The most typical tax resolution case has three distinct phases:
1. Research
2. Stop Collection Process
3. Resolution of Debt
1. Research
The first step we take for every client is research their record at the IRS - by posting the Power of Attorney form 2848 or 8821. We need to find out most importantly a. has our client filed all of their tax returns ? b. when were the tax debts assessed? so we can determine if they are going to expire. c. where do they stand in the collection process?
2. Stop Collection Process
If our client has a Revenue Officer, we make immediate contact on their behalf. If our client is in Automated Collection Services, we will only contact the IRS if are client has a bank levy or garnishment OR the client had previously made a deadline with the IRS OR if our client received a FINAL NOTICE OF INTENT TO LEVY. We stop the collection process by 1. negotiating extra time with the IRS. 2. showing the IRS our client is uncollectible. 3. negotiating the most favorable installment agreement that we can. (IT SHOULD BE CLEAR THAT IN MANY INSTANCES -- TAX PREPARATION WILL NEED TO BE DONE TO GET THE COLLECTION PROCESS STOPPED. Naturally, we assist our client by doing these returns internally or guiding them thru the process.)
3. Resolution of Debt
While an installment agreement or uncollectible status (above) can be considered "resolution," we also will consider ways to ultimately reduce or settle our client's tax debt: Offer in Compromise -- Doubt as to Collectability or a Penalty and Interest Abatement.
These phases, of course, are for the most straightforward IRS collection cases -- NOT ALL CASES.
Wednesday, November 11, 2009
Tuesday, November 10, 2009
Dishonor Roll: BBB Records for Tax Resolution Companies for 2009
Last year, I compiled a list of the largest tax resolution companies and how they rate at the BBB. (See my posting on September 3, 2008). Here is new and more comprehensive list for 2009:
All of the below companies have F ratings:
1. JK Harris, South Carolina - F Rating, 879 complaints in 36 months.
2. Taxmasters, Houston, TX - F Rating, 478 complaints in 36 months. Taxmasters is the newest of the bunch. They advertise heavily on Fox. They have quickly joined the list of really bad companies out there. The bearded guy at Taxmasters who does their ads really gives us bearded guys a bad name.
3. American Tax Relief, Los Angeles, CA - F Rating, 145 complaints in 36 months (up from 141 last year).
4. Associated Tax Relief, Los Angeles, CA - F Rating, 133 complaints in 36 months. Heavy TV advertisers right now.
5. Power Tax Relief, Los Angeles, CA - F Rating, 78 complaints in 36 months (up from 70 last year).
6. Innovative Tax Relief and Progressive Tax Group (same ownership), Los Angeles, CA - F Rating, 70 and 56 complaints -- although Progressive gets a D plus rating (?!).
It is very interesting that the top five companies are clearly the BIGGEST ADVERTISERS ON TV AND CABLE -- based on my TV consumption... Roni Deutch , however, does ranks a B minus -- although they have had 240 complaints -- she/they do quite bit of TV advertising.
How does Washington Tax Services fare at the BBB?
Well, we get a C rating based on 22 complaints in the last 3 years. This is frustrating for us to get this low a rating - we don't have many complaints based on our client volume and they all get resolved and responded to. For years, we had a SATISFACTORY rating, but they changed the rating system in 2008. We expect to get back to a B if not an A relatively soon. I, Jay Freeborne, have one complaint of those 22 complaints. I described the nature and resolution of that one complaint in a posting a couple of months ago.
All of the below companies have F ratings:
1. JK Harris, South Carolina - F Rating, 879 complaints in 36 months.
2. Taxmasters, Houston, TX - F Rating, 478 complaints in 36 months. Taxmasters is the newest of the bunch. They advertise heavily on Fox. They have quickly joined the list of really bad companies out there. The bearded guy at Taxmasters who does their ads really gives us bearded guys a bad name.
3. American Tax Relief, Los Angeles, CA - F Rating, 145 complaints in 36 months (up from 141 last year).
4. Associated Tax Relief, Los Angeles, CA - F Rating, 133 complaints in 36 months. Heavy TV advertisers right now.
5. Power Tax Relief, Los Angeles, CA - F Rating, 78 complaints in 36 months (up from 70 last year).
6. Innovative Tax Relief and Progressive Tax Group (same ownership), Los Angeles, CA - F Rating, 70 and 56 complaints -- although Progressive gets a D plus rating (?!).
It is very interesting that the top five companies are clearly the BIGGEST ADVERTISERS ON TV AND CABLE -- based on my TV consumption... Roni Deutch , however, does ranks a B minus -- although they have had 240 complaints -- she/they do quite bit of TV advertising.
How does Washington Tax Services fare at the BBB?
Well, we get a C rating based on 22 complaints in the last 3 years. This is frustrating for us to get this low a rating - we don't have many complaints based on our client volume and they all get resolved and responded to. For years, we had a SATISFACTORY rating, but they changed the rating system in 2008. We expect to get back to a B if not an A relatively soon. I, Jay Freeborne, have one complaint of those 22 complaints. I described the nature and resolution of that one complaint in a posting a couple of months ago.
Response to a Refund Request from 2006
ONCE IN A WHILE -- we get a refund request for our services. If we feel there is good justification for a refund -- we will always comply. However, we will NOT refund money to people who have no grounds for a refund or who merely think we are a bank, e.g., they decided to hire someone else instead of following thru with us. We do allow for a two week grace period where client can't get a partial refund, but beyond that we only grant refunds when there is some egregious oversight on our part, in other words -- that doesn't happen very often. Here's the letter
Thanks for your letter requesting full refund of $2750.00 of Mr. B fee paid in December 2006.
We are denying this refund for three reasons:
1. Mr. B paid this fee to us 3 years ago and too much time has elapsed as per the Engagement letter and Authorization for payment that Mr. B signed and dated in December 2006. The Engagement letter states that a 50% refund is possible within the first two weeks of being hired but NOT after two weeks have passed. December marks the three year point of the handling this case. These documents can be produced if necessary in a court of law or for your own perusal.
2. Contrary to your accusation, we actually did work on this case -- spending resources and time to the resolution of the matter. To start your negotiation with a request FOR A FULL REFUND is frankly insulting and fails to acknowledge that we spent time on the case.
3. On December 14, 2007, after a full analysis of his options, we notified Mr. B what was the next step on his case -- he would receive aggressive mail from the IRS in which we would implement resolution of his situation from the IRS including a request of penalty and interest abatement. Mr. B was informed that when he received the threatening letters to fax/mail them to us As Mr. B did NOT contact us at that time and chose to have another party handle the case is NOT our problem. We were ready and willing to resolve the case - he chose not to contact us.
We are STILL available to Mr. B should he choose to have us represent him on his tax issue. If an installment agreement has been reached, we are available to prepare his request for penalty and interest abatement. However, we are NOT issuing a refund of any amount on this case.
Please contact me if you have any questions at x.
Thanks for your letter requesting full refund of $2750.00 of Mr. B fee paid in December 2006.
We are denying this refund for three reasons:
1. Mr. B paid this fee to us 3 years ago and too much time has elapsed as per the Engagement letter and Authorization for payment that Mr. B signed and dated in December 2006. The Engagement letter states that a 50% refund is possible within the first two weeks of being hired but NOT after two weeks have passed. December marks the three year point of the handling this case. These documents can be produced if necessary in a court of law or for your own perusal.
2. Contrary to your accusation, we actually did work on this case -- spending resources and time to the resolution of the matter. To start your negotiation with a request FOR A FULL REFUND is frankly insulting and fails to acknowledge that we spent time on the case.
3. On December 14, 2007, after a full analysis of his options, we notified Mr. B what was the next step on his case -- he would receive aggressive mail from the IRS in which we would implement resolution of his situation from the IRS including a request of penalty and interest abatement. Mr. B was informed that when he received the threatening letters to fax/mail them to us As Mr. B did NOT contact us at that time and chose to have another party handle the case is NOT our problem. We were ready and willing to resolve the case - he chose not to contact us.
We are STILL available to Mr. B should he choose to have us represent him on his tax issue. If an installment agreement has been reached, we are available to prepare his request for penalty and interest abatement. However, we are NOT issuing a refund of any amount on this case.
Please contact me if you have any questions at x.
Thursday, October 29, 2009
Legitimate Reasons for Complaints against Tax Resolution companies
In my experience, here are the Top Five reasons people have a problem with a tax resolution company and why they eventually file a complaint against them:
1. They can't get a hold of their representative. Fly-by-night tax resolution companies have a high turnover rate for employees. If a representative isn't effective at selling the service, for example, he/she may get fired and subsequently, the handling of your case is passed to someone else. OR the company is so SALES oriented, they really do customer service only when they have some spare time.
2. They were PROMISED an Offer in Compromise but didn't get one. Many of these companies use very aggressive sales tactics -- including the inflation of what kind of tax resolution the taxpayer can get. If someone is guaranteeing or promising you that you will get an Offer in Compromise -- that is a shoo-in that the company is NOT on the up and up. Eject quickly.
3. They charge your credit card or bank account without authorization. Yes, some of these companies, once they get this information, will charge your account without telling you. Now, these are the worst of the worst that do this, but it can happen. Most commonly this will occur when you decide that you DON'T want to work with them yet they still charge a monthly payment on your account, etc.
4. You can't talk to your representative or professional. It is very common for the CPA, Enrolled Agent or Tax Attorney to be buried very deeply in their office. In many offices, you are NOT allowed to talk to your representative. You usually only get to talk to the salesperson or customer service person.
5. Charging continuous reopening fees. You should only be charged a reopening fee when it is very clear that enough time has passed or a new procedure needs to be done. There are companies that will continue to invent reasons to charge you more money. These are the situations when I charge a reopening fee:
a. taxpayer owes money AGAIN on a new tax year and that will need to be incorporated in the resolution and/or the resolution will need to be redone.
b. taxpayer wants to upgrade their case to giving us full power-of-attorney.
c. taxpayer has a new issue to resolve -- like state representation on top of IRS representation.
d. taxpayer's case is assigned to a field officer -- when originally case was dormant or assigned to an automated division of the IRS.
e. taxpayer wants us to redo their case -- due to their own neglect at providing us information previously.
1. They can't get a hold of their representative. Fly-by-night tax resolution companies have a high turnover rate for employees. If a representative isn't effective at selling the service, for example, he/she may get fired and subsequently, the handling of your case is passed to someone else. OR the company is so SALES oriented, they really do customer service only when they have some spare time.
2. They were PROMISED an Offer in Compromise but didn't get one. Many of these companies use very aggressive sales tactics -- including the inflation of what kind of tax resolution the taxpayer can get. If someone is guaranteeing or promising you that you will get an Offer in Compromise -- that is a shoo-in that the company is NOT on the up and up. Eject quickly.
3. They charge your credit card or bank account without authorization. Yes, some of these companies, once they get this information, will charge your account without telling you. Now, these are the worst of the worst that do this, but it can happen. Most commonly this will occur when you decide that you DON'T want to work with them yet they still charge a monthly payment on your account, etc.
4. You can't talk to your representative or professional. It is very common for the CPA, Enrolled Agent or Tax Attorney to be buried very deeply in their office. In many offices, you are NOT allowed to talk to your representative. You usually only get to talk to the salesperson or customer service person.
5. Charging continuous reopening fees. You should only be charged a reopening fee when it is very clear that enough time has passed or a new procedure needs to be done. There are companies that will continue to invent reasons to charge you more money. These are the situations when I charge a reopening fee:
a. taxpayer owes money AGAIN on a new tax year and that will need to be incorporated in the resolution and/or the resolution will need to be redone.
b. taxpayer wants to upgrade their case to giving us full power-of-attorney.
c. taxpayer has a new issue to resolve -- like state representation on top of IRS representation.
d. taxpayer's case is assigned to a field officer -- when originally case was dormant or assigned to an automated division of the IRS.
e. taxpayer wants us to redo their case -- due to their own neglect at providing us information previously.
Most Common Situation #2 -- Bank Levies -
Bottomline about Bank levies : THEY ARE NOT CONTINUOUS.
THEY DO NOT LOCK UP YOUR ACCOUNT FOREVER.
They are a one-time event locking up the funds in your account for 21 days from the day that the levy posted. You are free to deposit money in the account after the account is levied.
Some small town banks (maybe 1 in 50 banks) do NOT understand the distinction and may need to be educated about it.
MYTH: a bank levy shuts your account down.
THEY DO NOT LOCK UP YOUR ACCOUNT FOREVER.
They are a one-time event locking up the funds in your account for 21 days from the day that the levy posted. You are free to deposit money in the account after the account is levied.
Some small town banks (maybe 1 in 50 banks) do NOT understand the distinction and may need to be educated about it.
MYTH: a bank levy shuts your account down.
Most Common Situations in IRS Tax Resolution #1 - Notice of Levy -
In the next couple posts, I am going to outline the most common conversations I have with clients about their cases.
Today's issue #1:
Notice of Levy - Form 668A against an Accounts Receivable.
The form 668A is a way of collecting back taxes thru a taxpayer's account receivables. You are only vulnerable to this if you are in business for yourself. The other kind of a levy is the 668W. This is effectively a garnishment on wages.
The big debate among businesses that receive the form 668A is whether the levy is 1. continuous 2. one-time. I have met Fortune 500 companies who did NOT intrepret this form correctly. I have a conversation once every two weeks with either the receiver of the 668A (or their legal deparment) or the client who is suffering the levy.
It's pretty simple (but so often misinterpreted):
The form 668A is a ONE TIME LEVY. Any money that the company owes you at that time is required to be sent to the IRS. If the company does NOT owe your business anything, then the levy is INEFFECTUAL. The IRS will have to RELEVY if they want to capture future money that the company owes to you. (All the above is also exactly how you interpret a bank levy -- another one time and NOT continous event).
The form 668W is a CONTINUOUS LEVY OR GARNISHMENT. In this situation, the IRS has intrepreted the recipient of the 668W as your main and/or sole source of income. Sometimes the IRS sends a 668W to somebody when they should have sent a 668A, in other words, the client is somebody you do business with occasionally.
There is one caveat to the above: a recipient of a form 668A could intrepret it as continuous IF they are the SOLE person you do business with. BUT, there is a lot of grey area in this situation. If you were my client, I would work to argue that it should be interpreted as a one time event.
Please call me if you have a situation like this that you want me analyze, Jay Freeborne, Washington Services, 1-866-525-7302.
Today's issue #1:
Notice of Levy - Form 668A against an Accounts Receivable.
The form 668A is a way of collecting back taxes thru a taxpayer's account receivables. You are only vulnerable to this if you are in business for yourself. The other kind of a levy is the 668W. This is effectively a garnishment on wages.
The big debate among businesses that receive the form 668A is whether the levy is 1. continuous 2. one-time. I have met Fortune 500 companies who did NOT intrepret this form correctly. I have a conversation once every two weeks with either the receiver of the 668A (or their legal deparment) or the client who is suffering the levy.
It's pretty simple (but so often misinterpreted):
The form 668A is a ONE TIME LEVY. Any money that the company owes you at that time is required to be sent to the IRS. If the company does NOT owe your business anything, then the levy is INEFFECTUAL. The IRS will have to RELEVY if they want to capture future money that the company owes to you. (All the above is also exactly how you interpret a bank levy -- another one time and NOT continous event).
The form 668W is a CONTINUOUS LEVY OR GARNISHMENT. In this situation, the IRS has intrepreted the recipient of the 668W as your main and/or sole source of income. Sometimes the IRS sends a 668W to somebody when they should have sent a 668A, in other words, the client is somebody you do business with occasionally.
There is one caveat to the above: a recipient of a form 668A could intrepret it as continuous IF they are the SOLE person you do business with. BUT, there is a lot of grey area in this situation. If you were my client, I would work to argue that it should be interpreted as a one time event.
Please call me if you have a situation like this that you want me analyze, Jay Freeborne, Washington Services, 1-866-525-7302.
Wednesday, October 28, 2009
Behind the Scenes: Doing an Offer in Compromise case
PROFILE: Client in Washington State owes $178,000 in 1040 taxes due to unpaid self employment taxes as taxpayer is plumber. Client paid Washington Tax Services $1050.00 to assist her at preparing an Offer in Compromise while keeping the IRS collection process on hold.
ACTION: We submitted the Offer in Compromise in which we believed the IRS would settle for $1000.00 on her debt. IRS has now fully reviewed the case and believed the client could settle for $22,000.00. Their calculation was based on their determination of the taxpayer's disposable income ($450) multiplied by 48 months.
Closer review of the case shows that client's income was overstated. We reduced client's disposable income to $133 per month, multiplied by 48 months plus the net equity in her assets ($1085.00). Client qualified for a $7200.00 Offer. Not a bad deal considering she owed $178k in taxes.
Bad news: even though the Offer looked like a pretty good deal -- client could NOT raise the $7200.00.
RESULT: Client is withdrawing her Offer. We are waiting for the case to go back to collections. When it gets there, we will petition the IRS to get the client "currently not collectible." Unfortunately the case will have to be handled at the Large Dollar Unit of the IRS: not easy to deal with.
ACTION: We submitted the Offer in Compromise in which we believed the IRS would settle for $1000.00 on her debt. IRS has now fully reviewed the case and believed the client could settle for $22,000.00. Their calculation was based on their determination of the taxpayer's disposable income ($450) multiplied by 48 months.
Closer review of the case shows that client's income was overstated. We reduced client's disposable income to $133 per month, multiplied by 48 months plus the net equity in her assets ($1085.00). Client qualified for a $7200.00 Offer. Not a bad deal considering she owed $178k in taxes.
Bad news: even though the Offer looked like a pretty good deal -- client could NOT raise the $7200.00.
RESULT: Client is withdrawing her Offer. We are waiting for the case to go back to collections. When it gets there, we will petition the IRS to get the client "currently not collectible." Unfortunately the case will have to be handled at the Large Dollar Unit of the IRS: not easy to deal with.
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