In August 2013, I wrote a blog regarding New York’s new enforcement procedure to collect state back taxes by suspending drivers’ licenses. The link to my blog post is: https://www.irsproblemsolve.com/2013/08/new-york-back-tax-penalty/. Below discusses a recently published case regarding the license suspension program. The case illustrates how simple it is for NY to suspend a driver’s license for the failure to pay back taxes.
In order to suspend a New York drivers license for the failure to pay taxes, Tax Law §171-v , requires that the taxpayer owe $10,000 or more of NY back taxes. The statute further requires that NY send notification to the delinquent taxpayer of inclusion into the driver’s license suspension program. Upon receipt of the notification, the delinquent taxpayer is provided with 60 days to respond. The taxpayer’s response is limited to the following:
- Pay the back taxes or establish a payment plan
- Notify the Division of a tax exemption; or
- Protest the suspension by filing a request for a conciliation conference with the Bureau of Conciliation and Mediation Services (BCMS) or a petition with the Division of Tax Appeals.
Around the tax deadline, people will call and ask the following questions:
- Should I file if I cannot pay the tax due on the return?
- Should I file if I don’t have all of my tax information?
- Should I file my tax return if did not pay enough taxes throughout the year?
- Should I file if the person for whom I work didn’t take out any taxes?
You should always timely file no matter what. Not timely filing a tax return is reckless, financially devastating, and exposes you to criminal prosecution. If you owe money and don’t file, then you will cost yourself a lot of money in penalties and interest. If you owe taxes and file your return late, then the IRS will assess the failure to file penalty. The failure to file penalty is a penalty based on the amount of tax owed that accrues at 5% per each month that the return is late for a maximum of 25%.Continue Reading...
We are proud to announce that Todd S. Unger has been selected for the Super Lawyers 2015 New Jersey Rising Stars list. This honor is reserved solely for those lawyers who exhibit excellence in their practice.
His listing will be placed in the New Jersey Super Lawyers Magazine (April 2015 issue), which reaches more than 33,000 attorneys, and in New Jersey Monthly (April 2015 issue), which reaches more than 558,000 readers. The selection process for the Super Lawyers 2015 New Jersey Rising Stars list is rigorous, ensuring only the best and brightest attorneys are chosen for recognition.
In April 2013, the selection process for Super Lawyers was granted a patent from the United States Patent and Trademark Office. As a third-party rating system, it is impartial and credible — providing relevant information for attorneys and consumers. Super Lawyers rates attorneys in more than 70 different areas of practice, looking to recognize those who have attained high levels of professional achievement and recognition from their peers.Continue Reading...
A Slight Increase of Partnership Audits
The IRS is reporting that partnership audits have increased during the 2014 fiscal year. According to the IRS, there was a slight increase from the 2013 rate of 0.42 to 0.43 percent in 2014. To put the numbers in historical context in 2007, the audit rate for partnerships was 0.4 percent. While the increase in partnership audits was slight, it paints a different picture from the audit rate of other business structures.
Large and Small Corporation Audits Decline
According to the IRS, the audit rate has declined for large corporations (corporations with assets of more than $10 million). IRS Commissioner John Koskinen stated that audits for large corporations fell by 20% between fiscal year 2013 and 2014.
According to the IRS if you are operating a small corporation (a corporation with less than 10 million in assets), then you have slightly less than a 1% chance of being audited. The IRS reported the 2014 fiscal year audit coverage rate was the same as the prior fiscal year of 0.95%. In the 2012 fiscal year, the audit coverage rate for small corporations was 1.12 percent.Continue Reading...
Contrary to popular belief, the IRS wants to work with taxpayers. Owing the IRS money can be intimidating, but you have options. One option when you owe back taxes, is to try to negotiate less than the total amount owed. This is called an offer in compromise, and can be an excellent way for you to catch up financially and move forward with your life.
In some cases, you won’t be able to pay all the taxes you owe. If you can prove to the IRS that you do not have the ability to pay your owed taxes within 10 years, the offer in compromise could be worth trying. Tax Attorney, Todd Unger was recently quoted in a New York Times article that dealt with the IRS and its offer in compromise program. Unger stated that “when the IRS accepts an offer it can be the deal of a lifetime for the taxpayer needing assistance.”Continue Reading...
Real Estate Investors Watch Out When Preparing Your 2014 Tax Return. Audits and Tax Litigation Involving Real Estate Losses are on the Rise
A highly audited issue that often leads to US Tax Court litigation is whether or not real estate losses can be deducted as ordinary losses rather than having to classify the loss as passive. The disallowance of the passive activity loss has been such a hot tax controversy that it was listed among the Taxpayer Advocate’s “Most Litigated Issues” in its 2014 Annual Report to Congress. Therefore, it is worth paying extra special attention to reporting real estate losses when preparing and filing your 2014 taxes.
Real Estate Tax Controversy Background
As part of its anti-tax shelter agenda in 1986, Congress codified IRC 469. Generally speaking, IRC 469 precludes deducting passive activity losses from trade or business activities in which you do not materially participate. The tax code considers rental activities to be a passive activity.Continue Reading...
Late Filed Returns and Discharging Back Taxes
A State of Uncertainty
On December 29, 2014, the Court of Appeals for the Tenth Circuit, (In re Mallo, 2014 WL 7360130 (10th Cir. 2014)), followed the Fifth Circuit (In re McCoy, (CA 5 2012) 666 F.3d 924) and several other tax bankruptcy court cases which held that late-filed tax returns cannot be discharged in bankruptcy. Unfortunately, this draconian result known as the One-Day-Late Rule could preclude the taxpayer’s goal of eliminating back taxes in bankruptcy and obtaining a fresh start.
How do I eliminate taxes in bankruptcy?
In bankruptcy, back taxes are either secured or unsecured claims. If the IRS or state taxing authority files a tax lien, then the tax claim is secured and paid first from the taxpayer’s assets. If the tax claim is unsecured, then its treatment will be contingent upon whether the IRS’s claim is classified as a priority or a general claim.Continue Reading...
Through the 2015 Consolidated Further Continuing Appropriations Act, Congress cut the IRS’s budget for the fifth consecutive year. Congress reduced the IRS budget by $346 million from the 2014 fiscal budget which was $526 million below the IRS’s 2013 funding level. The IRS budget is cause for concern when the tax season starts on January 20, 2015.
Where is my tax refund? I cannot get through to the IRS.
IRS Commissioner, John Koskinen estimated that approximately 50% of calls will be answered during the 2015 filing season. Koskinen stated that “those who do get through could easily wait 30 minutes more.”
In June 2013, Nina Olsen, head of the Taxpayer Advocate, an independent unit of the IRS whose mission is to protect the taxpayer said “the IRS is an institution in crisis”. . . as a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.” As a tax attorney whose focus is exclusively on taxpayer representation, I would agree. The IRS is not functioning well. Some of the problems that I am encountering in my tax practice are as follows:Continue Reading...
In a recent US Tax Court decision, Budish v. IRS, T.C. Memo. 2014-239, the Court held that a settlement officer erroneously concluded that the Internal Revenue Manual (“IRM”), an IRS employee handbook, required the filing of a notice of federal tax lien as a condition to execute an IRS installment agreement. This is an important taxpayer victory because of the difficulty involved in avoiding an IRS tax lien. It further emphasizes the importance of timely filing an appeals hearing when the IRS threatens to levy.
The IRS Collections Unit Threatens a Tax Levy
In Budish, the taxpayer owed $205,000 in back taxes. In an effort to collect the back taxes owed, the IRS collection unit threatened to levy the taxpayer’s property or right to future property. The taxpayer filed for a Collection Due Process Hearing (“CDP”) which afforded the taxpayer the right to appeal the tax levy and provide US Tax Court review if the taxpayer and appeals could not negotiate a tax resolution.Continue Reading...
Mistakenly, many believe that filing a tax extension is an extension of time to pay your taxes. While a tax extension provides an extension to file your tax return, it does not provide an extension of time to pay taxes owed.
The federal income tax is a pay-as-you-go tax system. If you’re an employee, then your employer will withhold income tax during each pay period in your name and social security number. If you are self-employed, then you would make estimated tax payments throughout the year based on earnings and, generally speaking, have to pay self-employment tax. If you are an employer, then you may have to make federal tax deposits for payroll taxes throughout the year as you are paying your employees.Continue Reading...