Tax Legal Questions

The penalty for failure to file a return is 5% a month of the tax owed max of 50%. There is also a late payment penalty of 5% a month max of 50%. Of course, there is interest (3% a year currently) on any unpaid taxes. Possibly your brother can get with the IRS to eliminate the penalties, if he voluntarily files the returns and requests a waiver. Interest is never waived. Unless you're an attorney, CPA or enrolled agent, you can't represent your brother with the IRS. Of course, you can help him file the returns.... Read More

The first thing is to challenge the audit report to the auditor's supervisor. ?Some auditors come to amazing conclusions (I had one that wasn't familiar with the concept of a checking account or that expenses could be paid with a little piece of paper called a check. ?I've had several that didn't grasp that regardless of the amount of revenue taxable income was revenue minus expenses - "Your client had sales of $4 million dollars, so it's taxable income must have been at least $1 million.") ? If that doesn't result in a satisfactory resolution.... Read More

Generally, I advise all business people to have an attorney represent them at an IRS audit. ?Most people are quite nervous about an audit and being nervous tends to make you unsure and causes mistakes. ?Being represented by an attorney, deflects a lot of the pressure on the attorney. ?Of course, the attorney knows the limits of the IRS's authority and the IRS is much more willing to negotiate with an attorney than with the client. You have an additional problem - you don't have adequate records to support your deductions. ?The attorney will be able to help you reconstruct your records and support your return.... Read More

There is an annual exclusion and a lifetime exemption from the gift tax. The annual exclusion is $14,000 that mean you can give a person $14,000 every year without any gift tax effect. ?If a married couple is making the gift, the limit is $28,000 (husband can give $14,000 and wife can give $14,000) if the married couple is making a gift to a married couple the limit is $56,000. ? The lifetime exemption is currently $5,430,000. ?That means you can give a total of $5,430,000 (over any annual exclusions) to any number of people without paying gift tax. ?To use the lifetime exemption, you'll need to file a gift tax return to inform the IRS that you've used part or all of your lifetime exemption.... Read More

The IRS has the power to put a lien against your house, to foreclose on your house, to take your business, savings and garnish your wages among other things. However, they will notify you first and you'll be able to determine what the basis of their claim is and whether it's correct. Once you and the IRS agree on the amount due, you'll be able to work out a payment plan based on your income... Read More

There are limits on what the IRS can take. They can only garnish a maximum of 25% of your wages. There are protections for certain amounts of bank accounts, cars, clothes, furniture, etc. 401(k)s and other retirement plans are exempt. However, unless you are a flight risk, the IRS doesn't start by garnishing your wages or seizing your bank account. It starts by sending you letters, notifying you what they think you owe. Your choices are 1. Pay what they claim, 2. Work out a payment plan, 3. Dispute the claim (often the IRS numbers are estimates or you have information on deductions, etc. that the IRS doesn't) or 4. The ever popular "ignore it and hope it goes away" Only if you chose #4 will you find your assets being taken by the IRS.... Read More

You need to work with the IRS on a realistic payment plan which may include forgiveness of taxes owed. You cannot ignore the IRS. You can obtain your tax transcript for each tax year. This is the most crucial record. You can explain your situation. How much is owed ? Do you have assets? ... Read More

First, if you filed the returns then any taxes more than 10 years old are written off by the IRS (that's why the TV ads say "we can get a deal where you pay 5% of your back taxes" the IRS has already written off the old years). Second, taxes where you filed the returns more than 3 years ago are discharged in bankruptcy. So, if you filed bankruptcy you'd still have to pay 2012, 2013 and 2014 taxes but not the older ones. You could handle these through in bankruptcy court in a Chapter 13 or directly with the IRS in a Chapter 7. Many bankruptcy attorneys don't have a clue about taxes, go to an attorney who is also a CPA.... Read More