$41,000 Civil Penalty Reduced to Zero!

This was a different case and something that I had not come across in a long time. When the IRS notices that a business has not filed, filed timely, or filed in error all the wage statements (Form W-2 and W-3) for a particular tax year they assess a penalty. Usually the penalty is $100 per form, or it can be as high as 10% of the gross figure on the actual wage statement. In this case, the penalty was $41,000. The other downfall to the IRS systematic assessments is they do not notify a business taxpayer until 4 years later. They are very far behind with catching up with one another and trying to get two government agencies on the same page is like trying to balance a two golf balls on top of one another.

Our client has been with us for sometime and we have actually already negotiated an installment agreement on the 941 and 940 balance dues. However, the Civil Penalty assessment against the business put this agreement at risk. We immediately filed for abatement of the Civil Penalty and sent it to the appropriate office (we also filed for a collection due process appeal on the lien). It took about 3 months to hear back but when we finally did the IRS agreed to abate all of the penalty!! It will take approximately 30 - 60 days for a release of tax lien, but their debt size has been cut by 25%! The reasons for filing for abatement is the fact they had arson take place (2 fires at the business location) that caused them to lose a lot of paperwork to fire damage. Our claim was in direct relation to the damage created and the fact the business had to recreate these same documents in order to file them with the Social Security Administration. P.S. The IRS administers the penalty for late filing and the Social Security Administration keeps the forms on file.

We still have another abatement request in for this particular (in relation to the 940 and 941 tax debts) taxpayer and hope to see similar results!

Offer Settled for 5% Of The Liability!

The client came to us last fall with a balance due of $20,000 in personal taxes owed to the IRS. The client had experienced job loss and had to cash out his 401k in order to pay bills and survive on a day to day basis. As you may not be aware, if one cashes in a 401k prior to the necessary retirement age, one can expect to owe a tax and a 10% early withdrawal penalty. This was the case with our client and therefore he came to us here at Larson Financial, Inc. to seek assistance with his outstanding tax debts.

At first glance it appeared the client had a decent job and might be able to afford a $333.00 payment to the IRS on a monthly basis. ($333.00 would be the payment based on a streamlined agreement for the debt to be paid in under 60 months). After further financial review, we concluded with the taxpayer that he could not afford such a payment. We decided to look at his financial portrait again and see if he might qualify for an Offer In Compromise.

After reviewing his financial statement (Form 433-A), all the taxpayer had available to him was a small brokerage account in his name. It had approximately $1,100 in the account. When calculating an Offer In Compromise one must offer the net equity in assets and available income. He spent well below under the national standards for food, clothing, and miscellaneous as well as housing and utilities, transportation, and health care expenses. His income was not that high either. Therefore, we felt he qualified based on his personal financial data. We decided to file for an Offer In Compromise. After waiting for 3 or 4 months, and providing an additional update as to the value of the brokerage account, the Internal Revenue Service accepted our Offer in the amount of $1,100! The taxpayer was more than appreciative and agreed to be a reference for us at Larson Financial, Inc!!

We are pleased to assist with the resolution of another satisfied customer.

State of Kansas Partial Pay

We have worked with the State of Kansas Department of Revenue with regard to many different taxpayers. For the record the State taxing authorities are much more aggressive than the Internal Revenue Service. This means that if a business owes a tax the State will not hesitate to Seize, Shut Down, Levy Bank Accounts, Levy Customers, etc., to collect the tax.

This particular client came to us in the fall of 2009. She is a sports goods and outdoor equipment rental and sales store. She houses several different types of equipment typically used for summer sporting. However, with winter approaching in 2008 and with the downturn in the economy, she was unable to pay or file her sales tax returns and withholding returns for 2008 and a good part of 2009. The State of Kansas was getting ready to shut her down when she came to us.

After 60 days we were able to get the taxpayer current with her tax returns, she was missing 15 or 20 sales and use (these are filed monthly) and several quarterly and annual returns. Once the returns were filed the State came up with a balance due of over $120,000. Typically the State will allow for repayment of the debt within 5 years. However, our client could not afford to pay $2,500 or $3,000 per month toward the outstanding debt. As such, we sent in a financial statement for the business as well a personal financial statement for the officer of the company. This financial statement concluded she could only afford to pay $1,500 per month, an amount that would service the debt in 120 months versus 60. The State finally agreed and accepted our proposal. We were thrilled and so was our client as she could stay in business, afford to repay her debt and keep up with her current obligations. The client is another satisfied customer and agreed to be a reference as well.

Volunteer Income Tax Assistance Program

The IRS offers a service to allow taxpayers to get their individual and state tax returns prepared for free. There are a few limitations such as income and types of schedules used on each return, however, it is great for those who qualify. I currently volunteer for the IRS in Boulder at the Front Range Community College Boulder Campus Site. On the right hand side of my blog there is a link called VITA and it will take you to the respective IRS web page that offers site locations, information on the VITA program, and more specifically what taxpayer's need to bring to get their returns completed.

I have been volunteering since the first week of February and will continue through until April 10th. I love working with taxpayers and assisting them with their returns, questions, and of course letting them know what their refund will be. Feel free to drop by, our hours of operation are 10 a.m. to 2 p.m. every Saturday with the exception of March 20th and March 27th.

Links and Forms

I recently added a feature to my blog to include various webpages and forms that relate to the tax resolution industry and most importantly my clients and thier specific needs. Please take time to view all of the links. Following I have provided a breif breakdown of the specific links and pages:

- Larson Financial, Inc. - the homepage of the Larson Financial; the company I work with
- Internal Revenue Service - the homepage of the Internal Revenue Service, I find various news, publications, and other handy facts at this link
- Power of Attorney forms, Financial Statement forms, and IRS pages dedicated to explaining Installment Agreements and Offers. Please take a look as it will give you some insight as to how the IRS explains each specific resolution. Also, if you forgot a form or need one please utilize this tool to download the applicable form
- IRS forms and instrutions (2009 and prior tax forms if needed)
- Where to file addresses (more important than you think when you need a quick address of where to file a return with payment or without!)

Enjoy and let me know if any changes, subtractions or additions can be made.

$56,000 Reduced to a $300 Refund!

We recently worked with a taxpayer who owed Use Tax to the City of Golden. When the taxpayer came to us last fall he owed $56,000 to the City of Golden, figures which stemmed from an Audit. Further, the day he hired us the City was getting ready to shut his doors. When we spoke with the City Revenue Agent she indicated she was on her way out to the business location with the Sheriff. We knew the City meant business so we got to work right away.

After speaking with the City it was made apparent to us the client did not supply the City with information to allow them to prepare and assist him with the returns and payment of Use Tax. For those of you who are not aware Use Tax is based on the value of equipment, machinery, tools, etc that are "used" within the business. The City usually assesses a 3% tax based on the value of the equipment used within their jurisdiction. However, the figures used by the State were based on preliminary lists of tools, equipment and machinery, half of which was not used in the business. We had to convince the State to first back off of seizure, which they did. They allowed us time, (1 day) to provide the additional information they had been asking for to come up with a figure that was accurate for the Use Tax. We informed the client of the good news (The City would allow him to remain in business) and he delivered the majority of the documents the very next day.

After months of research, sending in supporting documents to the City, working with the taxpayer and the City, they finally arrived at a figure. The taxpayer had been forced to pay $10,000 to the City prior to working with us. Therefore, he had a credit with the City of Golden. The tax owed for the periods in question, over 5 years worth of tax periods, came to around $9,700. When it was all said and done, he was issued a refund. All liens were released and the taxpayer will continue to operate a profitable business without fear of enforcement.

Tax Debt Reduced To A Refund!

Here at Larson Financial, Inc. we dedicate ourselves to assisting those with their tax issues, whether they are actual or substituted debts. I recently worked with a taxpayer to reduce two balance dues with the IRS and the State of New York to refunds.

We had been working with the taxpayer since April of 2009. At that point in time he had an outstanding debt with the IRS in the amount of $25,000 with several missing returns (2003 through 2008 Personal Income Tax Returns). We were able to successfully keep the Internal Revenue Service from taking any aggressive collection action while we allowed the taxpayer time (6 months or so) to work with his CPA to get the returns completed. Once the returns were completed, his balance due with the IRS was processed to zero and he received a refund of $2,000 last month. The refund was attributed to the fact he had been levied in the past and the monies were applied to the Substituted balance due. Therefore, he was entitled to receive this money back.

With regard to the State of New York, he had actually paid his assessed balance due for the 2003 and 2004 tax years. Meanwhile, he filed all of the State of New York returns to allow for processing. Once the returns processed we began our follow up for refund. Now here is the tricky part, because the modules were old, he was not entitled to a tax refund of what monies were withheld for that year, or any credits. However, he paid approximately $25,000 on the assessed balance in January of 2009, therefore, he was entitled to receive this money back, with interest. Finally, between January of 2010 and February of 2010 the refunds were processed and he was issued two checks.

We were informed today that all checks have been received totaling just over $27,000. Further, this particular client agreed to be a reference as well.