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Updated: Nov 26

 

I have been successful at negotiating an offer in compromise for many of my clients. Unpaid IRS debt can result in tax liens, poor credit rating, and wage and bank account levies. Settling your debt will give you a peace of mind so that you can live your best life! However, there are strict guidelines that warrant such an arrangement with the IRS which I will discuss below.

 

WHAT IS OFFER IN COMPROMISE?

The IRS will allow you to settle the debt for less than what you owe based on financial hardship. The IRS will consider the following:

  • Education/Occupation

  • Ability to Pay

  • Income

  • Allowable Expenses according to the IRS National Standards

  • Assets

  • Compliant with all tax filings and payments while offer is under consideration

Based on these guidelines, the IRS will determine if they can reasonably expect payment over a certain amount of time. If not, you may qualify to settle your debt. I know it sounds weird, but the more you owe the better your chances of an offer in compromise. Use the https://irs.treasury.gov/oic_pre_qualifier/ to determine if you qualify.

 

Probation Period

If your offer in compromise is accepted-you must file and pay all current taxes timely for 5 years including estimated tax payments if applicable. Should you default, the offer will revert to the original amount owed.

 

Contact our office at 770-575-9737 for a free 30-minute consultation to determine if an offer in compromise is right for your situation.

 

End of Year Checklist

  • Business owners-check that you have completed W9s for your contractors

  • Order 1099s and W2s

  • Review your financial statements

 

  • P. Diggs-Costen EA, MBA

 

I have represented many clients in an audit. The majority of tax returns not prepared by me; I might add! My rule is to prepare a return as though there will be an audit. The good news is the IRS is auditing less returns due to budget cuts. But, don't roll the dice. I have observed these five most common red flags:

 

  1. Excessive Auto Mileage

Let me ask you, could you substantiate your records detailing trip purpose and business miles driven? Do you record beginning and ending mileage? Do you use your vehicle for business and personal? If so, how many miles are personal use? When these records are not available, the auditor will disallow your deduction.

 

I know it is a hassle to keep a log, but technology has made this task more palatable. Also, many employers have accountable plans (require documentation for reimbursement).

 

2. Meals

 

Meals that are not for client meetings or provided for employees are non-deductible unless you are on a business trip. In other words, if you go to McDonald's alone for lunch in your tax home- this is not tax deductible. There are two tiers 50% and 100% deductible.

50% Deductible

A meal with client where work is discussed

Employee meals

Travel meals

100% Deductible

Company-wide holiday party

Food and drinks provided to public

 

Write the purpose of expense on receipts and or bank and credit card statements

 

3. Travel

 

In an audit you must substantiate time and place of expense along with the business purpose of trip. Your receipts or bank and credit card statement records will not sufficiently prove business travel.

 

4. Home Mortgage Interest Claimed on Schedule C (Business Return)

 

Yes, I represented a client in an audit where his tax preparer added his mortgage interest as a business expense. Naturally, the deduction was disallowed. Unless you own your office building, mortgage interest is a personal expense.

 

5. Fraudulent Tax Preparers

 

Over the years, I have obtained new clients because their tax preparer is under criminal investigation by the IRS or State agency for filing fraudulent tax returns. These preparers overstate deductions to increase their client's refunds. Their business model is to build a reputation on charging less to prepare the returns and obtaining large refunds for their clients. Thereby, building their practice on sheer volume. The problem is when they are caught, the IRS and or state will audit every return filed by them. Subsequently, the taxpayer is left with a huge tax bill. If it sounds too good to be true; it likely is!

 

To avoid these pitfalls and getting hit with a large tax bill post audit- remember to be prepared to substantiate all claims made on your taxes. Further, ensure your tax professional practices due diligence, too.

 

I have provided a short summary for this article. For more information, contact us at 770-575-9737 for a free consultation.

 

 

 

UPCOMING DEADLINES

 

  • Individual Tax Return (Extension) October 15, 2019

  • C Corporation Tax Return (Extension) October 15, 2019

 

  • P. Diggs-Costen EA, MBA

Updated: Sep 3

 

While writing this article a client contacted me panicked. He was renewing his passport to travel out of the country soon, and the application contained a question regarding unpaid taxes. I informed him the IRS implemented another enforcement tool for seriously delinquent taxpayers by sending certifications regarding unpaid debt to the State Department to revoke or not issue you a passport. I assured him that he did not fit the criteria outlined:

 

The IRS defines unpaid federal taxes over $52,000 including interest and penalties where:

  1. A tax lien has been issued

  2. A levy has been filed

 

However, you are not at risk if you are in an approved installment agreement, Offer in Compromise, or other legal remediation. You will also not be affected if you are in bankruptcy, currently not collectible status, pending Offer in Compromise, pending installment agreement, reside in federally declared disaster area, or an identity theft victim.

Further, if you are currently out of the country-the State Department will allow validity for you to return to the United States.

 

Here is what to expect if you meet the criteria:

  • The IRS will send you a notice before your case is referred to State Department.

  • You will then have the opportunity to contact the IRS and provide a solution.

  • The IRS will reverse certification if you meet certain qualifications.

Costen Tax Group has handled hundreds of IRS collection cases and we can help you resolve your tax situation. Contact us at 770-575-9737 for a free consultation.

Important Tax Returns Due Date September 15, 2019

 

  • S Corporation Tax Return

  • Partnership Tax Return

  • 3rd Quarter Estimated Tax Payment