What Tolls the 10-year Statute of Limitations on IRS Tax Debt Collections?

There are certain time limits on the IRS to collect a tax liability, which is ten years from the time it is assessed. The "Collection Statute Expiration Date (CSED)" is the last day the IRS has to collect any unpaid taxes. Once the collection statute expires, the IRS loses its right to pursue collection of a tax liability. But there are certain things that can "toll" or "stop" the statute of limitations clock from ticking.

What Actions Can Extend IRS Statute Of Limitations?

By Filing an Offer in Compromise
Filing an offer in compromise will toll the collection statute by the time the IRS considers the offer, plus 30 days. The offer can take up to twelve months to be investigated, and if accepted, the IRS allows up to two years to complete the settlement process. Remember, submitting an OIC will largely work towards the best interest of the IRS.

Leaving the Country
Living outside the United States for more than six months may stop the clock on the CSED from running. So don't assume that you can run out the IRS statute of limitations while you are staying abroad. For that reason, the IRS very specifically asks about these details on its form 433A Collection Information Statement.

Filing of a Bankruptcy
The ten year statute of limitations period will be suspended if you file for bankruptcy – the suspension will last for the entire time you are under the protection of the bankruptcy court, plus six months. This period for Chapter 7 bankruptcies would be around 6-9 months.  For Chapter 13 bankruptcy, the suspension of the CSED period can last for several years.

Installment Agreement Request
If your proposed Installment Agreement is pending with the IRS, the statute of limitations will be tolled during the entire waiting period. If the IRS rejects the proposed agreement and you appeals against it, the CSED is tolled while the appeal is pending.

IRS Collection Due Process (CDP) Hearing
The CSED is tolled after the Collection Due Process (CDP) hearing request is filed and it will last until the hearing is over. The hearing process may take six months to complete; sometimes, this can take longer time if you use the appeal right to go to tax court. But an Equivalent Hearing does not suspend the IRS statute of limitations on collections.

Fraud Cases
If the taxpayer attempts for any fraudulent action to evade taxes or files a false return, then there will be no statute of limitations on IRS collections whatsoever.

Waiver/Extension
A taxpayer may voluntarily agree to extend the statute of limitations by signing a waiver form 900. The IRS is limited to request statute extensions only in conjunction with an Installment Agreement and when the taxpayer wants to pay a lower amount each month.

Wrongful Levy (Seizure)
The limitations period will be extended during the time where the taxpayer’s assets are under the custody or direct control of a state or federal court. The same applies during the time the IRS wrongfully has a lien in place against the property or when it has wrongfully seized the property from a third party.

8 tips before calling the IRS to set up a tax payment plan

8 tips before calling the IRS to set up a tax payment plan

IRS Tax Debt Forgiveness Programs – What You Need To Know

People suffering from insurmountable tax debts look for a lifesaver, something that helps them to stay afloat and provide protection from the scary IRS collection actions. Believe it or not, that lifesaver can be in the form of IRS's best-kept secret – tax debt forgiveness. The following paragraphs will explain about the various debt forgiveness programs and situations that force the IRS to forgive your tax debts.

Under what circumstances, the IRS will forgive tax debts?

Statute of Limitations on Tax Collection: When you owe the IRS money, can you ever be off the hook from IRS collection actions? The answer is "yes" you can. There is a clock that will start to run on the IRS as soon as the tax is assessed. This is technically referred to as statute of limitations. Once the statute expires, your liability expires as well as the IRS's legal right to pursue collection efforts. So, if you can pay only X amount of dollars in the next ten years or so, what if the IRS is offered X+ $1 dollars by you to settle tax dues? Is that a good deal for the IRS? Can it work wonders for you? Yeah, it could very well be.

Reasonable Collection Potential (RCP): You may owe thousands or even millions of dollars to the IRS but what if you don't have any assets and/or income? How will you pay off the tax debt? This is where the IRS makes a determination of taxpayer's repaying potential, technically referred to as Reasonable Collection Potential (RCP). The RCP is how the IRS evaluates the taxpayer's ability to pay back their tax debts. If you are dead broke and your RCP is $0, paying just one dollar to the IRS can be a good deal to them. But settling for "pennies for the dollar" is not that likely to happen as most people aren't without any money. However, this is another instance where your tax debts could be forgiven by the IRS.

”Fresh Start”: Under certain circumstances, Chapter 7 bankruptcy can stop all the IRS collection efforts and also completely discharge back tax debts. In other words, you don't have to repay anything to the IRS, even if you have huge amount of back tax debts. Your debts forgiven and a fresh start granted – allowing you to start over a new life free of IRS liens and levies.

IRS Debt Forgiveness
So now, let's have a brief look into the specific IRS debt forgiveness programs.

Currently Non-Collectable Status
If your RCP is very low as your income or household cash flow matches the IRS "allowed expenses" and if you don't have any assets to sell, you may be able to qualify for Currently Not Collectible Status. Under this, the IRS will stop coming after you to collect back taxes and you will be protected from IRS levies, apart from your current withholding. In contrast to offer in compromise or bankruptcy that put collection statute on hold, the clock will continue to run while you are listed as non-collectible. If you have only few years left, you can run out the clock on the IRS. That means you pay the IRS nothing for your back taxes.

Partial Payment Agreement
If you do not qualify for CNC, the next best tax debt reduction plan is Partial Payment Installment Agreement. In this program, you pay a monthly amount to the IRS that you agreed upon. Similar to CNC, the collection clock continues to tick for PPIA also; you have to pay until the statute runs out. Once the statute of limitations expires, the IRS forfeits the right to collect the balance tax dues.

Doubt as to Collectibility – IRS Offer in Compromise
There are three different reasons the IRS can forgive your tax debts through the Offer in Compromise program, but the most common one is "the Doubt as to Collectability". It is based on what you afford to pay back to the IRS within the statute of limitations. At IRS Medic, we have a high success rate of reducing our client's tax debts by effectively using this program.

The IRS has realized that the chance of collecting back taxes more than what the taxpayer can afford to pay is very unlikely to happen. So they figured out it is in their best interest to forgive the tax debts either partially or fully depending on the taxpayers' ability to pay back. Remember, the IRS forgives tax debts not out of kindness towards the struggling taxpayers. The key is to offer hope and bring them back as productive, taxpaying citizens.

IRS Revenue Officer – First Contact

IRS Revenue Officer – First Contact

2015 FBAR filing procedures

2015 FBAR filing procedures

Statute of Limitations on Foreign Income

Statute of Limitations on Foreign Income

IRS Fresh Start Program Installment Agreement

IRS Fresh Start Program Installment Agreement

Form 5471 IRS OVDP

Form 5471 IRS OVDP

IRS Fresh Start Tax Amnesty Guidelines

IRS Fresh Start Tax Amnesty Guidelines

IRS Fresh Start Program Myths

IRS Fresh Start Program Myths



Myth Number 1:  It's not a program. It's a lifestyle, baby!

IRS Fresh Start Program Overview

IRS Fresh Start Program Overview



Entire video located here:  http://www.irsmedic.com/irs-fresh-start-program-2015/

Foreign Real Estate Tax Schedules: A Success!

Foreign Real Estate Tax Schedules: A Success!

Overseas and Foreign Bank Account Reporting Disclosure

Overseas and Foreign Bank Account Reporting Disclosure

Tax Problem Consultation: Sales pitch or actual help?

Tax Problem Consultation: Sales pitch or actual help?

Complex Expat Tax Problems

This is very common: Todd was sent to Singapore for a three-year long
assignment and he was assured that all of the tax-focused aspects of his
move would be taken care of by his employer. They were not. Only
Singapore returns were prepared and filed on his behalf. After coming
back to the US, Todd realized that he was delinquent with his US tax
filings. That is, nothing had been filed! Learn how we fixed this problem here. http://www.irsmedic.com/2015/04/06/expat-tax-problems/

Complex Expat Tax Problems

Complex Expat Tax Problems

This is very common: Todd was sent to Singapore for a three-year long
assignment and he was assured that all of the tax-focused aspects of his
move would be taken care of by his employer. They were not. Only
Singapore returns were prepared and filed on his behalf. After coming
back to the US, Todd realized that he was delinquent with his US tax
filings. That is, nothing had been filed! Learn how we fixed this problem here.  

FBAR audit success

FBAR audit success

An awesome job by partner, Michelle Wynn! The cloud to this silver lining? Our tax code is so out of control it takes someone with this extraordinary talent and passion to finally get the right result for a client who did nothing wrong but try to make a buck or two overseas.

Positive OVDP Opt-out Results

Positive OVDP Opt-out Results

US taxation of Chinese nationals

US taxation of Chinese nationals

Many Chinese nationals who are "US persons" are in non-compliance with the IRS and Bank Secrecy Act. I asked one of our firm's senior tax preparers and Enrolled Agents, Julia Zhai, who is also from China, why this is and why many are reluctant to use one of the IRS voluntary disclosure programs. 

OVDP help for IRS anxiety

OVDP help for IRS anxiety

To remove IRS OVDP anxiety, you can image a beautiful garden, and a warm
breeze where you are totally safe. Or you can take action by learning
about what OVDP programs are available (and you still can imagine you
are in your beautiful garden).

FBAR success stories

FBAR success stories



Sometimes what convinces a client that you are on their side is when you actually demonstrate that you are on their side, as one of our OVDP specialists Jenn Pallatto did in this FBAR success story. 

Shared Responsibility Payment

Shared Responsibility Payment

The Unholy Terror that is the Shared Responsibility Payment

I’m not going to try to explain this too much. Just that when I first saw the source video I used in this edit…I
was speechless. I am now finally able to express my terror, via video
footage of my youngest son Ellis, as we re-enacted a scene from Stanley
Kubrick’s “The Shining.”

IRS Business Tax Audit Success — IRS examiner overruled

IRS Business Tax Audit Success — IRS examiner overruled

Foreign Bank Account Reporting – How to Avoid Excessive Penalties

Since the UBS tax evasion controversy that picked up in 2008, the federal government began looking for all possible ways to increase their tax revenue. Nowadays, the prime targets for the IRS were the U.S. taxpayers with undeclared offshore accounts. They set out to find and prosecute the non-compliant individuals with hefty FBAR penalties. The IRS has decided to target the wealthy taxpayers by scrutinizing their returns, just hoping to find someone with unreported offshore income.

The severity of FBAR penalties
It is absolutely legal for US citizens and residents to hold foreign bank accounts. Individuals have offshore accounts for a variety of legitimate reasons, including those that have family in a foreign country, those accounts that are inherited and those who want to facilitate transactions for business purpose. These people are usually dual citizens who play an important role in the economic growth of our country. But the sad truth is, the U.S. asserts universal taxation legal power over all income of an individual, regardless of the location of the paying source yielding the income or revenue.

FBAR penalties are assessed per account value; it is not calculated on your income or per unfiled FBAR. Further, the penalties will be assessed for each account for each year there is a violation that could end up with extreme disproportionate penalties. As an example, if you have $600,000 in your offshore account, the IRS can impose $300,000 as penalties - for just one year. For two years, the willful FBAR penalties could eat up your entire amount on the bank account. You see, the IRS will not necessarily have to stop here. They could potentially calculate penalties for 6 or more years that can put you in a position of negative equity.

What are your options to avoid FBAR penalties?
The following are some of the options for people qualifying to disclose under the voluntary disclosure program.

Standard OVDP with 27.5% penalty: Intended for people with some bad facts on their side, the standard 27.5 percent offshore penalty ("in-lieu-of-FBAR penalties") is applied to the taxpayers' "offshore assets" at the time where they were highest in value during the OVDP period.

50% Offshore Penalty: This applies to taxpayers with offshore accounts where public disclosure has been already made on the financial institution. The 50% Offshore Penalty will be evaluated on the highest aggregate value during the eight years covered under the OVDP.

Domestic Streamlined OVDP: This is for only to non-willful taxpayers who are living in the US and are willing to pay a penalty equal to 5% of the highest year-end account balance.

Streamlined OVDP offshore: Taxpayers residing outside the United States would be eligible for a 0% offshore penalty as long as they meet the requirements.

Voluntary Disclosure: In case your OVDP is turned down as you are under investigation, it is advisable to try to enter into a regular IRS voluntary disclosure program or at the minimum get ready for trail.

FBAR only: The IRS may not impose a penalty for taxpayers who didn't file missing FBARs if there are no unreported tax liabilities on their foreign income.

OVDP Opt-out: A taxpayer may elect to "opt out" if he/she disagree with the application of offshore penalty or other settlement structure of 2014 OVDP and want to have their case handled under normal audit process. A FBAR warning letter, Letter 3800 or non-willful penalty is the ultimate goal of any opt-out.

Being under investigation for unreported foreign account
If you are under audit for having significant unreported offshore income or at high risk for criminal prosecution, you need to get legal protection by hiring a tax attorney specialized in handling FBAR cases. Criminal penalties for FBAR violators include a fine of $250,000 along with 5 years of imprisonment. Moreover, the assessment of a civil penalty will be done separately in addition to criminal FBAR penalties.

Either way, get an expert opinion from an experienced FBAR attorney who can help you determine if are at high risk for criminal prosecution. They will help in bringing your offshore account into IRS compliance and minimize your criminal exposure to the IRS.

2015 Tax Amnesty

2015 Federal Tax Amnesty Programs



It would be nice if we lived an world where taxes were simple and any penalties for getting them wrong would be small. But neither is the case. Tax problems are serious problems so getting real legal advice for any federal tax amnesty program that would be best for you is critical.2015 Federal Tax Amnesty Programs

IRS tax debt forgiveness programs

IRS tax debt forgiveness programs



The IRS doesn’t forgive debts out of the kindness of their blessed heart. They forgive tax debts because it could be in their best interest.   The key is to align the government best interests, with yours. 

Unreasonable about FBAR reasonable cause?

Unreasonable about FBAR reasonable cause?



We've seen IRS examiners focus solely on "reliance upon a tax professional." Even though this is not what the IRM states. Also, for a future topic, I am looking at how the Treasury regulations requiring an FBAR to be filed have nothing to do with the claimed authorizing statute. That is , 31 U.S. Code § 5315 - Reports on foreign currency transactions, is about reporting the import and export of currency, not reporting foreign bank accounts. Not that this argument matters much, it's more of an interesting point that will be ignored. But still, a terrific argument. 

Unfiled tax return forgiveness

Unfiled tax return forgiveness

OVDP for US Corporations, Partnerships and Trusts

OVDP for US Corporations, Partnerships and Trusts

2015 Tax Law Changes – What You Need To Know

As 2015 filing season has started, it's time for the taxpayers to be aware of the latest tax law changes and how it will affect federal tax returns for the 2015 tax year. This article will focus on three important changes that every taxpayer should know before filing their return.

Affordable Care Act 2015
Affordable Care Act (ACA) commonly referred to as ObamaCare is in full-swing and it's time to take a closer look of the new rules that comes into effect starting 2015. Under the health-care reform law (individual mandate), most citizens are expected to have health insurance or risk paying a penalty. Individuals may choose to obtain insurance from government-run marketplaces, also called state run exchanges or from private insurance, in case if they are not covered under employer sponsored health insurance program.

Those individuals who didn't get health insurance will have to fork out non-compliance penalty to the IRS starting this year. For instance, the minimum penalty for the 2014 tax year is $95 ($285 for families) but the middle and upper-income families will actually end up paying more with 1% of income is the 2014 default penalty rate. The penalty is scheduled to rise considerably in 2015: to a $325 minimum per adult or 2 percent of income, whichever is greater. The scheduled penalty for the 2016 tax year is even worse: a greater of 2.5% of income or $695 for individuals and $2,085 for a family.

From 2015, small businesses with less than 50 employees can access the Small Business Health Options Program or SHOP, for health coverage to workers and themselves. To help pay for the employee premiums, tax credits are offered to businesses with fewer than 25 full time employees, with average annual wages below $50,000. Beginning November 15th, 2015 companies with hundred full-timers or less can start using the SHOP program.

2015 Federal Income Tax Brackets
The top income tax rate of 39.6 percent will hit individuals with incomes of $413,200 and higher for single filers and $464,850 for married taxpayers filing a joint tax return. This is up from the 2014 requirements of $406,750 and $457,600, respectively. The capital gains tax rate remains at 0% for individuals in the 10% and 15% tax brackets and the 15% rate for all other tax brackets. But for individuals in the 39.6% income tax bracket, 20% long-term capital gains tax rate will be applied. Personal and dependency exemptions have gone up by another $50 to $4,000 for tax year 2015. Standard deductions increase to $6,300 for single filers, up from $6,200 for 2014 and $12,600 for married joint filers.

Now, More 401 (k) Retirement Savings But Limited IRA Rollovers
Retirement savings contributions are up. Now you can contribute up to $18000 to qualified retirement plans, an increase of $500 from 2014’s limit of $17,500. The catch-up contributions limit is also increased by $500 for participants who are 50 or older.

The new IRA rollover limitation is yet another significant change made in the 2015 tax law. Beginning on Jan. 1, 2015, investors can perform only one tax-free rollover from one eligible IRA to another in a 12 month period. An IRA rollover often involves transfer of funds from one retirement account into another retirement plan. Prior to 2015, people were allowed to exclude rollover distributions from one IRA to another from their income if the same was deposited into another plan within 60 days. This enabled individuals to essentially take penalty-free, tax-free and interest-free loans from one's retirement savings. Unfortunately, the new rule has eliminated such tax-free IRA loans.

However, one can still do multiple IRA-to-IRA transfers during a 12 month period. This can be done through a direct trustee-to-trustee transfer, which one can perform for unlimited number of times in a given year. But remember that not all types of IRA transfers are eligible to receive tax free distribution. It is highly recommended for taxpayers to get an expert opinion from a tax lawyer before taking such IRA distributions.

The Thrill of IRS Notice CP523

The Thrill of IRS Notice CP523

Hard Hurtin' Dan Geurtin, Esq. won't let a CP523 keep you down. He lays out his reasons here. Now. Only at IRSMedic.

Who is liable for unpaid IRS payroll taxes?

Who is liable for unpaid IRS payroll taxes?



People without taste buds and/or common sense are responsible for the regrettable popularity of quinoa, but who is responsible for unpaid payroll taxes?

Delinquent FBAR

Delinquent FBAR

Dear Diary… My delinquent FBAR is actually now a delinquent FinCEN Form 114
and my magic wand will not make this entire mess go away. I am just
going to pretend I am not bothered. That should work, right?

IRS private letter ruling

IRS private letter ruling 

We like to know what to expect in life, in love, and with the IRS. So knowing how the IRS is going to rule on something with a Private Letter Ruling, before you have any liability, is typically a good thing. But sometimes, a Private Letter Ruling may not be possible or may not be the best idea. In this article I weigh the pros and cons. But mostly I talk about boats and Star Wars cause like tax stuff is so boring.

Form 872 consent to extend the time to assess tax

Form 872 consent to extend the time to assess tax

 

Experts have yet to authenticate whether or not this as an early IRS recruitment poster.

IRS statute of limitations on collections

Calculating your CSED is just as easy as finding out who the father is (on an episode of Jerry Springer).

2015 IRS tax filing deadlines for Foreign Income and Expats

2015 IRS tax filing deadlines for Foreign Income and Expats

A spoonful of sugar helps the IRS deadlines go down, the IRS deadlines go down…wait. What’s the sugar in this analogy? Fear of non-compliance? Hmmm. Still not buying it. Maybe I should have picked a song from Slayer’s catalog for this post, as opposed to Mary Poppins.

Important 2014 IRS 1040 Expat and foreign income changes

Important 2014 IRS 1040 Expat and foreign income changes



What is the deal with ObamaCare Penalties and US Expats? Let our friend Vlad explain it for you.

How to Deal With IRS Payroll Tax Problems

You run a business. Your sales have decreased, profits were down and cash flow has turned negative. You're in short of cash to pay your bills/vendors and your payroll tax deposit is due this week as well. There will be a temptation for you to hold paying for 941 employment taxes and pay your employees only their net pay. You want to use that tax money to pay most of your bills. Since the IRS looks far away from your world of business, so why not forget about them? You can always catch up paying the past dues sometime later like once after your cash flow gets better right? Wrong.

It's a completely different case, if your bookkeeper decides to embezzle your payroll tax deposit but your main problem is with the cash flow. The gross sales went down all of a sudden or the payments from the clients were not showing up on time. And then once you did get money, you are prepared to pay the IRS as much as and as far as possible. You think that this approach can solve your problem as well as keep Uncle Sam happy.

But then you learn that the IRS wants you to pay the entire payroll tax dues; they never like receiving just a portion of it. And since the late payment penalties are going to be huge with payroll tax deposits, you're now pushed into a world of never-ending tax problem. But can you come out of it? What is the solution to deal with the IRS payroll tax problems where you don't have to contend with the devil?

This is what you need to know. When you have a viable business that is experiencing problems with cash flow, the IRS has got a vested interest in keeping that business afloat! They want to see you be successful again on your business so they can collect unpaid payroll taxes as much and as quickly as they possibly can. The IRS may even encourage you to borrow on credit cards or take a loan to pay back the tax owed while putting levies on your business and personal assets at the same time.

What are the available options for you to deal with your payroll tax problems? Offer in Compromise, negotiating an Installment Payment Agreement, Non-Collectible Status and Penalty Abatement are a few solutions that might be available to you. Negotiations might include having your federal tax lien removed if it hinders in getting a loan to pay for your tax obligations. Also you should look for alternatives to stop the assessment of Trust Fund Recovery Penalties.

However, when you are not able to generate revenue and profits even after months of hard work, your business will be considered as not viable. And to top it all off, the Internal Revenue Service will not look kindly on people who aren’t able to pay up their payroll taxes. They just want their taxes no matter how bad your scenario is. The IRS views nonpayment of payroll tax liabilities a critical issue and they won't think twice in shutting down your company and then sell its assets to recover their taxes. And remember, pay-roll taxes cannot be discharged by filing a bankruptcy.

In such situations, a presence of legal professional can create a huge difference in the result of your case. The expert lawyers at IRS Medic have helped thousands of taxpayers with payroll debt problems throughout the country. We will make use of the very best solutions to stop aggressive collection efforts by the taxing entities and ensure the continuation of your business operations. Whether you are “in business” or “out of business” we can help you to put your payroll tax issues behind you!

2014 tax return changes

2014 tax return changes

Some of the ugliest tax return changes for 2014

2015 IRS tax filing deadlines

2015 IRS tax filing deadlines



This is the domestic schedule that you have been looking forward to seeing. Or perhaps not. 

International Tax Planning Strategies

International Tax Planning Strategies



Robert Hanson and I discuss why it is that Google and Apple can minimize US taxes via such devices as the "Dutch Sandwich," but why you can not. And then we get into some domestic and international tax planning strategies that do work for the individual and small and medium sized businesses.

IRS Post-Appeals Mediation

IRS Post-Appeals Mediation

If IRS Appeals "does not seek to take sides in a dispute" but rather offers "an objective point of view on each individual case," then should that not foreclose the necessity of Post-Appeals Mediation? What possible value could a Post-Appeal Mediation program could add if IRS Appeals was able to perform its core mission properly?

2015 Tax Law Changes Round-up

2015 Tax Law Changes Round-up

The hidden suffering caused by an IRS tax problem

The hidden suffering caused by an IRS tax problem

The Stress-Related Mental Health Issues caused by an IRS tax problem can end!

Many
of the people we work with well their IRS tax problems may exacerbate
or create issues such as depression, anxiety, alcoholism, and gambling
problems. In very rare instances, these issues can rise to such a level
that someone takes their own life. This is true. If someone in your life has an IRS tax problem go find them, tell them that you will help them and then give them a big old bear hug. Do not be surprised if they cry no matter how stoic they normally are.

If you are the one with an IRS tax problem

If
you the one are suffering from an IRS tax problem, and you can’t quite
break the news to someone important in your life. Then simply share this
blog article with your family  and close friends.  Let them know that
what we are saying is 100% correct, and let them know you need to have
them on your side.

Latin America FATCA update

Latin America FATCA update

FATCA: providing ugly acronyms for your reading displeasure

FATCA, itself an acronym, 
provides fertile grounds for many additional acronyms — for a world
apparently starved of esoteric lingo.  One important FATCA-related
acronym is FFI — which stands for Foreign Financial Institution.

Yes, one could get bothered by the ego-centrism of the US tax code, i.e., a Costa Rican bank in San Jose is not actually foreign
to itself, but there is so much to dislike about the over-regulation of
the worldwide economy via FATCA, that one should really keep their
powder dry for other outrages. ¿no es correcta