The IRS Solution If You Cannot Pay Your Taxes

by RICHARD CHAPO

The Internal Revenue Service wants you to pay taxes on time. That being said, it understands this is not always possible and has created a program for such situations.

The IRS Solution If You Cannot Pay Your Taxes

The Internal Revenue Service is very upfront about its goal in dealing with taxpayers. While it obviously wants to collect all taxes due, it is also focused on keeping you in the system. This attitude is a relatively recent change undertaken in the 1990s. The IRS essentially determined it made better financial sense to have you in the system versus spending hundreds of man hours hunting you down. In practical terms, this means you need not have a panic attack if you do not have sufficient funds to meet your tax obligation. If you panicked this past tax deadline, there was no need.

The IRS will put you on a payment plan if you cannot pay your taxes on time. The plan calls for monthly payments like a car loan, to wit, they are an equal amount each month so you know what you are obligated to pay.

You are only eligible for a payment plan if you file a tax return. Once you file, you want to use form 9465 to request the payment plan. It costs $43 to file the application. The IRS will then get back to you on what it is willing to do. The payment plan process is not an audit. Millions of people apply each year and the IRS considers it standard operating procedure. No red flags are raised when you file the application. To the contrary, the IRS tends to view you as an honest tax payer since you are acknowledging the full amount due and trying to find a way to pay.

Importantly, the payment plan should be viewed as a means to buy time. Making the monthly payments will eventually pay off the debt, but it will take years. Interest on the amount you owe will also continue to accrue. The best strategy for using the plan is to make the monthly payments while saving up money to make a lump sum payment to satisfy the debt.

If you cannot pay the taxes you owe, do not panic. The payment plan option will keep you out of trouble with Uncle Sam.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

Why You Shouldn't Take on Your IRS Tax Problems Alone

by Clifford N. Ribner

If the IRS determines that you owe the government money, then your first instinct may be to fight them. A tax attorney seems too expensive, so you decide to represent yourself.

However, that's a dangerous course to take for a number of reasons. First of all, tax law is extremely complicated, and only professionals who are truly trained and experienced in it, and who have access to specialized (and expensive) tax law databases and libraries and know how to use them, are truly capable of navigating through it. The number of things that can go wrong by taxpayers attempting to represent themselves is legion.

I have seen dozens of situations where taxpayers came to me to represent them after they had attempted to do so themselves. Most of my job, in those cases, consisted of undoing the damage they had done. This includes highly educated professionals who hired me too late -- after they left prison after tax convictions.

Protect yourself against IRS mistakes

If you've watched legal dramas at all, you've no doubt heard the phrase, "Anything you say can and will be used against you in a court of law." The same thing goes for the IRS.

Every conversation you have with IRS personnel is saved in memoranda of one kind or another, and these IRS personnel are perfectly capable of mistaking what you say. As Martha Stewart found out, any false statement to any federal official of any kind, even though not made under oath, can result in criminal indictment.

Without knowledge of the law, taxpayers can easily make seemingly innocent statements that IRS personnel interpret very differently, even if those IRS agents are acting in good faith, which, unfortunately, is not always the case.

Leave tax law to the experts

Because the tax law is so complex, taxpayers are likely to do more harm than good if there is any questionable issue between them and the IRS. And if you're having a conversation with the IRS, a questionable issue is almost always the case.

Every action in this area can have serious repercussions. You wouldn't try to do your own brain surgery, so why risk your financial life by attempting something equally complex: taking on the IRS alone?

The stakes are high and the requirements are numerous and complex. You could very well make a mistake and not even know it until after even more serious problems than those you were attempting to fix arrive.

With the help of a tax lawyer, you'll be able to avoid speaking to the IRS yourself at all. He can handle all communications with them for you.

Gain the full protection of the law

Don't rely on IRS personnel to protect you. They're on the government's side, not yours. A tax lawyer, on the other hand, knows what you're entitled to.

Believe it or not, Congress actually gave taxpayers significant new procedural protections in 1998. However, if you're representing yourself, you have no real way of forcing the IRS to respect those protections. A tax lawyer would know what those protections are, and how to help you make the most of them.

Pick the right tax attorney - they'll tell you if you need a lawyer or not

Everyone's situation is different, but it's rare that you won't save money by using a tax lawyer to interface with the IRS. When people don't need me, I tell them so. Sometimes I'll charge them a relatively nominal amount for a brief education on how they should conduct themselves with the IRS. I never do that unless I have first determined that there's no possibility of criminal exposure for those people with their specific tax problems.

When you're looking for a tax attorney, make sure you find a lawyer with specialized education (an LL.M. in Taxation). Good references, like other lawyers, judges, or peer-reviewed ratings like Martindale-Hubbell, will also help you in making a decision. Good tax attorneys will also have years of litigation experience under their belts.

Don't take on the IRS alone. You'll be inviting more stress and numerous unknown problems if you should make a mistake. A tax attorney may seem expensive, but the mistakes they help you avoid and the money they could help you save make them well worth it.


About the Author
Clifford N. Ribner is a tax attorney in Tulsa, Okla. For more than 28 years, he has helped people with serious tax problems fight the government and win. If you're deep in IRS debt and need somewhere to turn, visit him online at http://www.cnribneratty.com.

Tax Issues on a Subject To Deal

by Attorney William Bronchick

You buy a property "subject to" an existing loan. You sell the property on an installment land contract or lease/option. What are the tax ramifications? Part One: Determining Your Basis Your tax basis is basically what you paid for a property. If you have a seller $2,000 and took a deed subject an existing loan of $189,000, your basis is $191,000. Basically, your basis in a subject to is cash paid to the seller, plus existing loan you are taking over. If you also paid money for back taxes and mortgage payments, that would also be part of your basis. So, if in the above example you paid $3,000 to the lender to cure the back payments, your tax basis is $194,000. Part Two: Figuring Out Your Gain

If you resell the property for cash, the gain is easy to figure out - sales prices less your basis, less your sales costs (broker fees, closing costs, etc). If you resell the property on a lease/option, you haven't really sold it at all, since a lease/option is generally not considered a sale until the tenant exercises the option to purchase. During the period of the lease, you would be taking depreciation, so there's a recapture of that depreciation when you sell at 25%.

If you resell on an installment land contract (aka "contract for deed"), it IS a sale, even though title does not pass to the buyer. Thus, your gain is the sales price on the contract, less your tax basis. This is considered an "installment sale", so your taxable gain is based on the cash received, plus any principal received in the year of sale. When the buyer pays off the balance of the contract, you have a gain in that tax year for the balance of principal received. Part Three: The Interest

This part of the equation always gets people confused. In our example above, you bought a property from Sally Seller subject to the existing loan. You then sold it on a land contract to Barney Buyer. Who "owns" the property? For federal income tax purposes, there were two sales - from Sally to you, then from you to Barney. So Barney would be deducting the interest he is paying on schedule "A" of his federal income tax return as the "equitable owner".

This appears confusing because YOU have the deed and Barney does not. It is also even more weird because Sally Seller's lender is sending a form 1098 for the annual mortgage interest to the IRS in Sally's name! Don't let that fool you... the basic rule of the interest deduction is that the person who has an ownership interest in the property, uses it as his principal residence, and actually makes the interest payments is the one who is entitled to the deduction. So, in this case, Sally Seller neither owns the house nor makes the payments - she does nothing. Barney Buyer is the "equitable owner", which gives him an ownership interest. And, Barney is also actually making the interest payments, which he can deduct.

One last part of the equation - the interest YOU are paying on the underlying loan. If you buy subject to and sell on a wraparound, you are collecting payments from Barney Buyer and continuing to make payments on Sally's underlying loan. The interest YOU pay is deductible as an offset (business interest) against the interest income you are collecting from Barney Buyer.

Click Here for more info for Tax Issues on a Subject To Deal

Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

About the Author
Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Reasons for getting a tax attorney

by Ioan Margineanu

People can get sued for many reasons. There are a few ways to protect your self from a lawsuit, but some lawsuits are just unexpected. The most common way of getting in trouble with the law without even knowing it is when it comes to the tax law. Many people make mistakes when it comes to their taxes without even knowing it, but they will later find themselves in rough problems with the IRS. In this case, the best way to get protection is with a tax attorney.

Most people don’t realize that there is a significant difference between a CPA and tax attorney. A tax attorney can prepare a strong case when dealing with the IRS and everything you tell him is confidential. If you tell your CPA that you’ve done something illegal when it comes to taxes, he has to testify in court. On the other hand, the relationship between you and your tax attorney is somewhat similar to that between you and your priest or your doctor. Most people hire a tax attorney when they start having problems with the IRS, but it is best to already have an attorney before any incident. If the IRS starts an investigation on you, it might be a mistake or you might have done something illegal. There are a number of things that you can do wrong when it comes to taxes and the IRS has the right to start investigating. To make sure that the investigation doesn’t end badly for you, you need to hire yourself a good tax attorney. Unlike general attorneys, tax attorneys are confronted with tax problems every day. They have higher experience in this field and they know how to get around a rough situation.

The tax law is complicated because of three facts: it changes often, it can differ from state to state and it is not black and white. If you don’t have special knowledge about this matter, you will find it hard to keep in touch with all the changes in the jurisdiction. That is why you need a person with experience to handle your problems with the IRS. Your tax attorney will "fight" the IRS for you. Most people get in higher difficulties because they try to handle the IRS themselves and they give more information than they should. The IRS can start investigation based on our statements so it is best to let a tax attorney talk for you.

A tax attorney can stop the IRS through a number of strategies and it is up to you to decide what exactly to use. You can explain your situation and you and your attorney can come up with the best solution for your problems. The IRS uses many techniques in order to get what they want and they usually succeed. Only an experienced tax attorney can stop them in their tracks.

Any person that owns a business or has a reasonable amount of money in real estate or cash should try hiring a tax attorney. You can’t keep in touch with every move in the tax law, but your attorney can. A good tax attorney can make you save thousands of dollars in tax deductions and he can make sure that the IRS can’t touch you. The best way to stop a problem with the IRS is preventing it and only a good attorney can help you do that. You just need to search and find out who is the best.

About the Author
Avoid any problems with the IRS with the help of a tax attorney.

Tax Issues on a Subject To Deal

by Attorney William Bronchick

You buy a property "subject to" an existing loan. You sell the property on an installment land contract or lease/option. What are the tax ramifications? Part One: Determining Your Basis Your tax basis is basically what you paid for a property. If you have a seller $2,000 and took a deed subject an existing loan of $189,000, your basis is $191,000. Basically, your basis in a subject to is cash paid to the seller, plus existing loan you are taking over. If you also paid money for back taxes and mortgage payments, that would also be part of your basis. So, if in the above example you paid $3,000 to the lender to cure the back payments, your tax basis is $194,000. Part Two: Figuring Out Your Gain

If you resell the property for cash, the gain is easy to figure out - sales prices less your basis, less your sales costs (broker fees, closing costs, etc). If you resell the property on a lease/option, you haven't really sold it at all, since a lease/option is generally not considered a sale until the tenant exercises the option to purchase. During the period of the lease, you would be taking depreciation, so there's a recapture of that depreciation when you sell at 25%.

If you resell on an installment land contract (aka "contract for deed"), it IS a sale, even though title does not pass to the buyer. Thus, your gain is the sales price on the contract, less your tax basis. This is considered an "installment sale", so your taxable gain is based on the cash received, plus any principal received in the year of sale. When the buyer pays off the balance of the contract, you have a gain in that tax year for the balance of principal received. Part Three: The Interest

This part of the equation always gets people confused. In our example above, you bought a property from Sally Seller subject to the existing loan. You then sold it on a land contract to Barney Buyer. Who "owns" the property? For federal income tax purposes, there were two sales - from Sally to you, then from you to Barney. So Barney would be deducting the interest he is paying on schedule "A" of his federal income tax return as the "equitable owner".

This appears confusing because YOU have the deed and Barney does not. It is also even more weird because Sally Seller's lender is sending a form 1098 for the annual mortgage interest to the IRS in Sally's name! Don't let that fool you... the basic rule of the interest deduction is that the person who has an ownership interest in the property, uses it as his principal residence, and actually makes the interest payments is the one who is entitled to the deduction. So, in this case, Sally Seller neither owns the house nor makes the payments - she does nothing. Barney Buyer is the "equitable owner", which gives him an ownership interest. And, Barney is also actually making the interest payments, which he can deduct.

One last part of the equation - the interest YOU are paying on the underlying loan. If you buy subject to and sell on a wraparound, you are collecting payments from Barney Buyer and continuing to make payments on Sally's underlying loan. The interest YOU pay is deductible as an offset (business interest) against the interest income you are collecting from Barney Buyer.

Click Here for more info for Tax Issues on a Subject To Deal

Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

About the Author
Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.