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Unpaid Payroll Taxes?

September 8, 2016 by admin

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.

Filed Under: Uncategorized Tagged With: “Owe Taxes”, “Tax Relief Chicago”, back taxes, IRS Help, IRS Help Chicago, IRS Levy, irs options, IRS Options Help, IRS Tax Problem, Payroll Taxes, Tax Solution, TFRP, Trust Fund Recovery Penalty

Peter Bella – TheCookingCop.com

August 4, 2016 by admin

Steven A. Leahy

Peter Bella – TheCookingCop.com

By Steven A Leahy

Regular listeners to The IRS Radio Hour know my family members were union iron workers for three generations. I was a member of the Riggers, Machinery Movers & Erectors Local 136 for many years before I started practicing law. As a Rigger, I met and became friends with many Chicago Police Officers (still am). I always enjoyed their refreshing honesty about life in Chicago – It isn’t always what we think it is.

This week on the IRS Radio Hour we welcome Peter Bella to the show. I have known Mr. Bella for some time, he hired me to help him solve his IRS problem – it turns out he knew my brother Jim before he hired me. They were friends through mutual work with conservative causes. Peter Bella is a retired Chicago Police officer, photographer, blogger, chef and Chicago life observer.

PeterBella

I follow Mr. Bella’s blog posts on chicagonow.com. “Chicagonow.com is an online community created for Chicagoans by Chicagoans. Every day, ChicagoNow bloggers post more than 100 entries to the site about local topics. And every day, thousands of ChicagoNow users comment on those entries. The result is a lively, authentic conversation about all things Chicago.”

His recent articles include “Is it time to start Tentbnb in Chicago”; What cops know can solve some of America’s problems”; “Don’t bite the hand that fed you”; “Ignorant and uninformed rhetoric over police killings is disgraceful”; Just to name a few. Each article is a blunt, “as I see it” response to the biggest issues facing Chicago.

Mr. Bella also blogs about another subject I love: Food – as the Cooking Cop. Why Cooking Cop? He writes, “Cooking Cop sounded better than the Cooking Dude, Cooking Goof, Cooking Mook, or Cooking Mamaluke. I cook. I eat. I drink. I write about it. I shoot pictures too. That is my game.”

On TheCookingCop.com, Mr. Bella shares his “passion for eating, drinking, and cooking.” He shares “recipes, techniques and methods, handy kitchen tips and advice.” He also writes about his favorite Chicago restaurants, usually out of the way joints with little fanfare, but great food. I have to say, the pictures of the food he prepares are mouth-watering.

So, tune in to the IRS Radio Hour to meet Mr. Peter Bella, the Cooking Cop, on Sunday August 7, 2016 at 5:00 on AM 560 The Answer.

And remember, if you have an IRS problem – like the Cooking Cop did – Call Opem Tax Resolutions and the Law Office of Steven A. Leahy, PC at 312-664-6649.

Filed Under: Uncategorized Tagged With: Chicago Tax Help, Cooking Cop, IRS Levy, IRS Options Help, IRS problem, Peter Bella, tax attorney chicago, Tax Help Chicago, Tax Problem Help

IRS Lien vs Levy

February 26, 2015 by admin

Steven A. Leahy
IRS Lien vs Levy

By Steven A Leahy

On the IRS Radio Hour I often talk about the way the IRS works. The most important aspect of how the IRS works goes directly to how the IRS can collect assessed taxes from taxpayers, outside of voluntary agreements, like installment agreements, offers-in-compromise, currently not collectible, and bankruptcy. When a taxpayer ignores, or otherwise fails to negotiate a work out with the IRS, the IRS may take some drastic actions. The most dramatic action is a levy. This article will clear up IRS Lien vs Levy.

Many taxpayers confuse a levy and a lien. A federal tax lien is the federal government’s legal claim against a taxpayer’s property when a taxpayer neglects or fails to pay a tax debt. The IRS files a public document, the Notice of Federal Tax Lien, with the county recorder to alert the taxpayer’s creditors that the federal government has a legal right to the taxpayer’s property. A lien does not result in seizure of any of the taxpayer’s property.

A federal levy, on the other hand, is a legal seizure of a taxpayer’s property to satisfy a tax debt. If a taxpayer fails to pay the assessed tax, or make satisfactory arrangements to settle the debt, the IRS may seize any type of asset, real or personal.

There is a three-pronged procedure in place the IRS must follow in order to justify a levy. First, after the IRS assesses a tax, they must send a Notice and Demand For Payment. Second, the taxpayer must neglect or refuse to pay the tax. Finally, the IRS must send the taxpayer a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. The Taxpayer has 30 days from the date of that notice to request a Collection Due Process hearing with the Office of Appeals.

Once the IRS fulfills their obligations under the three-pronged procedure, they can seize any property the taxpayer is holding (including, cars, boats, houses), or any property someone else is holding (wages, retirement accounts, bank accounts, rental income, accounts receivables, cash value of life insurance or commissions).

In my practice I have seen levies against rental income – the revenue officer actually visited the taxpayer’s tenants each month to collect the rent before the taxpayer could collect; levies against insurance payments due a doctor – the IRS ordered all insurance carriers to send all payments to the IRS; levies on commissions – the IRS contacted the contract employer and levied, took, all commissions the taxpayer was due. A Taxpayer should never under-estimate the creativity of an IRS Revenue Officer looking to levy assets to collect on an IRS obligation.

The two most common levies involve bank accounts and wages; low hanging fruit. Remember, a bank must report any interest paid of at least $10.00 with form 1099-int. So, the IRS knows where most every taxpayer banks. Once a bank receives a Notice of Levy, the taxpayer’s account is frozen – the bank must hold any money in the account, up to the amount you owe, for twenty-one days. After twenty-one days the bank must send the money, plus interest, to the IRS. Any money deposited in the account after the date of levy, is NOT included in the levy. However, the IRS can issue more than one levy on the same account. I have seen accounts levied each week for months on end.

Finally, the levy most taxpayer’s fear is the wage levy. A wage levy is often referred to as a wage garnishment. The IRS issues a wage levy to the taxpayer’s employer, and the employer is obligated to send all net income, less exemptions, to the IRS CONTINUOUSLY. The more a taxpayer makes, the more the IRS will take. Generally, the exemptions are calculated by determining the standard deduction and the amount deductible for exemptions on an income tax return for the year the levy is served, divided by Fifty-two. The exempt income is designed to provide minimal sustenance – not enough to pay your expense. To do that, the taxpayer must work out an agreement with the IRS.

If you are facing IRS Collection Efforts, you should work with a local law firm that understands the IRS Collection procedures and will work to get you the best deal possible. 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.

Filed Under: IRS Radio Hour Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

IRS Audits – What are they looking for?

February 26, 2015 by admin

Steven A. Leahy
IRS Audits – What are they looking for?

By Steven A Leahy

The IRS calls an audit an “Examination of Returns.” The IRS accepts most federal tax returns just as they are filed. Some returns, however, are selected for review. The IRS selects returns for audit by computerized screening, random sample, or by an income document matching program. An examination can take place in several ways. Some audits are handled exclusively by US Mail, in the taxpayer’s home or place of business, at an IRS office or at your representative’s office. The time, place, and manner of the audit are negotiable.

Here are nine “red flags” the IRS uses to select a return to audit:

1. Make a mistake on your tax return – Gross errors will bring immediate scrutiny to your return and cause the IRS to audit your return. Simple math errors, not signing a paper return, leaving off or incorrectly listing your social security number are common ways to invite IRS scrutiny.

2. Round off the entries on your tax form – Generally, life doesn’t happen in round numbers. If you use round numbers, it tells the IRS that the numbers may be fictitious, or at least not accurate.

3. File late, or not at all – When you file late, the return is not processed with the hoard of annual filers. Instead, your return will be processed by a person, looking at the details of your return.

4. Be a Tax Protester – Tax protesters don’t believe the IRS has legitimate authority to collect taxes and they thumb their nose at the IRS by filing returns that indicate zero tax owed (if a tax protester files a return at all). Tax protestors can count on the IRS assigning a revenue agent to review it.

5. Have unreported Foreign accounts – Foreign banks have been reporting American account holders to the IRS for some time now. So, even if you don’t report the foreign account, you can be assured that the foreign financial institution will.

6. Don’t report some income – Companies are to issue a 1099 for any payments over $600.00 or W-2s to employees. So, if you don’t report some income, the company that paid you will likely report the payment in a 1099 or W-2 and the IRS will have the paperwork to match against your return.

7. Claim large charitable contributions – This is an easy target for the IRS. The IRS can simply audit you by mail and ask for substantiation for all deductions.

8. Take a repeated loss on a home based business – If a business loses money for 3 out of 5 years, the IRS considers that activity to be a hobby, not a business. If it is a hobby, you can only deduct losses equal to or less than income. You can’t use the losses in a hobby to offset taxes from other income.

9. Use an unscrupulous tax preparer – When the IRS notices a specific tax preparer is preparing returns that generate large refunds the IRS is likely to audit ALL the taxpayers who used that tax preparer. So, be careful whom you hire.

Generally, the IRS has three years from the due date to audit a return. That explains why the IRS will usually conduct an audit for three consecutive years, rather than just one. There are exceptions to the three year rule. For example, if you underreport your income by more than twenty-five percent, the IRS has six years to audit. And, if a taxpayer files a fraudulent or false return, there isn’t a time limit on an audit.

So, if you are facing an IRS audit, or have already been audited, you should work with a local law firm that will work to get you through the audit process and collections in the best way possible. 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.

Filed Under: IRS Radio Hour Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

IRS Currently Not Collectible

August 22, 2014 by admin

Steven A. Leahy
IRS Currently Not Collectible

By Steven A. Leahy

There are six things you can do if you owe the IRS money. First, you can simply write the IRS a check for the full amount. For many, that is simply not a realistic option. Often, if the tax obligation is not too significant, borrowing money from another source (friends, family, bank loan, credit cards, etc.) may be a less costly alternative than an installment agreement with the IRS. Second, you can enter into an Installment Agreement; pay the IRS over time. Third, you can obtain an Offer-in-Compromise: A lump sum settlement for less than the tax owed. Fourth, you can be declared Currently Not Collectible; pay the IRS nothing (for a period of time). Fifth, you can file for protection under the bankruptcy code; Chapter 7, Chapter 13 or Chapter 11. And the last option – you can do nothing, and let the IRS do what they will to you, your family and your assets.

This article addresses the fourth option – IRS Currently Not Collectible (CNC). The IRS lists a number of reasons to report an account CNC. The reasons include, inability to locate the taxpayer, expiration of the statutory recovery period (statute of limitations), death of an individual (where the IRS can’t collect from the estate), defunct companies without assets, or the taxpayer is out of the country or in a combat zone. The most common reason for CNC status is the existence of a taxpayer hardship.

The IRS may place a taxpayer in CNC status based on a hardship – when the IRS determines that the taxpayer can’t pay their tax obligation AND pay reasonable living expenses. The first requirement for a hardship CNC is compliance. In most cases, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees. The taxpayer must remain in compliance during consideration and, should a hardship CNC be found, thereafter.

In order to demonstrate a hardship, a financial analysis, with detailed financial information, must be completed to determine the taxpayer’s assets and equity, income and expenses. The investigation into the taxpayer’s financial condition begins by completing Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection Information Statement for Businesses, and providing all the necessary documents to substantiate the numbers.

The level of scrutiny depends on the tax obligation – the greater the tax bill, the greater the scrutiny. For example, if the unpaid tax balance is large, the IRS will review the taxpayer’s credit report, motor vehicle records and real estate records to determine if there are any additional sources for collection, in addition to the 433 and supporting documents. Generally, an IRS manager must review the IRS Currently Not Collectible recommendations paperwork and approve granting the CNC status.

Collection actions stop once a taxpayer’s account is placed in IRS Currently Not Collectible, including bank levies, wage garnishments and collection letters. The problem with CNC is that interest and penalties continue to accrue even though IRS collection activity has been suspended. In addition, if the balance is greater than $10,000.00, the IRS may still issue a Notice of Federal Tax Lien against the taxpayer (although the taxpayer can still appeal that action).

The good part about CNC is that the Collection Statute Expiration Date (CSED) is not tolled while the taxpayer’s account in a hardship CNC status. It is possible for a taxpayer to continue in hardship CNC status until the CSED passes. Once the CSED passes, the IRS cannot collect on that IRS obligation. Hardship CNC cases, however, can be reactivated if it appears there is a change in the taxpayer’s ability to pay indicating collectibility. And, the IRS may ask the taxpayer to reestablish CNC hardship status periodically.

So, if you owe the IRS and are unable to pay the full tax obligation immediately, you may be eligible for your account to be placed in a Hardship CNC status. Before you do anything, you should give me a call. We can discuss your 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: Uncategorized Tagged With: “Tax Relief”, back taxes, Chicago Tax Help, IRS Help, IRS Help Chicago, IRS Levy, IRS Lien, irs non-collectible status, irs options, Offer in Compromise IRS, Tax Debts, Tax Solution

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