Is the IRS Knocking
at Your Door?
By: Renee
Daggett
There are times when the IRS intimidates
taxpayers and they are so fearful, they will pay a notice without verifying
the accuracy. The IRS may not have all the facts, so do not pay
anything without checking the details. However on the flip side, I
have seen taxpayers ignore letters and make the situation much worse.
Dealing with the IRS can be stressful. Owing the tax can be what keeps
taxpayers awake at night. There ARE solutions. If you do owe
the IRS money, here are a few options I would like to share with you.
1. Pay them what you can each
month and be consistent!
2.
Set up a payment plan with the IRS:
a. They charge a one-time fee of $105 if you pay
by check in doing so, $52 if you allow them to do a direct
debit.
b. Interest and penalties still accrue (Interest
right now is 3% daily and penalties are .5% on the tax).
c. If it is less than $50k, you have 6 years to
pay it off.
d. No financial statements or bank statements
required to submit for approval.
3.
Offer in Compromise:
a. Pay less than you owe. Depends on:
i. Value of current
assets (house, rentals, boats, vehicles, retirement accounts)
ii. Amount of
discretionary income
iii. Ability to pay
future income looking at health issues and number of years left to generate
income, passive income opportunities.
b. Must submit financials, bank statements and
proof of expenses for approval
c. Once the offer is accepted, interest and
penalties are no longer accrued
d. Typically will take from 6-8 months or more to
go through the process
e. There are several options in payment, but usually
the agreed amount is paid soon after the offer is approved in either a lump
sum or payments
Here are some typical situations that Admin
Books can assist with an offer:
Scenario A:
A married couple ages 35 and 38. The wife gets pregnant and quits
working. They rent and have no assets. They owed $45,000, but
the IRS settled on a lump sum payment of $4,000.
Scenario B:
An 85 year-old single woman owns a home and a commercial building.
The IRS want to take the commercial building to pay for taxes from the last
25 years that they say totaled $1.5 million. The taxpayer sold her
personal residence, paid the IRS $85,000 and kept the commercial
building.
Scenario C:
A 58 year-old single man cashes out $100,000 of his retirement to purchase
a property. He puts the property in a friend’s name. There is a
falling out with the friend which leads into the man legally not owning the
property and owing the IRS taxes for the withdrawal of the funds plus the
early distribution taxes. The IRS assessed interest and penalties in
addition to the taxes owed, but settled on only paying the $39k of taxes.
Don’t get yourself in a situation where the IRS
deducts money from your bank account. Communication is the key.
Have someone on your side to fight for you. Call your tax
representative for sound advice!
Did You Know?
•The IRS allows business owners to deduct 50% of
their entertainment expenses. However, if audited, they will look at
the details of what was deducted and deem anything lavish or extravagant as
not deductible.
•If you have any foreign assets, you are required to
inform the IRS. If you do not, the penalties are very high!
•Do not co-mingle personal and business bank and
credit card accounts. You will eliminate your
credibility and any deductions may be denied!
Our Featured
Client:
IP Solutions, Inc.
We
have some fabulous clients that have amazing businesses.
As an added value of working with Admin Books, clients are highlighted in
our newsletters.
See their answers to our interview questions below.
1. What is your industry?
Legal: Art Licensing and Patent Contracting.
2.
What is unique about what your business offers?
With regard to the Art Licensing, we are a one-stop shop for
artists. We act as the agent on behalf of the artists at trade shows
and in dealing with licensees. We are also equipped to handle the
artist's copyright and trademark needs.
As for the patent contracting services, our
veteran patent paralegal is capable of assisting law firms and companies
with many issues concerning their patent practice/portfolios. Since
the patent field is so specialized, it is not possible to hire a temp unless
they have patent experience. Our paralegal fills a role that is
generally unavailable through regular temp agencies.
3.
Who is your ideal client?
For art licensing, that would be an artist with work that would appeal
to a broad range of manufacturers. It is also important to have a
great rapport and connection with clients.
On the patent side, the projects are generally
more interesting at companies rather than law firms. Working in the
patent departments at companies offers more flexibility in the work schedule.
Again, there must be a great connection between our paralegal and the
client.
4.
What is the best business advice you can pass on?
Always be straight forward with your clients, even when something goes
wrong. Transparency will help build trust and your services will
likely be requested multiple times. Never B.S. your way through an
issue and be direct and honest about failures.
"I've learned that
people will forget what
you said,
people will forget what
you did,
but people will never
forget
HOW YOU MADE THEM
FEEL."
~Maya Angelou, Poet
Our Business Corner
Do you have questions on home office rules,
auto deductions, charitable donations, etc.? Here is some
information on those HOT
Take advantage of this helpful guide full
of important BUSINESS TIPS.
Looking forward to
connecting with you,
408.782.9640
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