Tag Archives: Offer In Compromise

Tampa, FL: IRS Continues Crackdown on Aggressive Employee Retention Credit Claims; 20,000 Disallowance Letters Being Mailed

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I represent taxpayers in Tampa, St. Petersburg, Sarasota and throughout the state of Florida who have federal and state tax issues. John S. Wood, C.P.A., P.A. is a full-service tax resolution company with extensive experience in helping clients solve their tax problems.

As part of continuing efforts to combat dubious Employee Retention Credit (ERC) claims, the Internal Revenue Service is sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims. IRS is disallowing claims to entities that did not exist or did not have paid employees during the period of eligibility to prevent improper ERC payments from being made to ineligible entities.

The letters are being sent as the IRS continues increased scrutiny of ERC claims in response to misleading marketing campaigns that have targeted small businesses and other organizations. The IRS mailing is the latest in an expanded compliance effort that includes a special withdrawal program for those with pending claims who realize they may have filed an inaccurate tax return. Later this month, a separate voluntary disclosure program will be unveiled allowing those who received questionable payments to come in and avoid future IRS action.

After an initial review this fall, the IRS determined that a large block of taxpayers did not meet basic criteria for the credit. Starting this week, taxpayers who are ineligible for the credit will begin receiving copies of Letter 105 C, Claim Disallowed.

This group of letters will cover taxpayers ineligible for the ERC either because their entity did not exist or did not have employees for the time period when the credit was claimed.

“With the aggressive marketing we saw with this credit, it’s not surprising that we’re seeing claims that clearly fall outside of the legal requirements,” said IRS Commissioner Danny Werfel. “The action we are taking today is part of an initial set of steps in our compliance work in this area, and more letters will be going out in the near future, including both disallowance letters and letters seeking the return of funds erroneously claimed and received.”

“As we continue our audit and criminal investigation work involving the Employee Retention Credits, we continue to urge people who submitted a claim to review the rules with a trusted tax professional. If they filed an inaccurate claim, we urge them to consider withdrawing their pending claim or use the upcoming disclosure program to repay improper refunds to avoid future action.”

Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims through at least the end of 2023. The IRS noted that enhanced compliance reviews of existing claims submitted before the moratorium is critical to protect against fraud and also to protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters.

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were either fully or partially suspended due to a government order or had a significant decline in gross receipts during the eligibility periods.

In July, the IRS said it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS has hundreds of criminal cases being worked, and thousands of ERC claims have been referred for audit.

20,000 letters focus on two ERC problem areas

The mailing reflects just part of the ongoing IRS review of these claims. In this group, two categories of claims have been identified and are being disallowed:

  • Entity not in existence during period of eligibility: TheERC applies to qualified wages for periods between March 13, 2020, and Dec. 31, 2021. Entities established after Dec. 31, 2021, are not entitled to the ERC under the law passed by Congress.
  • There are no paid employees during the period of eligibility: TheERC is intended as a credit against qualified wages paid. Entities that did not pay any wages are not eligible for ERC.

The IRS respects taxpayer rights, and the disallowance letter will explain that a taxpayer that disagrees with the disallowance can respond with documentation that supports their eligibility or claim amount, or they can file an administrative appeal.

The disallowance letters that identify ineligible claims before they’re paid serve several purposes that help taxpayers and tax administration. They:

  • Help ineligible taxpayers avoid audits, repayment, penalties and interest,
  • Protect taxpayers by preventing an incorrect refund from going to an ERCpromoter, and
  • Save IRS resources by disallowing incorrect credits before they enter the audit process.

The IRS plans additional letters beyond the disallowance letters. Plans are also being finalized for a special voluntary disclosure program involving ERC claims that will be announced later this month.

The IRS is also continuing to review ERC claims and may request more information from taxpayers to support their ERC claim.

IRS reminder: Still time to withdraw pending ERC claims

The IRS is also continuing to accept and process requests to withdraw a taxpayer’s full ERC claim under the special withdrawal process. Taxpayers have until at least the end of the year to request a withdrawal.

This withdrawal option allows certain employers that filed an ERC claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that has not yet been paid can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible. They can also withdraw their claim if they’ve received a check but have not yet deposited or cashed it.

The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

During this period, the IRS warns taxpayers to use extreme caution before applying for the ERC as aggressive maneuvers continue by marketers and scammers. In addition, the IRS continues to urge taxpayers who submitted claims to review the ERC requirements and talk to a trusted tax professional about their eligibility amid misleading marketing around the credit.

If you or someone you know has a federal or state tax issue and you are not sure what to do, call me at 813-514-2920 or contact me by email at jwood@jwoodcpa.com.

John S. Wood, CPA

15310 Amberly Drive, Suite 250

Tampa, FL 33647

Phone: 813-514-2920

www.jwoodcpa.com

IRS Increases Visits To High-Income Taxpayers Who Haven’t Filed Tax Returns

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As part of a larger effort to ensure compliance and fairness, the Internal Revenue Service on Wednesday announced that it will step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns.

Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven’t filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance.

“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country. We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”

For the current tax season, the IRS reminds taxpayers that everyone should file their 2019 tax return by the April 15 filing deadline regardless of whether they can pay in full. Six-month filing extensions are also available, although that does not extend the April deadline for paying any taxes owed.

“Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer, Mamo said. “It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS.”

For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS. Taxpayers who exercise their best efforts in filing their tax returns and paying or entering into agreements to pay their taxes deserve to know that the IRS is aggressively pursuing others who have failed to satisfy their filing and payment obligations.

During the visits, IRS revenue officers will share information and work with the taxpayer to hopefully resolve the tax issue.

How to pay

There are many payment options for people having trouble paying their tax bill. Payment plans can be set up quickly online.

Once returns are filed or an assessment occurs, there are various online payment options available at IRS.gov, including direct pay through a bank account or using a debit or credit card. Other ways to pay include the Electronic Federal Tax Payment System (best option for businesses or large payments; enrollment required), Electronic Funds Withdrawal (using during e-filing), same-day wire (bank fees may apply), check or money order or cash (at a participating retail partner). Those who can’t pay immediately may be able to meet their tax obligation in monthly installments by applying for a payment plan (including installment agreements and those who owe less than $50,000), they can find out if they qualify for an offer in compromise (a way to settle their tax debt for less than the full amount), or request that the IRS temporarily delay collection until their financial situation improves.

For those who refuse to pay, the IRS has a number of options available under the law, ranging from a series of civil enforcement actions and, when appropriate, pursuing criminal cases against taxpayers. IRS compliance personnel are also now working more closely with IRS criminal investigators on priority compliance issues, including high-income cases.

“These compliance visits underscore the importance of people filing their taxes this April, even if they can’t pay the full amount of tax due,” said Hank Kea, Director of Field Collection Operations, Small Business/Self Employed Division. “Not filing because you don’t believe you can pay at the time of filing makes the problem worse, as interest and penalties mount over time. We have many payment options available on IRS.gov to help taxpayers. It’s better to work on these issues up front rather than ignoring it and ultimately getting to the point of the IRS taking more serious action. Our continued use of ever-changing technologies, coupled with additional enforcement personnel, would suggest that waiting is not a viable option for delinquent taxpayers.”

What’s a revenue officer’s job?

Revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or taxes owed. Revenue officers conduct interviews to gather financial information and provide taxpayers with the necessary steps to become and remain compliant with the law. When necessary, they will take the appropriate enforcement actions to collect the amount owed, following the law while respecting taxpayer rights and following the law.

Don’t be confused: Visits are not a scam

For this new initiative, these high-income taxpayers have typically received numerous letters from the IRS over an extended period of time, so they generally realize they have a tax issue.

Revenue officer visits shouldn’t be confused with scams. Here’s what to look for:

  • While most IRS revenue officer visits to a taxpayer are unannounced, they will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials.
  • A legitimate revenue officer helps taxpayers understand and meet their tax obligations. The officer will explain the liability to the taxpayer, along with the consequences of failing to comply with the law. The IRS employee will not make threats nor demand an unusual form of payment for a nonexistent liability.
  • Visits by revenue officers generally occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
  • If someone has an outstanding federal tax debt, the visiting officer will request payment but will provide a range of options, including paying by check written to the United States Treasury.

If you have questions about this or any other tax matter, call us at 813-390-3170.

IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered

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The Internal Revenue Service strongly encourages taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

The IRS will begin implementation this month of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt.  A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

  • Paying the tax debt in full
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having requested or have a pending collection due process appeal with a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer:

  • Who is in bankruptcy
  • Who is identified by the IRS as a victim of tax-related identity theft
  • Whose account the IRS has determined is currently not collectible due to hardship
  • Who is located within a federally declared disaster area
  • Who has a request pending with the IRS for an installment agreement
  • Who has a pending offer in compromise with the IRS
  • Who has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

  • In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs.
  • Taxpayers can request a payment agreement with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.

Some financially distressed taxpayers may qualify for an offer in compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

If you have any questions about this or other tax matters, call us at 813-514-2920.

Offer In Compromise May Be A Legitimate Option If You Can’t Pay Your Full Tax Liability

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An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances including:

  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

The IRS generally approves an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. You should explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Before the IRS will consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding.

For more information on an offer in compromise, call us at 813-514-2920.