Today we received a call from couple who were understandably frighten. They had just off the phone with firm, who first promised them their debt could be settled for $500 (without knowing any knowledge or facts about their case), second, when they hesitated and asked questions he scared them into believing they were going to lose their home and bank account (extra nice touch). He convinced them to give him their checking account so he could start work saving them immediately (not so creative lie)from IRS collections. He told them he would send documents later they would need to sign. The firm immediately took money out of their checking account, according the BBB and online site complaints this is the only thing they “do” for clients. The reason this firm and others like it want checking account numbers, is that unlike credit card transaction is it very difficult for the account holder to contest the transaction.

The couple, had second thoughts, checked up on the company and as you expect they have a bad BBB rating and dozens of complaints. They called us, albeit a bit concerned about the industry, we don’t blame them a bit.

We know we can help this couple, it will take the proper steps to solve their problem, at this time until we review their financials in writing we can’t say with certainty that we will recommend an OIC or IA. We know they will only be charged for the service we perform for them.

If you have the unfortunate experience to call one of these firms or receive call from their aggressive sales people, be firm, listen, ask good questions, don’t believe their crazy unsubstantiated promises or succumb to their fear tactics, and never give them your checking account or credit/debit card number over the phone. Do check out their BBB rating (in business for more than one year) and look at the company online complaint forms.

New IRS procedures. This is a positive step by the IRS to help those taxpayers who in the past couldn’t file an OIC.

IRS has directed IRS employees to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise. Normally, the standard practice is to judge an offer amount on a taxpayer’s earnings in prior years. This new step provides greater flexibility for the unemployed when filing an OIC. There is one potential catch, the IRS may also require that a taxpayer entering into such an offer in compromise agree to pay more if the taxpayer’s financial situation improves significantly. What, when, and how the improvement will be evaluated will be important to learn before moving ahead with an OIC.

Great article. I applaud her for her tenacity and the amount of time and effort she put forth to ultimately win her battle with the IRS. I do wonder where her tax preparer was during the audit, it is possible tax preparer may not have been experienced enough to representing her in the audit. There is also the question what emotional cost did she pay for her time, effort, and worry during the process.

If she had hired a firm to represent her when she first got the audit letter the story would not have been as compelling to read, but the same outcome could have occurred without the drama.

It is something to consider when hiring a firm to prepare tax returns. Will they or can they help if you ever get audited (random audit, or triggered by claims made by ex-spouse, disgruntled ex-employee)?

I recall in a meeting a few years back, where a CPA (medium sized firm) bragged that none of the clients in all their years had been audited. Two things struck me as he talked: First, I hoped that he would be wise enough to never consider representing one of his clients in audit, given his obvious fear of the IRS and lack of experience. Second, was his firm preparing returns with such fear and for their own goals, that their clients were being short changed in the tax preparation?

http://finance.yahoo.com/taxes/article/108550/nurse-outduels-irs-over-mba-tuition?mod=taxes-advice_strategy

Many employers should be very concerned about how they hire contractors yet treat them as employees. The IRS has specific guidelines on how to classify a contractor verses an employee, some employers may have ignored (or are unaware) the guidelines in hopes that the letter or visit will never come. The audit in the past has been stimulated by a complaint from the contractor after they discover how much they owe in SE taxes. The changes in the tax receipts have changed this from a complaint driven process to a hunter process.
We have represented a number of clients who have been audited in this area. In one case the audit occurred after a contract employee claimed that they should have been classified as an employee. The result of the audit was in favor of our client, the contractor in this case was clearly free to set their own hours, work for other companies, and did advertised their trade to other companies.
This article is a good read.

http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1563557&_blg=1,1563557

Another “tax firm” has closed its doors and left their trusting client’s in the lurch. According to their website, Effecture filed Bankruptcy on 9-25-09. If it sounds TOO good to be true , it is. The claims made on the late night TV ads are not true and if you call those firms, the person you will be talking with will be a sales person who understands only how to sell/trick you into agreeing to hire them so they can get a commission/percentage of your hard earned money. Be smart, check the BBB and online complaints about any company before you agree to hire them

Last July we received a visit from the an agent from the Department of the Treasury, he informed us that our company name IRS/State Tax Relief Associates, Inc was potentially in violation of a U.S. code regarding the misuse of Department of Treasury names, symbols, etc. The fact that the IRS approved our name years ago and apparently that the IRS was not even aware of the code makes this more amusing and the fact that hundreds of tax returns have been sent to IRS with our company name as preparer had no bearing on how the code was to be interpreted.

After several months of not hearing back, we contacted the agent to ask when we would receive the determination and he informed us he was still working on the file. We did get the chance to voice our frustration that time could spent on our name while dozens of “phony tax firms” were all over TV & the radio every day promising impossible outcomes and stealing from clients while the U.S. Treasury watched without interference was a strange to say the least. We met today to discuss what we should do and decided that a name change is inevitable so we have put the name change process into motion. Now we have to decide on what to change it to. This is a pain! We are sure there is a silver lining to this mess, guess we just have to look harder. More to come.

The IRS sends out this warning out one or two times a year to remind taxpayer that the IRS does not use e-mail to communicate with taxpayers. The link below is to the IRS site.

http://www.irs.gov/newsroom/article/0,,id=211669,00.html

This article appeared the other day and I found it interesting. It is plausible that if employers are scanning the internet to check up on employees that collection agents would do the same.

http://articles.moneycentral.msn.com/Taxes/AvoidAnAudit/tax-collectors-trolling-facebook.aspx

Several times a month our firm receives a call from a “marketing or lead generation companies” wanting to sell our firm leads from their Television campaigns. Our policy is not participate in this form of marketing for several reasons. First, the company that the TV viewers are responding to isn’t really a tax firm, they are only a firm that sells the information to tax firms that have a boiler room of sales people. We don’t have a boiler room of salespeople that earn commissions by selling “promises” they can’t keep. Second, the TV commercial content is normally filled with half truths and unsubstantiated promises of “pennies on the dollar” and elimination of interest and penalties. These commercials are unethical and they and the firms they are selling to are ripping off of desperate people, who are merely seeking help with their tax problem and deserve to get real representation.

Bottom line. Be very weary of firms that advertise on TV and Radio. Do check out any firm with BBB and other “rip-off research company” internet sites. Do check to see how long the company has been in business. Never do business with a firm that has been in business for less than a few years. Some of these “boiler room” firms play the company name change game.
The good news is that in many states the Attorney General is putting the screws to these firms.

The IRS will make changes to Allowable Living Expenses, Transportation, Housing and Utilities, on October 2007.  The new standards are not completely known at this time, but the some of the changes are regarding health and living expenses, cell phone use, and transportation.  The IRS will have a new standard for health expenses for taxpayers under 65-years-old and thankfully a separate standard for taxpayers over 65-years-old.  The proposed changes for Allowable Living Expenses are vague at this point, the IRS is stating that “it will be more fair” for all taxpayers and that household income will not be determining factor anymore.  With transportation changes will be the area of the allowance for public transportation and operation costs for a second vehicle.  Cell phone expenses are now being included as an allowed expense. These changes will impact Offer In Compromise and Installment Agreements.  It is not known at this time of existing OIC’s will reviewed under the new standards