How To Negotiate With The IRS When You Have A Large Debt

17. April 2018 16:49 by Selina Stewart in

A lot of hardworking taxpayers don’t think it’s possible, but you can actually negotiate with the Internal Revenue Service (IRS) if you happen to have a large debt. The IRS’ sole existence is not to ‘get’ you. Many times, they are looked at as the bad guy—the villain who’s out to take all of your hard-earned wages.

What are Taxes for Anyway?

The fact of the matter is, if you like your living conditions, the way the streets are paved for better transportation—if you value the convenience of public transportation and things like your trash and recycling getting picked up, if you can appreciate the technology of the traffic lights (depending on where live in the country, maybe not), or maybe you’re just thankful for brave servicemen like firefighters and law enforcement patrolling the streets to make you feel safe, then you might want to start feeling OK with paying taxes!

How Does the IRS Determine How Much Taxes You Pay?

Now, we realize the actual problem comes when you discover that you owe and your annual income doesn’t seem like it’s enough to make ends meat—so how is it that you ended up owing Uncle Sam?

Well, there are a couple of reasons why you may owe the IRS a lot of money. Perhaps you didn’t fill out your W4 employment form right and you’re not getting enough taken out of your check during the year. Are there any unreported wages? There could be a mistake in your filing. One transposed number can throw everything off.

Don’t Try to Cheat the IRS

Don’t assume that the IRS will see an error on your right away. That’s what audits are for! And maybe, just maybe the IRS made an error. It happens.

Whatever the reason is for you owing the IRS, be encouraged that all is not lost. The IRS is reasonable and will work with you. All you have to do is call them and let them know that you understand that you owe, but you would like to negotiate a payment plan. Now, there are a few ways you can go about this.

Working Out a Deal

You can actually negotiate your tax debt to less than half of what you owe depending on whether or not what you owe is substantial. For instance, if you owe $1,000, the chances are pretty slim that the IRS will reduce that amount. At the very least, they may compromise with an affordable monthly payment for you to make. If this is the case, take it! The terms are strict though. One missed payment—even if you are late, then the deal is off and you’re back to owing $1,000 in full. If you’re late, then interest and late fees build on this amount, increasing the total amount you originally owed.

Sounds scary? It is. But it doesn’t have to be.

We have been in the business of alleviating taxpayer’s debt for over 30 years. We know what we’re doing.

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Not one but two - The power of having a dual strategy!

7. April 2018 10:11 by Megan Kunis in

            

     

Michael Porter's view is that when businesses speak of strategy, it is their relative competitive position in the marketplace to their competitors, that is the only true strategy. For example it might be taking a cost leadership position or a high end quality position. His view is that if companies try to target a number of strategies, it leads to confusion both for the customers and internally for the business itself.

Porter's view is that to be truly successful, a business should focus on one strategy and nail it. Porter quite rightly argues that all other business initiatives e.g. outsourcing to low cost countries, acquiring a competitor, or eliminating waste, are in fact not strategies, but ways in which businesses achieve their single strategy, which is their "SCA".

Mindshop's "Sustainable Competitive Advantage" or "SCA" tool is a good practical approach to define your businesses competitive position. 

A company that is challenging Porters view and is in fact smashing their competitors through a dual  approach to strategy is Singapore airlines. Many have said it cant be done, but a study in the July 2010 Harvard Business Review showed not only a company adopting a dual strategy of cost leadership and high quality very well, (one example cites airplanes with the best first class seats in the world, while high level executives work out of an airport hangar in Changi airport), the airline also leads all the key indicators of a successful global airline such as profitability, customer satisfaction, cost per km and so on.

Whether your business model is defined by a single approach to strategy, or dual approach to strategy, make sure that it is clear, and not only resonates with your customers, but also gives your business an edge on your competitors.

Next week in this series of "burying your old business model", we will look at innovation, with some great examples of some businesses who are thriving in some of the toughest industries using innovation.

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How Trump’s New Tax Plan Might Affect Your IRS Debt

31. March 2018 13:21 by Zach Haris in

It’s really too soon to tell how any changes within the Trump administration will affect taxes, but one thing is certain, if you are currently in debt with the Internal Revenue Service (IRS), it is fully expected for you to pay what you owe. That’s not going to change no matter if the taxes are raised or lowered.

Stay Focused! Do Your Due Diligence.

It’s important to not let your emotions get in the way of your financial obligations to the IRS. No matter who is in office, as United States citizens, it our responsibility to uphold our part and pay the taxes we owe. If for some reason you believe that the amount that you owe is incorrect, you have a right to contest these numbers. You can do this by mail or telephone, although we recommend that you do both—in that order. This way, you’ll have written documentation that proves you’re actively communicating with the IRS, and speaking to a representative by phone will show that you’re following up accordingly.

Need Help with That?

We realize personally speaking to the IRS can be intimidating. That’s why the professionals at Success Tax Relief, a tax relief firm is staffed with a team of tax experts to communicate with the IRS on your behalf.

Back to the Whole Tax Thing!

We realize that you still may be a bit concerned about how Trump’s new tax plan might affect your taxes in the years to come.

The plan has been described as “Reagan on steroids”, a plan that follows the concept of the ‘rich getting richer and the poor getting poorer’—all in theory, of course!

According to White House Reporter, Matthew Nussbaum ,who tweeted a photo of the one-page 2017 Tax Reform for Economic Growth and American Jobs, are as follows:

  • The standard deduction will double, but many tax breaks will no longer be available to individual filers except for home ownership and charitable contribution—this will reduce a number of deductions that you’ll be able to claim.
  • Tax relief will be provided for families with dependent care expenses.
  • “Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers”
  • Repeal:
    • Alternative Minimum Tax
    • Death tax
    • Obamacare
  • For businesses, the overall objective is to level the playing field of the territorial tax system for American companies.

In a Nutshell…

The plan reportedly is not projected to decrease the country’s deficit until after 10 years from now, and it will need a straight party vote. So, as of right now, there’s nothing to be actively concerned about, because it’s too soon to tell. It also doesn’t have much to do with you pay the IRS what you owe.

What Can You Do?

The best thing to do during this continuous transition is to continue taking care of your financial obligations. Maxfinancials.com/taxationandadvisory can help you along with this process. We work on your behalf—not for our benefit.

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Hummer Manufacturer’s Warranty Term Is Increased

12. March 2018 11:48 by Zach Haris in

To keep up with the luxury SUV market Hummer has extended their manufacturer’s warranty
Great news for Hummer owner’s looking for extended warranty protection. Now that all 2006 Hummers will be coming with a standard 4 year/50,000 mile warranty plan Auto Advantage Inc., an industry leader in Hummer warranties has reduced the pricing to warranty them for an extended term. This price reduction affects the Hummer H1, H2, and H3 models. The 2006 H1 Alpha which is already available for sale is the first model to come with the new, longer manufacturer’s warranty coverage.

Though Hummer owners all rave about their own experiences, they will also tell you that these vehicles are one of the most expensive vehicles on the road to maintain and have repaired. That is why Hummer extended warranty sales have soared over the past few years. Now with the new reduced pricing, warranty sales are expected to increase over the next year or so by about 40-50%.

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Financial Reporting and the Law

23. February 2018 10:26 by Jason Kelley in

 

                                               

Morgan Lewis is a global law firm that practices financial, international, and commercial litigation that includes tax and estate planning forms of law, among others. Its blog informs both the company’s clients and the broader populace of the latest developments and financial regulations affecting how businesses and industries operate their accounting practices. Up and coming accountants who are planning to specialize in largescale financial services would do well to pay attention to this series of law blogs.

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Auto Repair Shops Continue to Fight Dealers

8. February 2018 17:59 by Selina Stewart in Auto

Dealers hope you aren’t concerned enough to complain about their computer overrides, disallowing independent repair shops from repairing vehicles.

Now, two or three times per month, his computerized diagnostic equipment shows unknown codes when hooked up to an auto with a problem.

"The scanner gets codes, but no translation comes up, meaning the information hasn’t been released," Danneman said.

Manufacturers aren’t allowing shops access to some of the information they need to repair today’s computerized automobiles. They aren’t allowing independent’s to include the information in diagnostic tools that can be used on many different types of vehicles.

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Tax Pyramiding

30. January 2018 11:29 by Megan Kunis in

Pyramiding in a tax system refers to the imposition of a tax on a tax. It typically happens with taxes that are imposed on goods or services, such as a sales tax. Pyramiding causes a tax to violate several principles of good tax policy, including transparency, efficiency, equity and neutrality. For example, in California, most food purchased at the grocery store is exempt from the sales tax. However, the price paid for that food includes sales tax paid by all businesses in the production and distribution chain to get that food into the store. When a business pays a tax, it is one of many costs factored into its operations that either goes into the price of what the business sells and/or reduces profits. This effect makes the sales tax fail the transparency principle in that when you buy an item (whether tax exempt or not), the true amount of sales tax included in what you pay is not obvious due to pyramiding; the sales tax paid is definitely more than what is noted on your sales receipt.


The degree of tax pyramiding varies from state to state depending on the types of sales tax exemptions they provide to businesses. For example, California exempts purchases for resale. So, when the California grocery store buys food, it doesn't pay sales tax. Yet, it has paid sales tax on all of the equipment and other tangible personal property used in the store (supplies for example). Some states have reduced pyramiding by providing sales tax exemptions for certain types of equipment purchased by businesses, such as that used in manufacturing. Typically the rationale for such exemptions is to entice businesses to locate their manufacturing operations in the state.

The remedy for tax pyramiding is to not have businesses pay sales tax. If they don't pay the tax, then it won't be factored into pricing. There are two big obstacles to fixing pyramiding though:

  1. Pyramiding has been around since the beginning of the sales tax and it generates revenue for the state (likely at least 20% of the state sales tax comes from businesses). How do you replace that revenue?
  2. Many people (including lawmakers) think that businesses have too many tax breaks and are not paying their fair share and would not support legislation to make all business purchases exempt from sales tax.

Despite these obstacles, there are reasons to remove pyramiding from the sales tax system and ways to deal with the obstacles. First, there are other reforms needed to the sales tax system, such as base broadening (along with rate reduction; see my Report #2a at the link below). Revenue generated from that change can cover the revenue generated from pyramiding and be a more equitable and transparent way to generate sales tax revenue. Removal of pyramiding would likely generate increased business activity in the state because the price of doing business here would drop - other tax revenues should go up from the change. Also, taxpayer education would help. Individuals need to see the hidden cost of pyramiding (which they pay; businesses pass most costs onto customers). It would be more clear to individuals how much sales tax they are paying if the sales tax shown on the sales slip is the total amount and that will only happen if pyramiding is removed from the sales tax system.

The pyramiding flaw is a U.S. one. All industrialized countries other than the U.S. use a value-added tax to tax consumption (rather than a sales tax). A VAT that does not allow for exemptions and special rates does not impose a VAT on businesses purchases.

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Swept Away? How To Avoid An Asset Protection “Perfect Storm”!

25. January 2018 17:46 by Jason Kelley in

When it comes to asset protection, a lot can go right…but a lot can also go wrong. And often, what goes the most drastically wrong involves getting tripped up by details that can seem insignificant, even trivial — until they trigger the painful reality of being blown off course. Fortunately, these storms don’t have to sink you; they can be dealt with safely. But sometimes avoidance tactics seem to be more trouble than they’re worth, and you can wonder if all that detail is really necessary. Shortcuts are great if you know what they can (and can’t) do for you in the long run. But not knowing can get you in trouble — expensive trouble.

Simplify, Simplify, Simplify (Maybe)!

It’s only human nature to try to make things as simple as possible. And, in many cases, simplifying a process is the best thing you can do for yourself.  Why spend the time and effort working through Steps 1 thru 4 to reach Step 5 if an alternative approach allows you skip those intermittent steps and still arrive at Step 5 none the worse for wear?  There’s no reason not to take the shortcut, right?

Maybe. But the problem comes in when Steps 2 through 4 cover contingencies and provisions that may not be readily apparent to an untrained eye.  Specifically, the case I’m talking about today involves the difference in perspective between your CPA and your asset protection attorney.

Susan’s Situation

One of my clients, Susan, had me set up multiple single member Limited Liability Companies to protect a collection of rental properties for her.  In the process of doing this, a separate corporation was set up to manage these LLCs, with their secondary purposes of buying, rehabbing, and reselling the property. With the structure complete, and the rental properties deeded to appropriate LLCs, Susan’s corporation became a manager: its role was to manage all the holdings of the various LLCs. This included paying bills, collecting rents, and all those other myriad details.

Part of this structure included setting up a bank account for each LLC. That way, each could deposit rental income and pay bills associated with the properties held therein. One of these fees, in turn, is a management fee paid to the corporation for its monthly service, an amount determined in separate property management agreements with each LLC.

It Was Plenty Simple…

Under the structure, then, each LLC collected its own rent, paid its own bills, and distributed profits to Susan as sole owner. All my client then had to do was deposit monies into appropriate accounts and write a few checks each month.

….Or So I Thought.

For reasons I’m still not clear about, this simple structure became a hassle for Susan. When it did, her CPA stepped in and convinced her to close the individual LLC accounts. He told her that running everything through the management corporation would simplify and streamline the process. She could allocate her taxes through QuickBooks, merely by making ledger entries that indicated which LLC made income or sustained loss. She could run her business out of just one checkbook!

Susan was thrilled. She’d cut right through those pesky Steps 2 through 4, and her life was much simpler. And the system worked, for three good years…

Until someone sued Susan’s corporation.

Susan fought the lawsuit, but she lost, and a judgment was entered against her corporation. But, still, she thought — no problem. She could simply dissolve the corporation and walk away; after all, her assets were all held in separate LLCs, so her properties were protected from corporation debt. Right?

Unfortunately, Susan was wrong.

The plaintiff, confronted with her proposed action, sought to attach the assets of each LLC — and was successful.

“Why Didn’t You Protect Me?”

Understandably, Susan was upset by all this, and she came to me demanding to know why the plan I had created for her hadn’t protected her assets. This resulted in one of those difficult conversations, the kind we as asset protection pros hate to have: the one where you tell a client, as tactfully as possible, that your plan would have protected her, had she stuck to it. But she hadn’t.

That “running her business through one checkbook” became the “loophole” whereby her LLCs were no longer regarded as separate entities anymore. That, in fact, is why the court ruled the way it did: it cited that by failing to have separate bank accounts for each LLC, she had failed to treat them as separate businesses; the assets all became part of her corporation and were no longer “untouchable.”

Don’t Try This At Home! (Or Anywhere Else!)

The lesson learned? For asset protection, each of your businesses must be able to stand on its own. Don’t let a CPA or other professional convince you that you don’t have to bother with separate accounts, that you can sidestep important details, and still reach the same end. From a tax standpoint, the CPA might well be one hundred percent right; however, in terms of asset protection, he’s not. Trying to take “shortcuts” in this area can result in your “shorting out” your own plan…as it did for Susan.

Fortunately, you can avoid being swamped by an unexpected legal storm — but even the best CPA or tax specialist may not know about all the “life preservers” you’ll need to save yourself. That’s why it pays to consult professionals who deal with asset protection regulations every day. Call us, and we’ll gladly take you through all the steps you need to be sure…not sorry!

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How Accountants Can Grow Year-Round Business And Increase Client Loyalty

18. January 2018 16:33 by Megan Kunis in

Suddenly, it's tax season. Clients are pouring in, and your accounting firm has never worked so hard! Then the dust settles, and there's not as much work for long stretches of time. 

Today's accountants are expanding their service offerings beyond year-end taxes.  To create time for these profitable clients however, firms must first strategically scale back their relationships with unprofitable clients.

Making the investment in the right clientele nowwill save you time and money later. This whitepaper shows you how to attract more clients, choose the right ones, and maximize their business throughout the year.

Fill out the form on this page for an instant download.  You'll also receive a convenient link back to the document by email so you can download the file to your other devices.

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Offshore penalties and Tax Evasion

6. January 2018 22:12 by Jason Kelley in

 

          

HMRC is continuing to increase the number of tools available to tackle offshore evasion and are taking an increasingly aggressive stance in relation to offshore matters.

The government’s initiative to direct a further £60m to fund a threefold increase in the number of criminal investigations into serious and complex tax fraud is ongoing, and the enhanced penalties (see below) for undisclosed ‘offshore’ matters make it more important than ever for those with undeclared liabilities to take steps to regularise their tax affairs.

HMRC’s Worldwide Disclosure Facility (WDF) is the latest ongoing initiative to provide a means for taxpayers to bring to light undisclosed offshore income and gains.  Following a number of previous ‘tax-favoured’ initiatives in this regard, the WDF offers no specific favorable terms but does provide a clear forum via which individuals can settle overdue matters.

Penalties

The potential penalties related to undisclosed tax liabilities are currently as follows.  The categories refer to jurisdictions with varying level of perceived ‘secrecy’.  ‘Category 3’ jurisdictions typically have the lowest level of international information sharing agreements.

    Max. penalty if error is deliberate and concealed
(% of “potential lost revenue”)
Min. penalty if error is deliberate
(% of “potential lost revenue”)
Min. penalty if error is careless
(% of “potential lost revenue”)
Category 1 Voluntary n/a 30% 0%
  Prompted 100% 45% 15%
Category 2 Voluntary n/a 40% 0%
  Prompted 150% 62.5% 22.5%
Category 3 Voluntary n/a 50% 0%
  Prompted 200% 80% 30%

As might be expected, the rates of penalty are lower where disclosures are made voluntarily by taxpayers, as opposed to instances where HMRC prompt disclosure.  Similarly, the penalties for ‘careless’ as opposed to deliberate behavior incur a lesser penalty, and the timeframe over which unpaid tax may be assessed can also be limited in such cases.

If you would like assistance with offshore issues and managing a disclosure under the WDF please contact us.

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