. But preparing a return isn’t right for everyone.

In my office we have run into three common tax preparer scams that can raise red flags with the IRS. First, the most common: promises of large refunds. Second, the 1099 OID scam and finally, the ID theft scam.

The most popular tax preparation scam involves the tax preparer promising larger returns than other tax preparers. Many of these preparers charge a very high fee, or a percentage of the refund. Both of these fee structures should alert you that something is amiss. They achieve these high refunds by playing with your tax return numbers. They may include income that was never earned, claiming expenses you did not pay, or otherwise manipulating the tax return to qualify for earned income tax credits you are not qualified for.

The second scam involves filing false 1099 OID (Original Issue Discount) forms. The scam artist convinces the taxpayer that there is a secret fund held by the Treasury Account for an amount equal to the face amount of any debt they hold, including credit card and mortgage debt. To lend legitimacy to the scam, the scammer contends the government went bankrupt in 1933 and made all Americans chattel of the government’s creditors at birth, evidenced by their birth certificate. The scammer alleges that the government guarantees all your debts and the taxpayer need only apply through their tax return to access the hidden account.

By completing their tax returns and including 1099 OID for the full amount of all debt, including tax debt, sometimes amounting to hundreds of thousands of dollars. The real problem with this scam is – it works! The IRS sends the taxpayer a large refund check. The check tends to confirm the legitimacy of the scam. After much of the funds have been spent, the IRS comes looking to the taxpayer and the funds received from the fraudulent scheme.

Taxpayers will be on the hook for these first two scams, because they sign the return under penalty of perjury. These scams can lead to significant penalties and interest, and the possibility of criminal prosecution. So, before you sign a return, review your tax return, ask questions about entries you don’t understand – and NEVER sign a blank return. A reputable tax preparer will sign the tax return and provide you a copy.

Finally, let’s review identity theft and tax return preparation. There are two forms of identity theft to worry about: tax fraud through the use of identity theft and the tax return preparer using your personal information after preparing your tax return. Tax fraud through the use of identity theft tops the IRS’s list of top tax scams. This type of fraud occurs when someone uses a taxpayer’s personal information to fraudulently file a tax return and claim a refund.

The second type of identity theft is when your tax preparer uses your personal information to obtain credit in the taxpayer’s name, after the taxpayer willing provided the tax preparer with all the information they need to commit fraud. The IRS has more than 3,000 employees working on identity related cases.

The lesson here is to know your tax return preparer. If you are considering hiring a tax professional to complete your 2014 tax return, consider giving Opem Tax Resolutions and The Law Office of Steven A. Leahy, PC a call. We prepare old unfiled tax returns, as well as current returns. So, if you are a number of years behind in your filing, we can help get you in compliance with the IRS. Call (312) 664-6649 today and ask Bonnie to set up a time to talk me about your tax returns.

If you have a ongoing IRS problem – installment agreement, recent offer-in-compromise or currently not collectible status I recommend the IRS Protection Plan offered by Opem Tax Resolution and the Law Office of Steven A. Leahy, PC. This program anticipates the tax compliance requirements including, timely tax preparation, on-going IRS monitoring, resolution of IRS actions (cancellation of installment agreements or currently not collectible status and defaulting an offer in compromise). In addition, developing a relationship with a tax team will give you access to tax planning to avoid IRS problems in the future and minimize your tax burden.

Filed Under: Uncategorized Tagged With: back taxes, Chicago Tax Help, Help With IRS, IRS Help Chicago, irs options, tax attorney chicago, Tax Return, Tax Solution

Foreclosure Defense – Deficiency Protection II

January 15, 2015 by admin

Steven A. Leahy
Foreclosure Defense – Deficiency Protection II

By Steven A Leahy

Foreclosure is the process necessary for a mortgage lender (i.e. mortgagee) to take possession of a property because the borrower (i.e. mortgagor, homeowner) defaults on a contractual obligation to the mortgage lender, usually a default in payments. In Illinois, Mortgage foreclosures are governed by the Illinois Mortgage Foreclosure Law (IMFL) 735 ILCS 5/15-1101 et seq. (2013).

Illinois is a recourse state. The IMFL allows the public sale of property to pay a debt. If the public sale of the property does not generate enough money to pay off the borrower’s obligation to the mortgage company, the remaining balance is defined as a deficiency. Recourse loans allow the mortgage company to hold the homeowner (borrower) personally liable should the sale result in a deficiency.

If the homeowner is unable, or unwilling, to resolve the foreclosure case through reinstatement, redemption, litigation, loan modification, or Chapter 13 bankruptcy, the homeowner should concentrate on protecting themselves from a deficiency. There are at least six (6) ways to avoid a deficiency: Short Sales, Deed-in-lieu of foreclosure, consent foreclosure, shortened redemption, In rem judgment, & bankruptcy. This article will discuss consent foreclosures, shortened redemption and In rem judgments.

These three options are addressed in the IMFL: consent foreclosure, shortened redemption, and In Rem Judgment. Each protects the homeowner from a deficiency judgment. First, a consent foreclosure is an agreement between the parties to end the litigation by agreement. The homeowner agrees to a judgment and IMFL provides in return the mortgage company will “waive any and all rights to a personal judgment for deficiency against the mortgagor and against all other persons liable for the indebtedness or other obligations secured by the mortgage.”

Second, a shortened redemption period may be a remedy to protect the homeowner. The parties can agree that “the value of the mortgaged real estate as of the date of the judgment is less than 90% of the amount specified” and shorten the redemption period to 60 days rather than 3 months. If this order is entered, again, the mortgage company “waives any and all rights to a personal judgment for a deficiency against the mortgagor and against all other persons liable for the indebtedness or other obligations secured by the mortgage.”

Finally, an In Rem judgment is a judgment against the property, rather than the individual. “In rem” is a Latin term that means “against or about a thing.” So the judgment is directed toward the property, rather than toward a particular person (in personam – directed toward a particular person). If the judgment does not name a particular person, the mortgage company can’t collect the deficiency from the homeowner.

There are several reasons why one of these options may be used rather than a short sale or deed-in-lieu. First, if there are additional liens on the property, the mortgage company must go through with the foreclosure process in order to remove those liens from title. Because all parties are named in a foreclosure action, a judgment would be effective against all lien holders, thereby giving the buyer at auction (often the mortgage company) a clear title. In a short sale or deed-in-lieu, the lien holders can hold up the transfer and seek compensation for releasing the lien.

Another reason why one of these options may be desirable from the homeowner’s perspective is because the homeowner can avoid an investigation into their finances. If the homeowner has some assets that they prefer not to disclose, these judgments allow them to escape the deficiency to the mortgage company and maintain their privacy.

If you are facing foreclosure, you should take action. You need an attorney to help you sort through your options and choose the best remedy. Never hire a firm to help you with your foreclosure unless the firm is experienced in helping homeowners with all the possible remedies, loan modification, short-sales, deed-in-lieu, consent foreclosures, and bankruptcy. Before you do anything, you should give me a call. We can discuss all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Foreclosure Tagged With: foreclosure defense, Illinois Mortgage Foreclosure Law, mortgage company, mortgage default

Foreclosure Defense – Deficiency Protection I

January 15, 2015 by admin

Steven A. Leahy
Foreclosure Defense – Deficiency Protection I

By Steven A Leahy

Foreclosure is the process necessary for a mortgage lender (i.e. mortgagee) to take possession of a property because the borrower (i.e. mortgagor, homeowner) defaults on a contractual obligation to the mortgage lender, usually a default in payments. In Illinois, Mortgage foreclosures are governed by the Illinois Mortgage Foreclosure Law (IMFL) 735 ILCS 5/15-1101 et seq. (2013).

Illinois is a recourse state. The IMFL allows the public sale of property to pay a debt. If the public sale of the property does not generate enough money to pay off the borrower’s obligation to the mortgage company, the remaining balance is defined as a deficiency. Recourse loans allow the mortgage company to hold the homeowner (borrower) personally liable should the sale result in a deficiency.

If the homeowner is unable, or unwilling, to resolve the foreclosure case through reinstatement, redemption, litigation, loan modification, or Chapter 13 bankruptcy, the homeowner should concentrate on protecting themselves from the deficiency. There are at least six (6) ways to avoid a deficiency: Short Sales, Deed-in-lieu of foreclosure, consent foreclosure, shortened redemption, In rem judgment, & bankruptcy. Because short sales and a deed in lieu are similar transactions, this article will discuss the first two options.

A short sale and a deed-in-lieu require the cooperation of the mortgage company. In both instances, the mortgage company typically conducts an investigation into the finances of the homeowner. That investigation resembles the process of a loan modification. The homeowner is asked to provide, bank statements, pay advices, tax returns, household budget and a hardship letter, along with other financial disclosures. The cooperation of the mortgage company often depends on the outcome of that investigation.

A short sale involves the sale of real estate where the proceeds of the sale fall short of the balance of the debts secured by liens against the property, and the lien holders agree to take less than the balance to release their lien. For example, Homeowner has a balance due the mortgage company of $150,000.00. But the sales price of the property is $110,000.00. Normally, this sale would not close without the homeowner making up the difference. However, in a short sale, the mortgage company agrees to accept the $110,000.00 and releases the lien on the property so the buyer receives a clear title.

A deed-in-lieu of foreclosure is an agreement whereby the mortgage company accepts the deed to the real estate outright instead of seeking a foreclosure judgment and sale. Often, the mortgage company will insist that a short sale be pursued before considering a deed-in-lieu, but not always. Placing the property on the market allows the mortgage company to determine the market value. In addition, should an offer be made on the property, the mortgage company will not have to take possession of the property, but realize the proceeds of the sale much faster than a deed-in-lieu would allow.

Short sales and deeds-in-lieu do not necessarily release the homeowner for the deficiency (the difference between the balance due and the amount the mortgage company accepts, $40,000.00 in our example). So, if you are considering a short sale or deed-in-lieu, read the agreement carefully to make sure you understand the consequences. Also, there may be tax implications to accepting these options, So, keep that in mind when making a decision.

If you are facing foreclosure, you should take action. You need an attorney to help you sort through your options and choose the best remedy. Never hire a firm to help you with your foreclosure unless the firm is experienced in helping homeowners with all the possible remedies, loan modification, short-sales, deed-in-lieu, consent foreclosures, and bankruptcy. Before you do anything, you should give me a call. We can discuss all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Foreclosure Tagged With: foreclosure defense, Illinois Mortgage Foreclosure Law, mortgage company, mortgage default

Who Should Not Prepare Their Own 2014 Tax Returns

January 12, 2015 by admin

Steven A. Leahy
Who Should Not Prepare Their Own Tax Returns

By Steven A Leahy

My last post was directed to those who should prepare their own returns. Remember, for the majority of people, preparing your own return makes sense; it may save you money, allows you to maintain control and may increase your understanding of your financial situation. But preparing a return isn’t right for everyone.

For those who own property or investments, own a business, are recently married, divorced or had a child, or if you aren’t a “numbers” person, aren’t interested in keeping up with changes in tax law, don’t understand the tax jargon on irs.gov, and prefer not to spend your free time working for the IRS, it makes sense to hire a tax professional to help you with your annual tax return.

Preparing your own taxes costs less up-front. According to the IRS, the average taxpayer filing a 1040 form (68% of all filiers) will spend 22 hours filing their taxes. It breaks down like this: form completion (4 hours), record keeping (10 hours), tax planning (3 hours), form submission (1 hour), “other” (3 hours). The average cost to hire a tax professional to prepare 1040 tax return is around $250.

Generally, I recommend tax preparation to avoid a tax audit. Having a professional prepare your tax return is not a guarantee you will not be audited – but it does cut down the odds. The IRS looks for “red flags.” Tax professionals can reduce, or eliminate red flags. Also, having a professional prepare your tax returns insulates you from the IRS. We prepare tax returns, but I always have a independent third party prepare my personal tax return and the business tax returns.

Those who are in an ongoing installment agreement, currently not collectible or were recently granted an offer-in-compromise should do all they can to ensure that there tax returns are prepared and filed on time. If the filing the return is delayed for ANY reason, you may find the agreement cancelled. Yes, the IRS can even rescind an accepted offer-in-compromise after the fact.

When the IRS accepts an offer in compromise, part of the agreement requires the taxpayer to remain in compliance for at least the next five years. That means the taxpayer must file all tax returns and pay all taxes due on time for the next five years. If the IRS calls an offer in compromise in default, the IRS will begin collecting what was originally owed.

Many who fall behind on their taxes are procrastinators at heart. Therefore, those who have a history of IRS problems should not wait until April to begin thinking about preparing their tax returns. The consequences are just too great. Get in front of the problem.

I recommend the IRS Protection Plan offered by Opem Tax Resolution and the Law Office of Steven A. Leahy, PC. This program anticipates the tax compliance requirements including, timely tax preparation, on-going IRS monitoring, resolution of IRS actions (cancellation of installment agreements or currently not collectible status and defaulting an offer in compromise). In addition, developing a relationship with a tax team will give you access to tax planning to avoid IRS problems in the future and minimize your tax burden.

If you are considering hiring a tax professional to complete your 2014 tax return, consider giving Opem Tax Resolutions and The Law Office of Steven A. Leahy, PC a call. We prepare old unfiled tax returns, as well as current returns. So, if you are a number of years behind in your filing, we can help get you in compliance with the IRS. Call (312) 664-6649 today and ask Bonnie to set up a time to talk me about your tax returns.

Filed Under: Uncategorized Tagged With: 2014 Tax Return Preparation, back taxes, Chicago Tax Help, Help With IRS, IRS Problems, IRS Tax Debt, steven a. leahy, tax attorney chicago, tax resolution

Should I Prepare My Own 2014 Tax Return

January 5, 2015 by admin

Steven A. Leahy
Should I Prepare My Own 2014 Tax Return

By Steven A Leahy

Filing your own returns sound simple enough. There are plenty of software packages out there to help – some are even free. If you are a W-2 employee without deductions, who generally receives a refund from the IRS each year, preparing your own tax return probably makes sense. The three best reasons to prepare your own taxes are; 1. Saves money; 2. Control; 3. Understanding.

First, preparing your own tax returns will save you money. Traditional software and online tax programs make doing your own taxes much easier. The IRS “freefile” program is also available. The IRS freefile program partners with software companies to provide free tax preparation software and e-filing to those who earn less than $60,000.00. Those you make more than $60,000.00 can use Free File Fillable Forms. However, taxpayers should know how to prepare their own tax returns in order to use Free File Fillable Forms. Free File doesn’t include state tax returns. But 7 States don’t have a state income tax, and 21 states and Washington D.C. have their own Free File program. Nearly 43 Million people have used Free File. Not all forms and schedules are available through Free File, so it isn’t right for everyone.

Software packages like TurboTax and TaxAct are also available, at a price. These programs walk taxpayers through the process of tax preparation. They both present typical scenarios and answer common questions. But, taxpayers should be familiar with their filing status, whether they are eligible to claim tax breaks and are comfortable doing research to answer any tax questions that are raised during preparation. It also helps if you are organized and keep complete records.

Second, preparing your own tax returns give the taxpayer more control. Without a tax preparer, how your return is prepared is up to you. Many have trust issues with others handling such an important aspect of their life – will they file the return on time? Did they take advantage of all the available deductions? Will they share my information with others? Etc. . If these questions haunt you, it is probably better you prepare your own tax return.

The final reason you should file your own tax return is the understanding you will acquire. Preparing your own return will force you to become familiar with your own finances, and you will gain financial insight. You may even learn about ways to reduce your tax obligations, simply by reviewing the tax code each year.

Often, however, hiring a tax professional is the best option. For example, if you own property or investments, own a business, are recently married, divorced or had a child, or if you aren’t a “numbers” person, aren’t interested in keeping up with changes in tax law, don’t understand the tax jargon on irs.gov, and prefer not to spend your free time working for the IRS, it makes sense to hire a tax professional to help you with your annual tax return.

If you are considering hiring a tax professional to complete your 2014 tax return, consider giving Opem Tax Resolutions and The Law Office of Steven A. Leahy, PC a call. We prepare old unfiled tax returns, as well as current returns. So, if you are a number of years behind in your filing, we can help get you in compliance with the IRS. Call (312) 664-6649 today and ask Bonnie to set up a time to talk me about your tax returns.

Filed Under: Uncategorized Tagged With: “Tax Relief Chicago”, back taxes, Chicago Tax Help, Help With IRS, IRS Tax Debt, tax attorney chicago, Tax Help Chicago, tax return preparation, unfiled tax return help

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