IRS Debt

You can hear the commercials on most any syndicated talk radio show in America. The pitch goes something like “Settle Your Debt With The IRS For Pennies on The Dollar”. Is it possible? Yes it is. It happens all the time.  But there are many factors that determine when an IRS debt can be settled.

The method used to settle debt for pennies on the dollar with the IRS is called The Offers in Compromise Program. It is a program offered by the IRS so that honest taxpayers can settle debts that they can not afford to pay. Let me reiterate. The program that can be use to settle debt with the IRS for “Pennies on the Dollar” is called the Offers in Compromise Program. It is designed for honest taxpayers to settle debt that they can not afford to pay.You have to be able to prove that you lack the ability to pay in order to qualify for this program.

Don’t let someone tell you they can settle your debt that is unaware of your ability to pay according to the IRS formula. The IRS has it’s own formula in arriving at whether a person can qualify for an offer and their definition of ability to pay is rarely the same as the taxpayer’s.

Many of the companies that are in the business of soliciting people to settle their IRS debts will make unrealistic statements and guarantees that they can not deliver. The name of the game is to prey on the taxpayers fear of the IRS and to get the taxpayer to pay for services now.  They will even go as far and tell the taxpayer that “You have already proven that your a procrastinator and you don’t need to let this go any further. Your problems are only going to get worse if you don’t make this decision right now”.

This is a pressure tactic to get you to commit your money to them before they have any idea whether they can provide you with any substantial help or not. Don’t get me wrong. If you have past due taxes you do need to get started solving your problems. But if the people you are talking with have not taken the time to learn about your income, your assets, and liabilities they have no idea if you will qualify for the Offers In Compromise program. Be wary of making any monetary commitment to a person that is promising to help but asking you very few questions about your financial status. Chances are they are not going to help you in the end they just want to get your money while you are scared.

When we take on an IRS Problem Resolution Client we usually ask for $500-$1000 to get started in the determination process of whether a taxpayer can qualify for the Offers In Compromise Program. We advise the client that we are making a determination if an Offer is appropriate or if a payment plan is the proper course of action. As well as an estimate of total fees depending on our determination. We require the deposit to pay for our time in assisting the client in gathering and organizing the financial data needed to make a determination on the clients ability to pay according to the IRS. Then we advise the client on our findings and the proper way to proceed with the IRS debt.

Any other methodology has a high chance of being a scam and the people that pressure the taxpayers to get them to commit money are potentially crooks. You should do your homework to determine the reputation of anyone that requires prepayment.  However, those of us who do IRS resolution work would be foolish to perform the work without some payment up front.  We are typically working for clients that are only dealing with their problem because they are being forced to act by the IRS.

Finally, I would never suggest that anyone pursue an offer without professional assistance. Taxpayers have rights and you need someone that knows your rights to protect you. Look for someone that you can trust by getting recommendations from people you personally know or ask for references and check them out before handing over you hard earned dollars.

I originally posted this article on February 2, 2008. I did so because I was dealing with my third client that had been duped by one of these organizations. I did not know that many state Attorney General’s were upset with their marketing message, subsequent failure to perform, and in pursuit of a remedy. I have attached a pdf file of an article produced by Web CPA on June 18, 2008. The group in this article is not the only offender but they are probably the most well known which is probablly why they started with them. It basically supports my article.  You should read it for yourself.

Ant and Grasshopper

THE ANT AND THE GRASSHOPPER
This one is a little different…. Two Different Versions…………….. Two Different Morals

OLD VERSION

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away..

Come winter, the ant is warm and well fed.

The grasshopper has no food or shelter, so he dies out in the cold.

MORAL OF THE STORY: Be responsible for yourself!

MODERN VERSION

The ant works hard in the withering heat and the rain all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while he is cold and starving.

CBS, NBC , PBS, CNN, and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.

America is stunned by the sharp contrast.

How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?

Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, ‘It’s Not Easy Being Green.’

Acorn stages a demonstration in front of the ant’shouse where the news stations film the group singing,’We shall overcome.’ Rev. Jeremiah Wright then has the group kneel down to pray to God for the grasshopper’s sake.

President Obama condemns the ant and blames President Bush, President Reagan, Christopher Columbus, and the Pope for the grasshopper’s plight.

Nancy Pelosi & Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.

Finally, the EEOC drafts the Economic Equity & Anti-Grasshopper Act retroactive to the beginning of the summer.

The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar and given to the grasshopper.

The story ends as we see the grasshopper and his free-loading friends finishing up the last bits of the ant’s food while the government house he is in, which, as you recall, just happens to be the ant’s old house, crumbles around them because the grasshopper doesn’t maintain it.

The ant has disappeared in the snow, never to be seen again.

The grasshopper is found dead in a drug related incident, and the house, now abandoned, is taken over by a gang of spiders who terrorize the ramshackle, once prosperous and once peaceful, neighborhood.

The entire Nation collapses bringing the rest of the free world with it.
MORAL OF THE STORY: Be careful how you VOTE.

Disaster Planning

On April 27th, 2011 a tornado hit Cullman, AL and destroyed many things. It swept through the downtown area and destroyed businesses, homes, infrastructure such as power lines and telephone lines and more. My office was spared a direct hit but the effects were substantial none the less. We were without power for 6 days and phone and internet services for 8 days. I had a disaster recovery plan. I thought that we were ready to quickly reestablish a computer network complete with backed up data. I learned that I was not nearly as ready as I thought and I hope that this message will help someone avoid my mistakes.

I had been advised by our IT management company to develop a disaster recovery plan that included having to start completely from scratch and rebuild my computers, servers and workstations. This plan was a plan that would need to work even if my building were completely destroyed and all my paper files essentially lost for ever. You see, while my experience is thus far limited to the ripple effect of a tornado, it could just have easily been a direct hit by the tornado or a fire that destroyed my building and everything in it. That is a scary thought for any of us. But I want you to think about how much better it would be if you planned ahead and had a recovery plan in place to get your computers and communications back up quickly and without losing any of your data.

It is not an impossible goal and it is not a goal that one can afford to fall short on if one is dependent on computers to operate a business. It is called a disaster recovery plan and if it is done properly 24 hours is within reason for a 5 or so user network.

Found Money

Many taxpayers leave money on the table, due to missed deductions even qualified tax preparers miss. Bring your tax returns and related documents into our office, and we’ll help you find lost money! If you don’t have more money coming back, we charge nothing! No Risk.

Come by our offices and drop off your last three year’s tax forms and income/deduction documents. Or, just call us today at (256)739-3195 to set an appointment for this year’s prep and bring what you can. If you have any questions, FEEL FREE TO CALL . We may be able to help you find money that is already due you but is yet unclaimed. Please contact us now and we will look for your money at absolutely no risk to you.

Incorporate

There are many different reasons for choosing to Incorporate your business. The best reason is typically liability protection for personal assets. I see and hear stories of all kinds of poorly formed and or operated corporate entities which do little to protect the owners when they need it.

The bottom line is don’t do it if you do not intend to maintain the correct form which means following processes that will limit the way you conduct business.

Website

Do you realize that similar to any other business a CPA is in business too. I have to make decisions about vendors just like any other business. What I learn from my business experiences is one way I gain information to share with my clients. Purchasing a web site is an area where I have learned some important things to share with you.

What a user sees, hears, or buys (including shopping) at a given web site is the user experience. For example, the user goes to the website, looks through the inventory or searches it, drop the items they want in the shopping cart, and then check out using a credit card. What it takes to create that experience is usually multiple services or products.

There are two major categories of services and products related to having a web site on the internet. A web hosting service is a service that allows individuals and organizations to make their own website accessible via the Internet. Web Site development is the process of building the site that will be hosted. Within these two major categories there are many products that have different pricing and cost. For example, band width is a product and cost associated with hosting. A shopping cart is product and cost associated with Web site Development. There are many other possible products and potential cost and it is important that one gains a very thorough understanding of the potential cost associated with the products needed to produce the experience one desires for potential users of the site.

Some of the services that can be segregated services or products are:

Hosting- Bandwidth, Storage Space

Website Development – Shopping cart, inventory management, credit card processing, content management, email management.

Fees for these services can vary widely from vendor to vendor and the offers that one might receive simply can’t be taken at face value. For example, I recently received an offer for a web site for $44.95 per month. My first reaction was this is a good deal. After doing a little research on the offer all it was was a template with financial calculators built in and some daily feeds included with the ability to link in social sites such as Facebook, and Twitter. There was not option to sell anything. There was no communication tool to allow me to write articles for my clients like this one. There was no hosting included (it was available as an extra charge), there was no newsletters, there was no way to get my site online for $44.95. I could build a page for $44.95 and have some dynamic information that was written by others. That was the basic offer. An offer from a competitor was $70 but it included all of these things and much more. Things that would help me market my business and included search engine optimization (SEO) services for clients in my industry. For what was being offered the $70 was a much better deal. It is like the old joke about the car sales pitch where they priced the car without the doors and tires. You have a car but you can’t go anywhere in it.

When buying web services it is important that one understands what the offer is. My understanding on this just scratches the surface because their are so many variables for every customer. For example if one has inventory to put on a site and wants the ability to sell inventory with little vendor interaction with the customer then one would need a database with enough storage to store the inventory, a shopping cart ( to allow check out), and order management (for fulfillment processing) at a minimum.

To sum it all up, when buying a web site with the intent of establishing a web presence one has to know what they need before they can assess who has the best offer. I would much rather do business with the person that discloses the cost for the products that will meet my needs in total than one who seduces me into the deal without letting me know that I am buying a car without doors and tires.

Mileage – Make it Bullet Proof

A well kept mileage log is essential for maximizing your deductions and preparing your return to withstand the scrutiny of the IRS. Don’t fool yourself and think that the Federal or State taxing authorities are never going to ask you for a mileage log. If they audit your return, and you do not have a mileage log, you will lose your deductions. If you think it will be easier to put a log together “IF NECESSARY” you are just kidding yourself. I have personally witnessed the horror from people faced with the need for a mileage log when they don’t have one. It is usually a long time removed from the filing when the need arises (read audit occurs). By then people have no idea when and where they drove to accumulate the miles that are on their return. I constantly remind folks to keep up with this information because it is a good practice to do so and it is REQUIRED by the IRS.

The following is what is required for a well kept mileage log. Date, beginning and ending odometer reading, purpose of trip noted. That is all you need. The same standards apply to business, medical, and charitable mileage deductions. Office supply stores have small mileage log books that you can purchase. They are set up for ease of entry into the correct heading. You can also use a pocket calender and jot down your odometer reading and the purpose of the mileage. I supply these for my clients on an annual basis and they are free for the taking. Either method will work well and they will substantiate your miles so that you don’t panic when the dreaded audit notice arrives. Travel on and log away.

[ Link to audit notice: http://www.tmicpa.com/avoid_audits ]

UPDATE 12-06-2010: I have recently learned that if a taxpayer has unusually high mileage that it may be necessary to have some third party verification of your logged miles. Oil change records will work well and if you use a third party oil change service that computerizes records then you can easily get a record from them. If you use someone that does not maintain those records or tend to use multiple locations then you should maintain a record of the oil changes and associated receipts.

It is also important to understand that if you are using more than one vehicle then you should maintain a mileage log for each vehicle. If you use the same log book to keep multiple vehicles you should clearly note which vehicle the mileage belongs.

Severe Weather

Alabama Department of Revenue

First Annual Sales Tax Holiday for Severe Weather Preparedness Items Set July 6 through July 8, 2012

The State Legislature passed and the Governor has signed Act No. 2012-256, creating an annual Severe Weather Preparedness Sales Tax Holiday by exempting certain “covered items” from the state sales and use tax during one weekend each year. The first Severe Weather Preparedness Sales Tax Holiday will be held July 6 through July 8, 2012, commencing at 12:01 a.m. on Friday, July 6, and ending at twelve midnight the following Sunday.

A provision in the new Severe Weather Preparedness Sales Tax Holiday law allows cities and counties to join the state and participate in the holiday by removing their own local sales and use taxes from the same items during the same weekend. The Department will compile a list of cities and counties that timely notify the Department of their decision to participate or not participate in the Severe Weather Preparedness Sales Tax Holiday. To provide guidance to both retailers and consumers, the city and county listing will be updated as notification is received by the Department and will be available at http://www.revenue.alabama.gov/salestax/WPSalesTaxHol.htm.

The following is a list of the “covered items” under this year’s Severe Weather Preparedness holiday:

Items below that have a sales price of $60 or less per item:

  • Batteries: AAA-cell batteries, AA-cell batteries, C-cell batteries, D-cell batteries, 6-volt batteries, 9-volt batteries. (NOTE: coin batteries, automobile batteries, and boat batteries are not exempt.)
  • Cellular phone battery
  • Cellular phone charger
  • Portable self-powered or battery-powered radio, two-way radio, weather-band radio or NOAA weather radio
  • Portable self-powered light source, including battery-powered flashlights, lanterns, or emergency glow sticks
  • Tarpaulin, plastic sheeting, plastic drop cloths, and other flexible, waterproof sheeting
  • Ground anchor system, such as bungee cords or rope, or tie-down kits
  • Duct tape
  • Plywood, window film or other materials specifically designed to protect window coverings
  • Non-electric food storage cooler or water storage container
  • Non-electric can opener
  • Artificial ice, blue ice, ice packs, reusable ice
  • Self-contained first aid kit
  • Fire extinguisher
  • Smoke detector
  • Carbon monoxide detector
  • Gas or diesel fuel tank or container

Items below that have a sales price of $1,000 or less:
Portable generators and power cords