Recently a concerned taxpayer emailed us and asked: “Should I hire a tax professional to represent me before the IRS and state taxing authorities?” We thought, this is a great question and the answer is worthy of sharing with our blog readers.

There have been many radio shows and published articles by Consumer Advocates warning you to beware of companies claiming to be able to fix your tax problems or make your tax debt disappear. You might have heard these “too good to be true” messages on the radio and TV – promising to defend you against those big bad bullies at the IRS!

While it is true the IRS can make your life miserable, some tax representation companies make it sound as though only they can fix your problem while in reality many of these are firms who often times make your situation worse. How can they make it worse? By promising you unrealistic outcomes, charging exorbitant fees and not doing the work you hire them to do.

Some of the most recent public displays and worst offenders of the dishonest practices in this industry are guilty of misrepresenting their ability to provide tax relief or reduce their tax bills for thousands of customers. Another dishonest practice some of these firms employ are training their staff who answers the phone not to find out the problem but rather to use heavy handed sales tactics and make unrealistic promises in order to fool the customers into paying thousands of dollars in advance fees. Unfortunately, again, in most cases they take the money but don’t deliver the services and help they are promising.

Unfortunately, these examples come on the heels of thousands of consumers giving millions of dollars to companies that have turned out to not care as much about the tax problem as they care about lining their pockets with the little money these taxpayers had left. Don’t get caught in this same trap others have gotten caught in. There are some very reputable tax professionals who can help you resolve tax problems and in some instances can help reduce your tax liability. Some red flags to watch for, spot a scam and separate the reputable firms from the scams are:

• Large upfront fees and high-pressure sales tactics. Consumers who call for an advertised “free consultation” often experienced obtaining few details of how the company could help them without first being pressured to pay an upfront fee. One of the excuses used is when consumers request an explanation of services and fees in writing that they could not generate any documents until the fee was paid.
• Another tactic to watch out for is their refusal or heavy pressure to meet by phone rather than a face-to-face consultation.
• The next scam tactic to be aware of is promising unrealistic results or guaranteeing the outcome of your situation. While there are legitimate IRS programs for taxpayers who cannot pay, only the IRS can determine whether you qualify for that relief and ultimately it is up to the IRS to agree to grant the various reliefs. While there are laws in place as to the various relief options such as an Offer in Compromise, Installment Agreements, Innocent Spouse or Injured Spouse, Penalty Abatements, Audit Representation and Audit Reconsideration, the interpretation of the law based on each individual case can vary greatly and any firm who offers a “guaranteed outcome” is more than likely not on the up and up.

In the past several years we have seen more and more tax-settlement companies that have flourished due to the downturn in the economy, housing market and the increased efforts made by the taxing authorities to collect taxes to make up for the shortfall in the budget. Sadly, though, there have been many desperate vulnerable people who have fallen victim to the unscrupulous tax relief firms who have only ended up in a worse situation than they started with.

If you are an individual or business with tax problems do your homework. Make sure you are hiring a reputable firm who takes you and your problem seriously. If you are looking to hire a tax professional to represent your rights check out their experience and reputation. Are they local and willing to meet with you face to face? What is their area(s) of specialty? Do they have trained staff ready and willing to deliver excellent customer service and care about you as a client? If you already have a tax professional such as a Tax Attorney, CPA or Enrolled Agent preparing your returns ask them first. It may be a simple matter they can help you with. If not, they can refer you to a CPA, EA or Tax Attorney who they know and trust that deal with IRS and State tax problems and will help you and be honest with you. If you feel you have been treated unfairly when trying to take care of it on your own you can always contact the local Taxpayer Advocate Service again locations posted on the IRS website.

Sometimes you can handle something simple on your own. However, there are legitimate times you should seriously consider hiring representation. As an individual, it is one thing to treat a cold on your own, however, you would never consider performing brain surgery on yourself! It is the same line of thinking when you represent yourself when dealing with the IRS or state taxing authorities.  Tax problems are too serious to handle on your own, hire a well-trained and versed tax professional such as a Tax Attorney, CPA, or Enrolled Agent who has in-depth knowledge and experience in the area of your specific problem.

At Gartzman Law Firm, we help clients overcome their tax problems. Some discussions include the subject of tax debt and in a recent consultation, a client asked about the statute of limitations regarding IRS tax collection, and if it applied to their case. As a tax lawyer in Georgia, I know this topic to be complicated and broad so I prepared general information on the subject, as it may be helpful to others.

The statute of limitations for IRS tax collection is as follows:

• For Back Taxes: Ten years from the date the first assessment was sent out to collect taxes, plus penalties and interest. However, once the ten-year statute has expired the IRS is prohibited by law to attempt collection on the expired tax debt. Taxpayers still receiving IRS letter after expiration, will need to send the IRS a letter showing proof of the expiration.
• For Assessment: Three years from the date of actual tax filing. The statute is six years if the taxpayer has omitted additional gross income in excess of 25% of the original gross income amount filed with the IRS.
• To Claim a Tax Refund: Three years after the date the tax return was filed with the IRS or 2 years after the date the tax was paid to the IRS. To claim a refund, taxpayers will need to send an amended return and file a claim for a tax refund of an overpayment.

When I handle Audit Defense cases in Georgia, I remind clients that the ten-year period begins with the date of the assessment (the date the tax liability is assessed) not the tax year for which taxes are due.  Once an official at the IRS signs an assessment, the ten-year clock begins ticking. Adjustments including interest and penalties (including late payment penalties) get added to the original tax assessment within the ten-year time frame.  Note: The statute of limitations is waived in all cases where the IRS suspects fraudulent or false tax reporting with intent to evade taxes.

Naturally, there are exceptions or special circumstances that can extend the length of time for collection. In my experience as a Georgia tax attorney and CPA, the time extension is so that the IRS can review the circumstances and validity surrounding the assessment.
Some of these include:

• Bankruptcy filings
• Offer in Compromise
• Collection Due Process Appeals
• Innocent Spouse Relief
• Signing a waiver Form 900 and installment agreement. This is a contract between taxpayer and IRS that suspends enforced collection in exchange for a taxpayer payment installment plan and consent to extend the collection statute of limitations. *(As a Georgia tax attorney, I do not advise signing any agreements with the IRS until you have consulted your tax professional.)

Some types of court actions can also suspend the ten-year clock.

Important point: The points above are for federal statues, states have differing laws. Georgia tax law states the statute of limitations is three years after the date the return was filed for assessment and seven years for collection, which can be pursued indefinitely. Some states, such as California do not have a statute of limitations so collection efforts can go on indefinitely.

It is not advised to directly deal with the IRS especially in cases where the statute of limitation is set to expire. These statutes are complicated and you won’t get much help from IRS. They are not so apt to be of assistance in cases where they ultimately have nothing to collect. As an Atlanta tax lawyer and CPA, we represent clients in these cases by gathering all their data and analyzing their unique set of circumstances. A professional tax lawyer or CPA can confidently deal with the IRS directly on a client’s behalf to sort out complicated tax problems and take the necessary steps to avoid further collection attempts and help put this situation safely in the past.

With tax season fast approaching, at Gartzman Law Firm, we are busy assisting the changing financial needs of our clients so they can get the most for their money. And it is hard to ignore a trend we’ve seen over the last few years that has affected many which is financial support for their elderly family members and in-home caregiving.

Two recent articles shed some light on the subject, Caring for mom and dad can activate tax breaks and 2011 Tax Tips for Family Caregivers, spoke to this situation and urged those who are providing care to take advantage of several IRS tax breaks they may not be aware of but could really benefit from. These tax breaks include claiming your parent as a dependent on your tax return or taking a deduction of the medical expenses and care you provide. These tax breaks can go a long way to ease the financial stress undertaken by anyone giving care to an elderly loved one.

As a Tax Lawyer from Atlanta, Georgia, it appears this shift in dynamics is caused by economic hardship. That hardship brings with it a need for financial planning that includes both the caregiver and the elderly family member and ideally works best before the family member has become dependent to determine eligibility for potential tax savings. Here are a few main points to keep in mind about eldercare and taxes:

Claiming your parent as a dependent
According to the IRS, you may claim your parent as a dependent and take an exemption for the 2011 tax year, which will equate to a reduction of your taxable income by $3,700. In order to determine if you qualify to claim your elderly parent as a dependent, you will need to pass the following five tests.

1. You are not a dependent of another taxpayer.
2. Your parent does not file a joint return.
3. Your parent is a U.S. citizen, U.S. national, U.S. resident, or a resident of Canada or Mexico.
4. You paid more than half of your parent’s support for the calendar year.
5. Your parent’s gross income for the calendar year was less than the exemption amount (less than $3,700.)

Deducting Medical Expenses
If you are not able to claim your parent as a dependent because their gross income is over $3,700, you still may be entitled, according to the IRS, to tax deductions for their medical expenses such as their health and dental care, prescription drugs or improvements relating to their disabilities can be deducted on your tax return.

Note from a tax attorney and CPA: If your parent is in an assisted living facility, you may want to ask how much of its monthly cost is attributable to deductible medical expenses. It could be possible to get a deduction from the monthly expenses if their reason for living there was deemed “medically necessary.”

Head of Household
As a practicing tax lawyer and CPA in Atlanta, Georgia, I recommend that clients pursue the “Head of Household” deduction (if applicable). The IRS allows caregivers to file as head of household if they meet the following requirements.

1. You are unmarried or “considered unmarried” on the last day of the year.
2. You may claim a dependency exemption for your parent.
3. You paid more than half the cost of keeping up a home for your parent for the tax year.

Important Point to Remember: Your parent does not need to live with you in order to qualify. In cases where a parent lives on their own or in an assisted living arrangement, your parent could still qualify as a dependent as long as they pass the other tests. Your tax attorney can explain the details and determine eligibility.

Multiple Support Declaration
Families with siblings sharing in the cost of parent care can claim a Multiple Support Declaration. This allows multiple family members who each provide more than 10 percent of the support, to claim the parent as a dependent. As tax lawyer in Georgia, I often advise families with siblings supporting a parent to make the determination as to who will be taking the exemption.

Working Caregivers
This Georgia tax help lawyer advises caregivers that if they are the caregiver for a person who is unable to care of themselves, and you paid someone to look after them while you went to work or looked for work, you may be eligible for Child and Dependent Care Credit that allows for deductions such as the following:

1. A credit up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
2. Use up to $3,000 of expenses paid in a year (for 2010) for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

In a recent survey of family caregivers by Caring.com, 41 percent now have one or both parents living with them and 21 percent are supporting at least one parent in an assisted living facility, nursing home, or other community living residence. At Gartzman Law Firm, these statistics remind us that we could wind up facing this reality too. For those people supporting an elderly parent with in-home care or with financial support, it’s not too late to consult a tax attorney or CPA for the 2011 tax year and take full advantage of these rewards designed to help you.

I recently published a “Small Business Tax Advice for 2011″ article to my Google Knol page (which will be discontinued in May 2012) – don’t worry! I will keep publishing articles.

It’s that time again to reflect on the passing of another year and to recall the triumphs and challenges experienced along the way. Yes folks, it’s tax season!  We at Gartzman Law Firm are in full swing accessing the available tax breaks before the end of the year. A recent article in the Houston Chronicle, Small business Q&A: Too late to save on ’11 taxes? spoke to the need for businesses to make sure they are taking full advantage of recent government incentive programs, that if applicable, can go a long way to adding to a business’s bottom line. But it is important to act quickly as these programs are due to expire soon. The following guidelines are designed to get busy small business owners to focus on closing their year with perhaps, more money in the coffers.

Georgia Tax Lawyer Advocates for Organized Records
For nearly thirty years as an Atlanta tax attorney and CPA, I have made it a point to educate both business owners and individuals on the importance of keeping meticulous records to avoid back tax problems; it cannot be overstated. Maintaining organized records throughout the year keeps you prepared should you have to present your books to the IRS.
First, take care of the following:

1. Organize Receipts and other related documents.
2. Balance and reconcile all records for the latest reading of where the business is financially.
3. Make an appointment with your CPA to discuss tax saving options.

Scrambling to gather important documents is a huge time-waster and could prevent you from participating in justified business deductions. The whole point to this exercise is to avoid tax problems including costly IRS business audits. Organized tax records provide a clear reporting of how well your business is run.

Atlanta Tax CPA Recommends 2011 Tax Deductions
You may want to consider large equipment purchases this year due to two large tax breaks targeted at small businesses. These special deductions allow businesses to purchase a piece of qualifying equipment and deduct the FULL PURCHASE PRICE from their gross income. This incentive was designed by the U.S. Government to encourage businesses to “invest in themselves” by purchasing equipment thus helping to stimulate the economy at the same time.

• The Section 179 deduction allows $500,000 (up from $250k previously) that is good on new and used equipment, including new software.
• “Bonus” Depreciation – 100% (taken after the $500k deduction limit is reached). Bonus depreciation is only for new equipment. (Businesses that exceed $2 million in capital equipment purchases can also take this).

Important to note: These programs will begin to phase out in 2012, so in order to qualify for the Section 179 deduction for the 2011 tax year, the equipment must be purchased and placed into service between January 1, 2011 and December 31, 2011. As a Georgia tax attorney and CPA, I typically schedule a consultation with my clients to determine if now is a good time to take advantage of any business deductions before making any large purchases of new equipment. If their business cycle is down, there may be less revenue to take deductions against and not always in their best interest to “spend money to save money.” Sometimes in these cases, a savings plan might be a better choice where salient advice from a tax attorney or CPA helps to make a more informed decision.

Atlanta Tax Attorney and New Health Tax Credits
One of the least known business tax credits could stand to benefit many business owners, yet so few understand it. According to the IRS, small businesses that contribute to their employee’s health care premiums, may be entitled to the Small Business Health Care Tax Credit:

• The maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities for tax years 2010 through 2013. On Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.
• Small business employers who did not owe tax during the year can carry the credit back or forward to other tax years.
• Eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit since the amount of the health insurance premium payments are more than the total credit – that’s both a credit and a deduction for employee premium payments.
• Small tax-exempt employers may be eligible to receive the credit as a refund, even if there is no taxable income so long as it does not exceed the income tax withholding and Medicare tax liability. Also, the credit is refundable.
• If you want to benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

According to a Kaiser Family Foundation’s 2011 survey on health benefits, very few small businesses, (about one third with fewer than 50 employees) were aware of their eligibility for the Small Business Health Care Tax Credit found under the Affordable Care Act (ACA).  As an Atlanta tax CPA, I have answered a litany of questions about the new health care provisions, but due to the complex nature of the new health care regulations and its controversy, it’s not surprising there are huge numbers of business owners who aren’t aware this tax credit could financially benefit their business’ bottom line. A seasoned tax attorney or CPA will be able to determine if their business qualifies.

Georgia Tax Attorney: Know Your Worker Classification
Classifying a worker as an independent contractor instead of an employee can save small businesses money, but stepped up IRS enforcement in this area has many unwitting business owners paying penalties instead of saving money simply because they don’t know the difference. The IRS gives a 20-point common law test that asks relevant questions to help determine the proper classification. As a tax attorney and CPA in Atlanta, Georgia, I suggest you look at it this way: how much control does a company have over the work being done? If a company is telling a worker not only what to do, but when, where and how to do it, providing the tools to do it and expecting him to clock in and out while he does it, he is probably an employee. If the worker is free to complete his tasks off-site within his own timeframe and on his own equipment while working for other clients at the same time, he is probably a contractor but remember, the IRS is focusing on compliance so take the time to be sure.

At Gartzman Law Firm, we review and counsel our small business clients as to the best deductions that save them money.  If you are a small business owner currently experiencing IRS tax problems, I encourage you to hire a tax professional to handle your case with expertise in handling small businesses. If you are overwhelmed with the day to day operations of your business, let the tax attorney and CPA who knows small business help you to keep your business up and running properly.

About Jeffrey S. Gartzman, Atlanta Tax Attorney and Certified Public Accountant
Jeffrey S. Gartzman is an accomplished Atlanta tax attorney and CPA who has been practicing tax law in Atlanta for nearly 30 years. He will help you resolve IRS and state tax problems, find tax relief and settle tax debt. Jeffrey S. Gartzman has a Master of Laws (LL.M.) in Tax from Emory University School of Law. Jeffrey S. Gartzman is a former IRS Taxpayer Education Program instructor. He is also an accredited Personal Financial Specialist with the American Institute of CPAs. Mr. Gartzman is a member of the Atlanta Bar Association, State Bar of Georgia, Georgia Society of Certified Public Accountants, American Institute of Certified Public Accountants, and other professional associations.

I recently had the opportunity to help a victim of Fraudulent Tax Returns on Lawyers.com. I am happy to share their question and my response and advice for them:

Question: What are my options or what can I do if I am a victim of fraudulent tax returns?

Answer: If you believe you are the victim of fraudulent tax returns, contact or have your tax attorney or CPA contact the Internal Revenue Service immediately to find out what tax info, tax returns and balances are on your file. Once you have determined which periods appear suspicious or fraudulent, you can contact the IRS to report this problem. If your account is in collections, you may have to speak independently with a collections agent and let them know you believe you are a victim of Identity Theft and request a suspension on collection enforcement to prevent levies and liens.

To read more questions and my responses, click here: Ask A Tax Lawyer blog posts

Small business is a powerful economic engine that collectively, is not really small at all.  According to a study by the Small Business Administration (SBA), small businesses employ half of all private sector employees and pay 44 percent of total U.S. private payroll. This strong economic sector represents the hopes and dreams of business ownership and often is seen as a gateway to the American dream.  However, this important economic sector has never been so financially challenged as it is right now. At Gartzman Law Firm, we see first-hand the stresses small businesses are experiencing and unfortunately see a shirking of their financial responsibilities that can end up hurting them more.

The recession has carried on for so long it has good business people barely holding on. But decisions such as skipping payroll tax payments to the IRS in order to keep the doors open can ultimately bring on larger and more expensive tax problems over time. As an Atlanta Tax Attorney and CPA for IRS Representation and a business owner, I believe all business owners deserve to know how closely the IRS examines small businesses when it comes to their tax liabilities. They closely scrutinize small businesses in large part for their contributions to the annual tax gap; the amount of taxes that should have been paid (reported) and what was actually paid. The current tax gap is hovering around $400 billion dollars and is a priority of the current administration to reduce. To discourage underpayment, the IRS has placed severe penalties and interest on uncollected funds thus avoiding tax payments has become a more expensive and hard to hide from proposition.

There are two areas where small business owners frequently create IRS tax problems for themselves: delinquent payroll / employment and incorrect employee classification. Understanding how these following issues can become problematic may just deter a struggling business owner who might be tempted to use allotted IRS funds for business operations or anything other than paying Uncle Sam what he’s owed.

• Delinquent payroll / employment taxes – Payroll withholdings collected from employees are considered in “trust” by the business owner until paid to the IRS. If not paid by the due date, the IRS can invoke Trust Fund Recovery Penalties (TFRP) to anyone who willfully fails to collect or pay. This action causes payroll tax penalties of 100% of the original amount to be assessed personally against the responsible parties. Depending on the size of the company this can be significant.

• Incorrect employee classification – Business owners can get into trouble if they do not know the difference between an independent contractor and employee. The IRS posts a 20-point common law test that an employer could take to determine classification. Understanding the difference is necessary should a small business owner be exposed to an IRS audit that determines underpayment for your “employee.” This breach can make you liable for employment taxes, plus interest and penalties, if a worker is incorrectly classified as an independent contractor.

As a Tax Attorney practicing in Atlanta, Georgia, strict adherence to tax laws is the first order of business. Penalties and interest for delinquent business tax liabilities are extremely high and an unnecessary waste of business capital. For small and fledgling businesses, consider the following factors: the large capital investment in the business, a means of income for owners and employees, as well as an owner getting to do what they love. With so much riding on the business to succeed, one can understand the difficulty in keeping up with tax obligations when you are trying to keep the lights on.
Recognizing the current economic pressure felt by small businesses, the IRS has responded by adjusting some of their requirements calling this a series of new steps to help people get a fresh start with their tax liabilities and help delinquent business owners become current with payments. IRS commissioner Doug Schulman understands small business importance in the nation’s economy. These steps are both good for challenged business owners as well as for the tax system.

New and improved IRS lien processes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

• Withdrawing liens in some cases where a taxpayer enters into a Direct Debit Installment Agreement.

• Creating easier access to Installment Agreements for more struggling small businesses.

As a Georgia Tax Lawyer, I encourage small business owners currently experiencing IRS tax problems that may include tax liens that the time is now to take advantage of these IRS changes. If you are overwhelmed with the day-to-day operations of your business, let a tax attorney and CPA expert in small business tax resolution handle your case. These tax professionals understand a small business owner’s need to balance operational cash flow with tax obligations. By hiring their services, you can take the IRS pressure off and keep the business up and running smoothly.

We often counsel consumers mired in IRS tax problems from our Atlanta tax attorney and CPA for IRS representation firm to help resolve their pressing issues. These tax problems are often brought on by their own inexperience with the IRS and how complicated and strong their powers can be. Sadly, there are also instances where a client has fallen victim to a tax scam that has not only robbed them of hard earned money but also facing serious IRS penalties, fines and possible tax fraud charges. The good news is that tax scams can be prevented if you know what to look out for.

As a tax attorney in Atlanta, Georgia for nearly 30 years, I know a thing or two about tax law and have seen not only the damage tax scams have made on the tax industry but also what they can do to ordinary citizens who get duped. My emphasis is to educate taxpayers to avoid tax scams at all costs, because the simple fact is that it is difficult to “beat” the IRS. If you are one of many Americans with tax problems, trying to game the system will not work, contacting a tax attorney or CPA to review your case will. The very nature of tax scams is to lure people in. Recognize the tax scam “signs” at the outset to prevent a “too good to be true” scenario from happening to you.

Here are some important points to keep in mind:
Every year the IRS lists the worst top scams and rightly names it, the “Dirty Dozen”. Some are old and some are new and range from identity theft to fuel tax credit scams. There are three categories the IRS has deemed important in distinguishing the following: Tax scams, Identity Theft, Phony Arguments. These three categories are inclusive of what most consumers encounter if they come across a tax scam.

Tax Scams
The most common abusive tax scams include ones that promise higher returns. Tax credits, rebates or tax refund (considered tax return related scams), home-based business, trust, and off-shore schemes, and anti-tax law are just some prized programs the scammers participate in. Recent scams we have seen at Gartzman Law Firm involve unscrupulous tax preparers charging a fee for a promise (typically aimed at low income taxpayers) of free money for tax credits and guarantee of a higher refund. Victims of this type of tax scam have reported not collecting any of what is promised and sadly paying hard earned money for very bad advice.

Identity Theft
This latest scam and tax fraud has been given a boost by the omnipresence of the internet. Methods for identity theft cases include the fraudulent use of the IRS logo. With this phony logo scammers contact taxpayers via the internet, mail service or via telephone or fax and convince them into releasing personal and financial information. These official looking documents confuse unwitting consumers and expose them to identity and in many cases asset theft. The common term for this type of theft is called phishing. While many are aware of its existence, thousands still fall prey to it every year. To prevent this type of scam from happening to you, it is important to understand these key points about IRS identity theft:

• The IRS does not send correspondence to a taxpayer through e-mail. If you have received a suspicious yet official –looking e-mail, BEWARE! You are advised NOT TO OPEN any attachments or links and to contact the IRS immediately to report it.
• By clicking on that e-mail, you could unleash malware that could download a virus to your computer or release personal or financial information the scammers can use.
• If you question ANY correspondence, contact the IRS immediately (irs.gov) to confirm the authenticity of the documents.

Phony Arguments
There are people, for example, who argue that the very filing of a tax return and payment of taxes is voluntary and challenge the US Government on these grounds as a matter of principle. As an Atlanta tax attorney and CPA, I have witnessed similar cases and have yet to see them conclude in a taxpayer victory. However, these same people are able to convince an audience into believing their misguided charges. Don’t be one of them, as you will most assuredly wind up on the wrong side of the IRS with your chances of winning at zero.

If you have been a victim of a tax scam or think you might be, it is important to consult a tax professional to help you understand what your options are. The charges for tax fraud are serious even if you were falsely scammed. As a tax attorney and CPA based in Atlanta who has handled cases such as these, I strongly encourage you to hire tax experts who understand IRS policies in these matters and who will stand on your side and get back on the right track.

About Jeffrey S. Gartzman, Atlanta Tax Attorney and Certified Public Accountant
Jeffrey S. Gartzman is an accomplished Atlanta tax attorney and CPA who has been practicing tax law in Atlanta for nearly 30 years. He will help you resolve IRS and state tax problems, find tax relief and settle tax debt. Jeffrey S. Gartzman has a Master of Laws (LL.M.) in Tax from Emory University School of Law. Jeffrey S. Gartzman is a former IRS Taxpayer Education Program instructor. He is also an accredited Personal Financial Specialist with the American Institute of CPAs. Mr. Gartzman is a member of the Atlanta Bar Association, State Bar of Georgia, Georgia Society of Certified Public Accountants, American Institute of Certified Public Accountants, and other professional associations.

As a tax attorney and CPA in Atlanta, Georgia for nearly 30 years, my focus has always been to prevent IRS penalties for our clients at all costs.  Errors that result in fines and penalties are not, in my estimation, a good way to spend hard earned dollars, but mistakes by taxpayers and by IRS, a very large government institution, are frequently made.  When mistakes become the case, trying to resolve the tax bill while the interest clock is ticking can, even for this Atlanta tax attorney, be challenging because no one wants or should pay more than they have to.

A recent Forbes article written by Robert Wood, When Fighting IRS Should You Stop to Pay Interest speaks to this dilemma and has most of us in the industry agreeing; there is no right answer and each case is different. When you find the IRS has made a mistake you can dispute it, but then you need to decide whether to pay or not to pay the IRS all that is due to stop the interest from accruing until your tax problems are resolved.

As an Atlanta CPA and tax attorney for IRS representation, I highly recommend that if you find yourself in this situation, you consult with tax experts who can guide you through the tangle of IRS rules and regulations and let you know your options, especially in cases where there are compound interest and penalties. Facing the IRS alone without proper tax representation might unnecessarily expose yourself to their wrath that could possibly leave your money on their table.

There are two schools of thought to the IRS interest payment issue:
1.    Don’t pay until your case is resolved. This approach is confident and if you can prove to the IRS there are no taxes due, there is no reason to pay any penalties. If there is a strong case for this action, it could work. However if you are wrong you will pay taxes, penalties and interest that compounds daily and runs at the short-term federal rate of 3% or
2.    Pay all taxes including accrued interest and any penalties to stop the interest clock while disputing your case and if you win, your money is refunded.

If you decide to pay all taxes, interest and penalties while in dispute, your CPA or tax attorney will insist you clearly deem this a DEPOSIT and send this designation of funds information (in writing) to the Department of Treasury to be deposited into your account. Otherwise, the IRS believes you are making a payment. Key point:  It is important when sending anything to the IRS regarding tax problems or issues that you provide very specific details and information and be sure to make copies for follow up correspondence.

In our Atlanta tax attorney and CPA for IRS representation firm, we advise our clients that the funds in their account to stop the interest can be retrieved should they need to use them. However, in doing so, we warn that requests to withdraw funds can be met with resistance should the IRS believe they would not be able to collect should you lose the dispute.

Some tax disputes are worth fighting the IRS for, some are not.  With a qualified CPA or tax attorney on your side to discuss the best financial options available and their dealing directly with the IRS on your behalf, will help ensure your IRS tax problems are put squarely behind you.

These days, it’s not hard to see so many people in serious financial trouble. We at Gartzman Law Firm, see too many clients facing such dire situations on a daily basis. This economic downturn has gone on for so long; it has affected people in every industry and at every economic level. It has also created a new sector: the chronically unemployed or underemployed worker. Many who have joined this sector, often through no fault of their own, are struggling to keep up with their obligations and find themselves sinking financially further and further underwater without a life ring.

The financial troubles that result from little or no income can be due to several factors including the following: prolonged unemployment or under-employment, an extended illness, sickness and or the death of a loved one. Individually, these troubles can throw any household into turmoil. Coupled with the added stress of little or no income and the pressure to pay the mortgage to keep a roof over their heads, has many turning to foreclosure for relief.

According to a recent Realty Trac study on Georgia foreclosures:

• 1 in every 352 housing units in Georgia received a foreclosure filing in September 2011

• Georgia ranks fourth in the nation for the most recent foreclosure activity at 11,552. (California is number 1 with over 53,000 followed by Florida and Michigan).

Given abysmal statistics like these and an economic recovery slow to materialize, it’s sad to see so many families feeling forced to let their house “go back to the bank” and default on their mortgage. However, while the relief of this burdensome debt might seem appealing in the short term, there are tax ramifications to this decision that, if not resolved, could quickly bring back the financial stress again.

Before considering the drastic steps to foreclosure, understand that there may be more options available to you.  As a tax lawyer based in Georgia, I recommend that you consult a qualified CPA or tax attorney to help you wade through the details of your individual situation in your specific area. Their purpose is to provide you with the best financial options available helping to ensure these tax problems become a thing of the past.

The prevention of foreclosure is always advised and should top the list for consideration. There are many government resources available to distressed homeowners who perhaps need additional information. One place to start is the US Department of Housing and Urban Development website to educate yourself on such topics as: rights as a homeowner, seeking help to work with your lender and how to avoid scams targeted at desperate homeowners.

If after weighing all your options foreclosure seems to be the only solution, consider that you could be trading one problem (getting out of a mortgage) for another (owing additional taxes).

Here are a few things to be aware of if foreclosure becomes your only option:

Debt cancellation
The IRS states that if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. This means that if you cannot pay your mortgage balance, the bank forgives or cancels that debt and reports that amount to the IRS to tax that same amount as income. There are exceptions that may apply to many homeowners:

• The Mortgage Debt Relief Act of 2007 (set to expire in 2012) allows for a taxpayer who defaulted on the loan to their primary residence to exclude the cancelled loan amount as income on their next tax return.

• Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.

• Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

There are several exceptions to the taxability of cancelled debt, such as insolvency or bankruptcy that your tax attorney or CPA will take into consideration for your case.  Given the current economic state, the IRS has adjusted some programs aimed at distressed homeowners with tax problems that deal with federal tax liens on homes. While these programs are helpful, be aware of whom you are dealing with; the IRS is not going to give anything away without taking something in return. At the end of the day, the IRS is still a tireless collection agency out to get what they’re due. Without proper IRS representation on your side against the IRS that can help plan a new financial road map, you may be doing damage to your own case. These tax professionals understand how the IRS works and they use that knowledge and experience to bring resolution to a client’s tax problems.

When to hire a Tax Attorney and CPA for IRS Representation
Certain cases can be handled with the IRS directly but if you find yourself considering a harsh and difficult decision like foreclosure, its tax implications and your financial future, you shouldn’t face the IRS without equal footing. Being a Tax Attorney and CPA based in Atlanta, I recommend that in situations that require both tax and legal advice, it’s best to hire professionals who best understand IRS business practices and can navigate those often complicated, murky legal and tax waters.  These legal and tax professionals work directly with the IRS on behalf of a client to resolve the following tax problems: an IRS notice, IRS lien, IRS appeal, including an Offer in Compromise, setting up an IRS payment plan, or penalty abatement, bankruptcy discharge of tax review. By taking the first step and calling for a consultation, you can begin to plan a brighter future on sound financial footing.

About Jeffrey S. Gartzman, Atlanta Tax Attorney and Certified Public Accountant
Jeffrey S. Gartzman is an accomplished Atlanta tax attorney and CPA who has been practicing tax law in Atlanta for nearly 30 years. He will help you resolve IRS and state tax problems, find tax relief and settle tax debt. Jeffrey S. Gartzman has a Master of Laws (LL.M.) in Tax from Emory University School of Law. Jeffrey S. Gartzman is a former IRS Taxpayer Education Program instructor. He is also an accredited Personal Financial Specialist with the American Institute of CPAs. Mr. Gartzman is a member of the Atlanta Bar Association, State Bar of Georgia, Georgia Society of Certified Public Accountants, American Institute of Certified Public Accountants, and other professional associations.