Archive for category: IRS Operations & Procedures

Many people want to know what they are up against for failing to file and or pay by the tax deadline of April 15^th so here are some things for you to consider.

1.         Federal income tax returns are systematically checked for mathematical accuracy. If there is any money owed, you will be sent a bill. So don’t worry so much about math errors on the federal tax return as it will be caught. Generally speaking if you catch a math error after the tax return was submitted it can make sense in many instances to wait for the IRS to contact you with the changes before going through the brain damage of filing an amended federal income tax return. The tangible cost incurred for waiting will be the assessed penalties and interest for the difference between the original underpayment and the actual balance owed.

Keep in mind too that a math error on a federal tax return will also impact your state income tax return and various states react differently to errors. So you will want to reach out to your state department of revenue with any necessary adjustments as soon as they are discovered.

2.         Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate, determined quarterly is the federal short-term rate plus 3% compounded daily. This in and of itself is not so onerous however when penalties are added in a $10,000 balance due can jump up to $15,000 in approximately 5 months.

3.         If you file a return but don’t pay all amounts shown as due on time, you will be subject to pay a late payment penalty. This penalty is on the amount of tax due at the rate of one-half of one percent for each month, or part of a month, up to a maximum of 25%, on the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. If you file by the return due date, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect.

4.         If you owe tax and don’t file on time, you will be subject to a total failure to file penalty. The total failure to file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months. If your return is over 60 days late, the minimum penalty for late filing is the lesser of $135 or 100% of the tax owed.

5.         You must file your return and pay your tax by the due date to avoid interest and penalty charges. Be mindful that the effective rate of accruals with the IRS can be as high as 8% per annum. Often times the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.

6.         Properly identify each payment you are making. To ensure your payment on a bill for tax is credited properly, be sure to return the tear-off stub on your bill. Make your check or money order payable to the United States Treasury. Do not make your check payable to Internal Revenue Service as it will likely be returned by the government to you. Enter the primary social security number or employer identification number, the tax year and form number, and your telephone number on your check or money order. Do not send cash.

What Should You Do?

If you believe there is an error on your notice or bill, do not assume that the IRS will discover this on their own. The IRS will not and will continue their efforts to aggressively collect the money they say is due. Instead, enlist the services of a qualified tax attorney to resolve these errors. There are circumstances where penalties can be abated if you have reasonable cause and the failure was not due to willful neglect. Working with a tax attorney lawyer at the Law Offices Of Jeffrey B. Kahn, P.C. with offices in Los Angeles, San Diego, San Francisco and elsewhere in California is the best way to assure that your account is corrected, and penalties are abated and that you get a payment plan or settlement that works for your situation and prevents IRS collection action to be taken against you.

Description: Working with an IRS lawyer to resolve errors in your IRS notice or bill and set up a payment plan can help you avoid a tax levy and other IRS collection actions.

From time to time the IRS issues consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

Suspicious e-Mail/Phishing

Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity.  Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.

2013/2014 Tax Season Fraudulent Tax Collection Notice Scam

The most recent scam that the public has told our office involves a sophisticated fraudulent tax collection notice scam targeting taxpayers for which the IRS has filed a Federal Tax Lien.

Here is how it works: The scamsters will search public records for the filing of a Federal Tax Lien by IRS and with the information gathered from that filing will generate a form letter and mail it to the targeted taxpayer.  The letter is designed to mimic an IRS notice but it is really coming from a third party having nothing to do with the IRS.  If the recipient of the notice contacts the number listed, the person answering your call will purport to be working for the IRS.  The intended victim is told he or she owes money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, he or she is then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the person who answered your call becomes hostile and insulting.

The IRS is aware of this scam too and has confirmed that this scam has hit taxpayers in nearly every state in the country.  The IRS does not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer.

If you receive a notice regarding your taxes which do not bear the official seal of the Internal Revenue Service and an official verifiable address of an IRS office or Service Center, that is a sign that it really isn’t the IRS sending you a notice.

Other characteristics of this scam include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security Number.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling you back.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts.

Employment Verification Contacts

If you receive a telephone call or a fax from someone claiming to be with the IRS and you are not comfortable providing the information, you should get that person’s name, badge number and office location and then contact the IRS customer service line at 1-800-829-4933 to verify the validity of the call or fax. Upon getting verification from this IRS customer service line, you may then contact the IRS employee who requested the information and provide the required information.

To Report Fraud

You may also report the fraudulent misuse of the IRS name, logo, forms or other IRS property by calling the IRS toll-free fraud hotline at 1-800-366-4484.

What You Should Do If You Really Do Have Tax Issues?

The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles and California know exactly what to say and handle the IRS.  Our experience and expertise not only levels the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems. 

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people avoid collection action by the IRS and State tax agencies. Working with one of our tax attorneys in Los Angeles or elsewhere in California is the best bet for reducing or eliminating the amount you owe.