Thursday

“We Now Have so Many Regulations that Everyone is Guilty of some Violation” - Donald Alexander, IRS Director 1975, before Congress.

Friday

Currently Not Collectible IRS Status 53

Currently Not Collectible

If all of your past tax returns are filed, you have stopped pyramiding taxes and have furnished the IRS with all the applicable financial data, you may be eligible to have your tax debt placed in a currently not collectible status.


This is a temporary delay in enforced collection action (from tax levies, bank levies, wage garnishments, etc.) until your financial condition improves. The IRS coded currently not collectible as “Status 53”. This code tells everyone in the IRS that it is not worth their time to pursue collection action due to lack of equity and income.

Typically the IRS will look at your financial situation every year to review your ability to pay the back tax debt. If after their review they determine you are making substantially more income will once again pursue enforced collection action such as bank levies and wage garnishments.

If the IRS determines that your financial condition has not improved they may still file a Notice of Federal Tax Lien to protect the government’s interest in all of your assets. The other drawback to this tax debt strategy is that penalties and interest are continuing to accrue.

I was successfully able to have this client's business account placed into uncollectible status after being on the case for less than 30 days (started July 15th and had the case in uncollectible status by August 5th) after pushing the Revenue Officer and the Taxpayer Advocate to approve the uncollectible status due to the client's bank demanding the case be resolved before my client's home was foreclosed upon (qualified for a loan modification under Obama's HAMP Program).

720-340-4065

Contact Nick

nick@patriotresolution.com


720-340-4065

Payroll Taxes and the Trust Fund Recovery Penalty (TFRP)

What to do When Your Business Falls Behind on its Federal Tax Deposits


To View Patriot Tax Resolution, LLC's take on Back IRS Payroll Taxes and the IRS Trust Fund Recovery Penalty please click on the highlighted links.

The IRS considers back payroll tax debt as the most serious of all tax debts. The IRS views operating a business while owing back payroll taxes as illegally borrowing money from the government. The IRS can seize assets and force you out of business if you owe back payroll taxes.

The scary thing about payroll taxes is that the IRS can assess a portion of the tax, called the Trust Fund Recovery Penalty, on individuals it believes had authority to collect and pay the tax. This can be an owner manager and even a bookkeeper.

The number one reason I have business clients is because of unpaid payroll taxes. Each scenario basically works similar to this:

Business is slow. You pay the rent and your employees’ wages, but don’t make your federal tax deposits. You believe that things will turn around next month with more work. The busy season is right around the corner and you are sure that you’ll be able to pull out of this slump catch up on your back payroll taxes.

Several months go by. Your sales have gone down. Orders stopped coming in and holiday sales were awful. Your vendors have sued you and your landlord is threatening to evict you. You haven’t been filing your 941 returns or made any federal tax deposits for the last several quarters. You decide to shut down and sell your assets to pay off the creditors you have personally guaranteed.

You feel that you are ready for a fresh start with everyone paid off. But wait. The IRS sends you a notice saying that they intend to hit you personally with a 100% penalty for non-payment of payroll taxes, also know as the dreaded “Trust Fund Recovery Penalty”.

When payroll deposits haven’t been made, the IRS can review a company’s books, interview employees and then hold its owners, managers, bookkeepers and check-signers personally responsible for the unpaid payroll taxes. This penalty applies mostly towards corporations. If you were a sole proprietorship, LLC or partnership, you can be found directly responsible for payroll taxes without the TFRP provision.


How the IRS Determines Who is Responsible for the Trust Fund Recovery Penalty


Per Section 6672 of the Internal Revenue Manual:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable for a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

The IRS makes over 50,000 TFRP assessments each year, averaging $21,000 per responsible person.

For each defunct business owing payroll taxes the IRS on average finds 1.6 responsible persons but it is not uncommon for several people to be declared responsible. The IRS can still assess the trust fund penalty if the business is still open. Then they have not only the individuals to collect from but also the business.

Revenue Officers will conduct what they call the Trust Fund Recovery Penalty Interview and begin by putting together a list of people with any authority over the businesses finances.


 Who made the financial decisions in the business?

 Who signed or had authorization to sign on the checking account?

 Who had the power to pay or direct payment of bills?

 Who had the duty of tax reporting?

To get this information the officer may interview everyone whose name comes up when she asks the above four questions. She looks at bank and corporate records for the names on bank signature cards, and to find out who actually signed checks and who were corporate officers.

The Trust Fund portion of payroll taxes is not a dischargeable tax debt in bankruptcy, however they can be resolved through an Offer in Compromise, payment plan, or placed into a not currently collectable status.


Appealing the Trust Fund Recovery Penalty


Once you are found to be a responsible person by a revenue officer, you will be sent a notice and a tax bill. The revenue officers decision can be protested to the appeals division.

From the date of the initial notice you have 60 days to file an appeal. To do this you must prepare a written response protesting the decision to the Appeals Office. If you fail to use your appeal rights, 60 days from the initial notice (notice number 1153), the assessment becomes final. If you refuse to pay the IRS can go through its normal collection process for a tax debt, i.e. file a lien, and then levy.

Even by simply filing the appeal of the proposed TFRP assessment it will buy you time- even if you know you are clearly responsible. An IRS collector can’t take enforced collection action. Another advantage for filing an appeal is that interest does not run during the time an appeal is being considered, which could give you time to catch up on the payment. For example, if you are eventually found responsible for $50,000 in unpaid payroll taxes and your appeal process takes a year, you’ll avoid paying approximately $3,500 in interest.

If you lose your appeal and feel you truly are not responsible go to court. You can sue in tax court, in the U.S. District Court nearest you or in the U.S. Court of Claims. Tax court doesn’t require you to pay the IRS any tax before filing our suit. However, if you sue in a district court or the court of claims, you must first pay at least some of the taxes claimed before you file a lawsuit seeking a refund. The minimum you must pay is equal to the unpaid payroll taxes due for one employee for one quarter of any pay period.


I have laid out the process in plain English, but the truth of dealing with the IRS is that it may not be this simple.


Hire an Experienced Licensed Representative.  Call Nick @ 720-340-4065 or email: nick@patriotresolution.com

http://www.patriotresolution.com/

Tax Lien Removal and Tax Lien Subordination

Whenever an IRS tax debt owed the federal government will make a claim against the debtor by filing what is called a tax lien. This tax lien is perfected by recording a Notice of Federal Tax Lien at the county recorder’s office or with your secretary of State’s office. The tax lien automatically attaches to all you own or have a right in.
Penalty and interest on the tax is also covered on the lien, so the lien simply acts like a placeholder (e.g. if the amount of the lien is filed for 2005 1040 taxes in the amount of $23,000 and next month the amount increases due to penalties and interest, the lien, although filed for $23,000, will not be removed until the additional fees are paid that are added later).

A tax lien allows the IRS to levy your property to satisfy your tax debt. The same is true with state taxing authorities. Just as a recorded mortgage tells anyone who searches the public records or pulls your credit report that you owe on your home, a Notice of Federal Tax Lien shows the world that you have a tax debt.

A recorded tax lien is like receiving the kiss of death on your credit rating. It damages your borrowing ability by scaring off potential creditors or lenders, making it difficult for you to finance any purchases or get a home mortgage. Tax liens are picked up by credit reporting agencies, such as Equifax, Experian and TransUnion.

There are several ways to avoid and get a tax lien released. The IRS must issue a Certificate of Release of Lien within 30 days after either:

• The tax lien becomes unenforceable because the statute of limitations for collections has run (10 years after the tax debt first became due), or

• The taxes are fully paid, discharged in bankruptcy or satisfied through an Offer in Compromise.

If you have property with some equity the IRS may allow the bank to obtain a “first position” on the mortgage note by subordinating the tax lien and taking a position behind the bank, of course if you agree to pay the equity you are drawing out directly to them.

Need help? Call Me.

Reduction of IRS Penalty and Interest

Abatement of Penalty

By far the accrual of penalties and interest are the most frustrating topic of those who owe back taxes.

The IRS charges interest, late payment and late filing penalties for each month you don’t file or pay the taxes due. Initially the late payment and late filing charge is ½% each per month with the late payment plan reduced to ¼% if you enter into a formal payment plan. The interest rate fluctuates quarterly. The late payment penalty maxes out at 25% as does the late filing penalty. Interest never maxes out.
The IRS can eliminate or reduce a penalty for a reasonable cause if you request it. The term the IRS uses for removing or reducing penalties is “abatement”. About one-third of IRS-imposed penalties are later removed. Only interest that has accrued on the penalties can be reduced unless it was erroneously applied or if it was due to lengthy delays by the IRS. The only way to completely remove all penalties and interest is through an Offer in Compromise.
To convince the IRS to reduce or remove your penalties Sirius would demonstrate that you showed “reasonable cause” for your failure to pay and/or file the tax return(s). The Internal Revenue Manual (IRS Policy Statement P-2-7) states:
Any sound reason advanced by a taxpayer as the cause for delay in filing a return, making a deposit…or paying tax when due will be carefully analyzed…
The few examples (this is not all inclusive, but an idea on what they accept):
• Death or serious illness in the family.
• Unavoidable absence of the taxpayer.
• Destruction by fire or other casualty.
• Lack of funds (only if you exercised ordinary business care and prudence).
• Embezzlement or Theft.

You have to demonstrate to the IRS and state taxing authorities that you acted with “ordinary business care and prudence” but still were unable to file and/or pay your taxes on time. You need to describe to the IRS exactly what efforts were made to repay the debt.  A lawyer who represents himself is a fool for a client and the same thing can be said about a taxpayer who represents himself has Time and again I am successful in removing penalties my clients by use of recent case law and statutes. 

Contact me today:  Nick Hartney, E.A. Phone: 720-340-4065; Email: nick@patriotresolution.com

Nicholas Hartney, E.A. of Patriot Tax Resolution; www.PatriotResolution.com; 720-340-4065; 1-866-947-7209; Nick@PatriotResolution.com