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The IRS Has A Billion Dollars to Hand Out

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Steven A. Leahy

The IRS Has A Billion Dollars to Hand Out

You may have heard the news that the IRS is searching for over a million tax payers to hand out more than a billion dollars. Here is what is happening. The IRS has ten years to collect delinquent taxes from taxpayer. This is referred to as the Collection Statute Expiration Date (CSED). However, if the IRS owes taxpayers refunds for tax years with unfiled tax returns, the taxpayer only has three years from the due date to collect this refund. And, if the taxpayer is also entitled to an Earned Income Tax Credit, those funds too, must be claimed within three years of the tax return due date.

If taxpayers have unfiled tax returns and it appears to the IRS there will be a tax liability, the IRS takes it upon themselves to file a Substitute for Return (SFR). The SFR is not a service, it is a penalty! They prepare your taxes in order to assess a tax – the IRS can’t collect a tax that has yet to be assessed. Generally, the SFR overstates the true tax obligation of the taxpayer. However, the IRS begins collection efforts to collect the assessed tax. It may take the IRS some years to assess the tax for an unfiled return – and the CSED does not begin until the tax is assessed. So, the IRS has additional time, from the date of assessment – not from the date the tax return is due, to collect the assessed tax.

If it appears the taxpayer has a refund due, the IRS does not complete the SFR. Therefore, a tax is never assessed, so the IRS does not calculate what your refund would be. They leave it to the taxpayer to calculate that number.

This year, 2017, tax-day is April 18th. This is the second-year tax-day has landed on April 18th rather than April 15th. The reason that is revolves around a little-known Washington DC Holiday, Emancipation Day. Here is the rule:

Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that isn’t a Saturday, Sunday, or legal holiday. The term legal holiday means any legal holiday in the District of Columbia. The calendars provided in this publication make the adjustment for Saturdays, Sundays, and legal holidays. But you must make any adjustments for statewide legal holidays, as discussed later.

Emancipation Day is a Washington DC holiday every April 16th. The holiday celebrates the DC Compensated Emancipation Act of 1862 that ended slavery in Washington DC. When April 16 falls on a Saturday, the holiday shifts to Friday. That’s why 2016 tax-day was moved to the next Monday, April 18th. This year, 2017, the holiday falls on a Sunday, so the holiday shifts to the next Monday, April 17th. And, because April 15th is a Saturday, the next day that is not a Saturday, Sunday or holiday is Tuesday April 18th.

Next year, 2018, April 15th will be on Sunday and Emancipation Day will fall on Monday Apirl 16th. Next year, tax-day will fall to Tuesday April 17th.
I have several clients with unfiled tax returns, many dating back before 2013. Several of these clients are W-2 employees, and likely have a refund due. So, we are concentrating on getting their 2013 tax returns completed and filed BEFORE Tuesday April 18, 2017 to make sure they receive credit for the refund they have coming.

If you owe the IRS for taxes pre-dating 2013, and you fail to claim your return timely, the IRS WILL NOT use the refund to offset those taxes. In this situation, Taxpayers are hit with a double whammy.

If you have unfiled tax returns dating back to 2013 – call my office today, right now! We can still complete those returns and get them filed so you can claim your refund. 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!

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.

Who Files Bankruptcy – The Answer Will Surprise You

by

Steven A. Leahy

Who Files Bankruptcy – The Answer Will Surprise You

By Steven A Leahy

With the Trump Bankruptcies in the news lately, you may be wondering “Who Files Bankruptcy?” The answer may surprise you. Bankruptcy is a Federal Law and is administered by the Federal Court System under the rules of the U.S. Bankruptcy Code. “The primary purposes of the federal bankruptcy laws are to give an honest debtor, either a person or a business, a ‘fresh start’ in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.”

In the first three months of 2016, 201.906 bankruptcy cases were filed nationwide – a vast majority (195,679) were consumer cases. There are 90 Bankruptcy Courts – each a unit of a U.S. District Court. The Northern District of Illinois is comprised of the Eastern and Western Divisions, and has 10 bankruptcy judges. 11, if you count the retired Judge that handles a limited case load. The Northern District of Illinois encompasses 18 counties – with court locations in Chicago, Joliet, Rockford, Lake County and Geneva.

The Northern District of Illinois leads the nation in bankruptcy filings with 47,535 case filings over the 12 month period ending March 2016. That is actually a decrease of 6.6% compared to the previous 12 month period. A recent study revealed the top reason people file for protection under the bankruptcy code is – Medical Bills! The second reason is – Job loss! Both of these reasons may have nothing to do with the person filing bankruptcy.

I help people resolve their IRS problems. As I have mentioned many times – there are only 6 things you can do if you owe the IRS money. One of those six things is bankruptcy. Many of my clients are reluctant to even consider bankruptcy as a remedy. They believe it isn’t morally available to them. They have always paid their debts, and filing bankruptcy would go against that value.

First, often a tax debt includes an unreasonable amount of penalties and interest. A debt that may not hold the same moral obligation as the underlying debt. Second, as I explain to my clients, bankruptcy does not protect you from your moral obligations. Bankruptcy only protects you from some legal obligations. My favorite example is Abraham Lincoln. That’s right Honest Abe sought protection under the bankruptcy laws. You see, he had creditors taking legal action against him after a failed partnership in a General Store.

The Bankruptcy Code protects a person from their creditors. Most creditors are prohibited from collecting on the debt. It does not, however, prevent that person from repaying their creditors if they elect to do so. Honest Abe is a good example of this concept. Once granted legal protection from his creditors, Abraham Lincoln felt he still had moral obligations to repay his creditors. He paid every creditor back. It took some time to accomplish this – but in the end, his creditors were paid.

If you were to seek legal protection from your creditors, like the IRS, you could still repay the debt, at your convenience, should you feel a moral obligation to do so. Maybe you feel a moral obligation to pay the underlying debt, but not the unreasonable penalties and interest. You could do that. The IRS would accept the money!

If you have IRS problems and need the help of a professional to resolve it – I encourage you to call my office. Opem Tax Resolutions and the Law Office of Steven A. Leahy, PC helps taxpayers resolve their IRS problems

How Long Can You Dodge the IRS? The Answer May Astound You…

by

Steven A. Leahy

How Long Can You Dodge the IRS? The Answer May Astound You…

By Steven A Leahy

Most of the taxpayers who come to see me have been playing hide-and-seek from the IRS for some time. They wonder “How long can I Dodge the IRS”? They hope the IRS will forget about them. I hear, “can I fly under their radar” a lot. The truth is – it may take some time before the IRS catches up with you. But in the end, they will find you. The IRS is like a battle ship: It may take a long time to turn on you and get you in their sites. But, once they do, the damage can be devastating.

The common scenario follows this pattern: The taxpayer owes the IRS on tax day, but doesn’t have the money to pay. The taxpayer gets VERY UPSET and SCARED. So, the taxpayer files an extension. The extension pushes the due date of the return to October 15th, typically. By filing an extension, the taxpayer feels a false sense of relief. It is false because, the taxpayer doesn’t recognize that they have already sustained a penalty for not paying any tax owed. That’s right – the extension, extends the time for filing the return, not for paying the tax. Next, as time goes by, the tax deadline gets lost in life, and goes by without notice.

The next time the taxpayer worries about their tax return is when the next tax year is upon them. The taxpayer has yet to file the previous year, and believes they have to file that year before filing the current year. So, you guessed it, as the April 15th deadline approaches, the taxpayer files another extension – Peace settles in until the next year. This is when the sleep starts to evade the taxpayer. They can bury the thought of their tax problem during the day. But, while laying in bed at night, their tax problem in all they can think of.

The IRS Has 3 Years to Audit

Did you know that the IRS has three years to audit a tax return. If you haven’t filed, they can’t audit the return. But they can file a return for you. When the IRS files a return for you, that is called a Substitute for Return, or SFR. The taxpayer may believe the IRS has forgotten about them, only to learn later (much later) that the IRS has filed the SFR and assessed a tax far in excess of what the taxpayer actually owes. So, often the IRS won’t even begin coming after you 5 years, or more, after the original return was due. This is what gives taxpayers’ with unfiled returns a feeling the IRS has forgotten them.

Now, not filing returns limits you options on resolving your IRS problem. For example, if you haven’t filed a tax return, the tax for that year will never be dischargeable in bankruptcy. That is true, even if the IRS filed an SFR for you. One more problem – if you file your tax return on time, the Collection Statute Expiration Date, or CSED, begins to tick right away.

If, however, the IRS files an SFR, the CSED begins on the date the tax is assessed, not on the date the tax was due. CSED is the time limit set on the IRS to collect a tax debt or file a complaint in court. Generally, CSED is ten years from the date of assessment. Although there are some events that may extend that date. If the IRS believes you are trying to avoid paying your taxes, they will simply file a complaint in court, obtain a judgment and seek to collect that judgment. There isn’t a time limit on collecting a judgment. That means the IRS may never go away until they are paid in full.

Dodging the IRS causes bigger problems down the line. Resolve your IRS problem today. So, if you have ANY IRS questions, Call me, Attorney Steven A. Leahy at 312-664-6649. I am the Chicago IRS Answer Man.

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