Southern California Tax Relief

Summary

Tax problems come in my shapes and sizes; they can be individuals or companies.  They can be Taxpayers who have made mistakes, convicted of past crimes or perhaps just victims of circumstances like an illness or death in the family.  There might be a past due tax liability or the Taxpayer can be one of the “lucky” ones who have been selected for the dreaded tax audit.  We handle all kinds of tax problems for individuals, partnerships or corporations for all kind of taxes; income tax, payroll tax or sales and use tax.  The only thing we require is that our clients commit to honesty and integrity; to represent their finances truthfully and fairly to the Taxing Authorities and us. 

No matter how bad your tax problems look, there is ALWAYS a solution.  The sooner you contact us, the sooner we can resolve your tax problems. Time is of utmost importance!  The sooner you contact us, the more time we have to strategize.  If you delay, we will have less time resulting making your tax problems worse than they should be.

Tax Audit Defense

If you have been selected for a tax audit, do not go it alone. You need a tax professional who knows your rights and the tax law. It is important to understand that Taxing Authorities, including the IRS, do not make tax law, just the responsibility to enforce it. It is important you have a tax professional who is aggressive enough to remind the Taxing Authorities of this fact.

Resolution of Past Due Tax Liability

There are millions of frustrated taxpayers who owe Taxing Authorities back taxes. Many are not tax cheats, but good people or business to whom bad things happen. Alternatively, they just made some bad mistakes. Whatever the reason we can help to give your life back. Solutions to this type of tax problem are a series of programs or procedures in an attempt to bring justice to an unjust system by assuring Taxpayers pay only their fair share of taxes or providing a second chance. It is not a way to avoid paying taxes, but fairness.

There are many Tax Resolution companies claim they can settle your tax problems for “pennies on the dollar”, but be careful for there are many who make wild claims but cannot produce. You might have seen them advertising heavy on TV or radio. Because Tax Resolution is not the only service we provide, you can be guaranteed that the advice given is the best advice for you. Because The John Ellis Company is an Accountancy Corporation, Certified by the State of California, we are obligated to a high level of professionalism and integrity that some Tax Resolution companies are not required to have.

If you owe back taxes, you have several remedies that are available to you, but many Tax Resolution companies do not tell you or are not qualified to do. Many times one can work through tax problems with the assistance of an employee of a Taxing Authority, including the IRS. However, it is dependent on the competence and work ethic of the employee or on the issue. It is well documented that many times tax advice provided by employees of taxing authorities are incorrect. In fact there are disclaimers by the Taxing Authorities that advice provided over the phone cannot be relied on. Remember that at the end of the day, the mission of a Taxing Authority is to collect taxes, not to assist Taxpayers in reducing their tax burden. The saying “I am from the government and I am here to help” is truly an oxymoron.

In summary, resolution of your past due taxes are:

(1) A Review of your tax returns to look for mistakes or missed tax savings. Many times an amended tax return can “wipe out” past due taxes and many Taxpayers do not consider this as a low cost option of resolving their tax problems. It is important that you go to a tax professional that is knowledgeable in tax law. “Tax Factories” are not qualified to perform this service. Your best person is a Certified Public Accountant.

(2) Bankruptcy. Many people are not aware that qualified income taxes can be discharged in a bankruptcy. If you call a Taxing Authority, including the IRS, most likely they will not admit this is as a possibility. It is important that you use a Bankruptcy Attorney that is familiar of the rules and a CPA who can give you the best opportunity the Taxing Authority will not prevail in a challenge to the discharge of your taxes.

According to Bankruptcy Code Section 507, Income Taxes can be discharged in bankruptcy if all the following conditions are meant:

• All tax returns have been filled

• The tax is based on income. Payroll taxes can never be discharged in a bankruptcy

• The Taxing Authority has assessed the tax within 240 days of filling the Bankruptcy

• The tax is over three years from the tax return due date, plus extensions

This is only a high-level summary and a CPA or Tax Attorney should be consulted to determine if your taxes are dischargeable.

(3) Tax Resolution Services. We are committed to be your aggressive advocate. The collection departments of Taxing Authorities are unforgiving and ruthless. Let us stand in between you and them, making sure they treat you fairly and with respect.

Tax Resolution Services

We offer Tax Resolution Services to Individuals and Corporations in Southern California.  The Tax Resolution Services we provide are:

• Offer In Compromise
• Installment Agreements
• Penalty Abatement
• Innocent Spouse Relief
• Removal of Tax Levy's
• Currently not collectable
• Payroll Taxes
• Appeals

Tax Solutions include the following services:

• The initial filling
• Financial and tax counseling
• Monthly financial monitoring
• Unlimited phone calls.

Installment Agreements:

Internal Revenue Code [IRC] section 6159 provides the statutory authority for the IRS to enter into installment agreement and IRC sections 6331 and 6159 has requirements to protect the Taxpayer including giving them the right to appeal.  If the total tax due is $25,000 or less the IRS will enter into an installment agreement through the streamlined installment agreement program, without giving them financial information.  Generally, they just have to give the IRS the name and address of their employer and their bank.  For larger debt, the Taxpayer is required to fill out form 433F and in many cases a 433A or 433B.  In this case, a strict formula is used and documentation of one’s finances is required.

Offer in Compromise:

The U.S. Congress established the Offer In Compromise [OIC] program with IRC code section 7122.  This covers all types of taxes [including payroll taxes] penalties and interest and it is the closest thing to “amnesty” that is available.  If an OIC is accepted and the negotiated settlement amount is paid, not only back tax liabilities are settled [compromised] all federal tax liens can be released. 

It is important to understand the OIC program is a privilege, not a right, like bankruptcy. Consequently, Taxpayers should beware of tax resolution companies that guarantee specific results.  There are three types of OICs (1) Offer based on doubt of liability, (2) Offer based on collectability and (3) Effective Tax Administration. 

An OIC based on liability is when there is a strong basis that the liability assessed by IRS in incorrect.  It is not commonly used. 

An OIC based on collectability is more commonly used.  The basis is the Taxpayer does not have the income and assets to pay the tax.  In other words, the minimum offer amount must generally be equal to (or greater than) the taxpayer's reasonable collection potential.  It is a once in a lifetime forgives of a tax debt and the Taxpayer agrees to NEVER have outstanding tax liabilities in the future.  If they do, the OIC is rescinded and the Taxpayer is required to pay all of the tax that was previously forgiven with interest. A strict formula s used, more involved than for installment agreements, and is about a 12-month process requiring documentation of 100% of one’s finances.  Effective, July 17, 2006, a 20% payment of the tax liability was required before an OIC is accepted for evaluation unless the Taxpayer meets a low-income test.  There is Federal legislation to remove this requirement [HR. 2343 – Tax Compromise Improvement Act of 2009].  It is currently going through the first step in the legislative process in the House Ways and Means Committee.   This has been tacked on other recent legislation.

An OIC based on Effective Tax Administration is where the IRS considers exceptional circumstances in which the Taxpayer demonstrates that the collection of the tax would create an economic hardship or would be unfair and inequitable like in the case of severe illness or disability.

Many states also have Offer In Compromise programs, some are similar to the Federal program and some are less formal.  

Penalty Abatement:

Penalties can be disputed based on grounds there was reasonable cause.   Some of the reasons can be unexpected illness, hospitalization, natural disaster or fraud / criminal behavior on behalf of the bookkeeper.  Not understanding the law, making mistakes or errors in judgment are not reasonable causes.

Innocent Spouse Relief:

When married Taxpayers file a joint return, both spouses become JOINTLY AND INDIVIDUALLY responsible, even if only once spouse made income.  This is true if the divorce court rules only one spouse is responsible in paying the tax.  The IRS does not recognize the divorce court rulings.

To qualify, Federal form 8857 needs to be filed within two years from the date the IRS first tried to collect the tax from the Innocent Spouse and he/she must meet the following conditions:

(1)  Must have filed a joint return with an “understatement of tax” due to “erroneous item(s)”.  Understatement of tax is the difference between what was shown on the return vs. the actual tax liability.  Erroneous items are either underreported income or incorrect deductions, credits or basis claimed

(2)  Must establish that at the time the return was filled, he/she did not know nor had a reason to know that there was an understatement of tax.

(3)  Must establish that given all of the facts and circumstances it would be unfair or inequitable to hold the Innocent Spouse liable.

Currently Not Collectable Status:

By looking at a strict formula, the IRS determines the tax cannot be collected from Taxpayer.  The formula used is net income less basic living expenses [generally credit card payments are not allowed as a living expense] plus available credit available and liquid assets like savings, 401Ks or stocks.  Uncollectable status does not forgive the tax, but the IRS “shelves” the liability and stops collection activities for a period time.  Interest continues to accumulate on the tax debt and the IRS will quietly review the case, generally annually, to determine if the Taxpayers financial condition has changed and will resume collection activity if the IRS feels it is warranted.

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