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August 2013 Archives

IRS Stepping Up Misclassified Worker Investigations

The IRS plans to step up investigations into businesses that may wrongly classify employees as contractors. Employment tax law deals with employee-employer relationships in terms of tax obligations.  Employers can classify people they hire as "employees" or "independent contractors". There are several cost benefits to labeling someone an independent contractor, leading to an incentive to do just that even when the relationship and dynamics of day-to-day work are similar to an employee-employer situation. The IRS is working with many state employment agencies to review the tax classification of independent contractors (ICs). The Questionable Employment Tax Practices Program (QETP) is a result of lengthy consultation and discussion between public and private tax attorneys. As of today, thirty-seven state employment agencies have submitted memorandums of understanding (MOUs) regarding the Federal government's QETP initiative. These MOUs will allow the IRS to access detailed employment data compiled by state-level employment agencies. This information will be relevant in civil cases that often center on questionable tax reporting practices. The rule of thumb is that legally classified "employees"  and "independent contractors"  are determined as such based on their relationship with the employer/client work hour regularity and overall obligation.  If an employee agrees to work as an IC yet behaves as an employee the employer-IC agreement is insufficient defense against misclassification liability. These liabilities trigger substantial penalties. Businesses that hire employees and IC's need to be aware of the latest IRS and state employment regulations in light of the QETP program.  The IRS has a tentative schedule to implement and enforce QETP provisions sometime in early 2014. This gives employers some time to go over several tools to help them properly classify employees for tax purposes. The IC Compliance Scale is one such tool employers can be used to verify if hired help in a business is technically an "employee" or "independent contractor".

What To Do If a Lien Is Placed Against Your Property

If you receive your "Notice & Demand of Payment" and you don't pay the tax debt, the IRS can then choose pursue the lien on your property. When they do, all of your creditors are notified that the government now has a claim against your property. Not only does it place a lien against property that you currently own, but it's also against any future property that you might own, as well as accounts receivable if you own a business (money that's owed to you). This is why a lien can do serious damage to your credit rating. Why would someone consider giving you a loan for property if they know that the government will immediately have a lien against it? What If I Already Have A Lien on My Property? This may be catching you a little late. Perhaps you already have a lien on your property. There may still be some options: 1) Pay the Tax - this is the most obvious, but it's still worth mentioning. If there's any way you can get the money and pay the tax, you should look into every option seriously. 2) Appeal - the IRS has strict rules that must be followed in assessing your taxes and placing a lien. If any of these rules have been broken, you may have a case to get the lien removed. You need a lawyer to represent you if you are going to appeal. Call me. 3) Partial Discharge - in order to pay-off your tax, you may need to consider selling your house or rental property. But if you have lien against the property, it will be virtually impossible to sell. We may be able to negotiate a "Partial Discharge" of the lien, enabling you to get the property sold, satisfy your debt with the IRS and get on with your life. There may be other options. Regardless if you've just been notified of a lien or you're already experiencing what it's like to be under one...you know that it's serious business.  

How To Know When You Can Appeal An IRS Decision

Did you know that you have the power as an individual taxpayer to appeal almost any decision made by the IRS? In fact, you can appeal audit findings, penalties and interest, rejected offers-in-compromise, liens, seizures, garnishments and other collection actions. However, according to the IRS, "Appeals is not for you if: - Your only concern is that you cannot afford to pay the amount you owe. - The correspondence you received from the IRS was a bill and there was no mention of Appeals." So in these two instances, an appeal would be a premature action to take. If you are concerned that you cannot afford to pay the tax you owe, there are channels to go through before you would begin the appeal process. For instance, you could work with a tax attorney and make your case to the IRS that your situation qualifies for one of these tax debt payment methods: - Non-Collectible Status - Offer-in-Compromise - Installment Payment Plan - Partial Payment Installment Agreement - Tax Bankruptcy If an Offer-in-Compromise is the path that is taken, if it is rejected (85% of all Offer-In-Compromise proposals were rejected in 2006 by the IRS) the decision can be appealed up to 30 days from the date of the rejection. Your chances for a winning an Offer-In-Compromise is increased with the involvement of a competent tax attorney. Since there is only a 15% success rate with the IRS in these cases, it's important that the paperwork is prepared from the standpoint of what the IRS wants to see. In fact, a good tax attorney will know from the start if an Offer-In-Compromise is the direction that you should go, and will certainly know if an appeal to a rejection of an offer is worth pursuing. If you're audited (which is happening with increasing frequency these days, especially for small business owners), you may disagree with the IRS findings. You have the right as a taxpayer to disagree with any or all of the IRS' findings.


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