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Tax Related Articles

Stay clear of abusive trusts
Retaining property in collection issues with the IRS
Did You Overpay On Unemployment?

Stay clear of abusive trusts

Many tax-filing experts believe that taxpayers who take part in what the IRS determines to be "sham transactions" can count on an audit, increased levies on current income and possible penalties.

If a trust is determined to have fraudulent intent, the IRS will shift income and allowable expenses back into the filer's tax return and assess appropriate penalties.

In the short run, these schemes may produce some dollar savings for the filers involved. But all are almost guaranteed to trigger the audit process, IRS watchers believe. Equity Search recommends careful research with reputable tax planners before establishing or filing any return involving a so-called "trust."

EXAMPLES OF ABUSIVE TRUST
Business	Taxpayer places a business in a trust. Business income and expenses are reported on a Schedule C. Payments are characterized as deductible expenses or distributions in order to reduce taxable income from both the business and the taxpayer's self-employment taxes.
Family	Taxpayer places home in a family trust. The goal here would be to "step up" the cost basis while the owner reports no gain. The purpose here would be to claim the residence as a rental gaining inflated depreciation and maintenance expenses.
Charitable	Distributions are made from the family trust to the charitable or foundation trust. Payments from this trust would be principally for personal education living or recreation expenses of the taxpayer's family.

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Retaining property in collection issues with the IRS

Taxpayer Bill of Rights 2, Public Law 104-168, gave taxpayers more options and leeway in their quest to retain their property in collection issues with the Internal Revenue Service. Although this somewhat leveled the playing field, it is still important to obtain quality guidance from an expert.

Equity Search can help. Many of Equity Search's staff have worked for the Internal Revenue Service and know the procedures well.

Many provisions of Taxpayer Bill of Rights 2 apply to attorney's fees and the determination of responsibility in tax matters. As with most of the tax code, the text covers volumes. Equity Search stands ready to provide explanations and devise a game plan that makes both sides a winner.

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Here are some provisions of the law and how they affect many of the people who have come to Equity Search for help:

Taxpayer advocate	A taxpayer advocate has stature and influence in helping "expeditiously resolve problems." The Advocate has authority to release or restrain liens and levies against property. A new taxpayer will have much to do with making this determination.
Installment changes	The IRS must give 30 days' notice of intent to change any installment agreement. It must establish procedures for review of changes, if such a review is requested by a taxpayer.
Abating interest	The IRS receives broader powers to abate interest when tax-collection procedures are delayed by the IRS itself.
Interest-free period	If the notice of tax deficiency totals less than $100,000, the tax payer may "settle up" without additional interest within 21 calendar days, more than doubling the former "grace" period.
Private delivery	Taxpayers can meet "timely mailing" requirements through use of such private delivery services as Federal Express.
Lien, levy modification	The new law gives the IRS more options to withdraw a public notice of tax lien. The Taxpayer Advocate (mentioned earlier)
Offers in compromise	Offers in Compromise, the core of Equity Search's expertise, require approval of the IRS Chief Counsel if the amount involved exceeds $50,000.

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Did You Overpay On Unemployment?

You may have overpaid your Federal Unemployment Taxes, overlooking possible refund credits on your 940 Federal accounts, if the State Unemployment was paid late.

Employers take a credit on their Federal 940 returns for payments made to the state for Unemployment. The state subsequently reports to the IRS whether these payments were made during the year. If not the IRS then assesses the employer for the entire 6.2 percent 940 tax and proceeds to collect.

Invariably, the employer will pay these taxes to the IRS as part of a payment plan and the IRS will most likely apply the payments to these non-trust taxes first.

When the employer eventually makes full payment to State Unemployment, and has made payments to the IRS on additional 940 assessment, the employer in effect pays the tax twice. Even if no payments have been made to the IRS, the employer can still request abatement of the assessment.

This process is called recertification. When you know that payments have been made to the state on Unemployment tax, contact that state's Unemployment Office and ask for the Recertification Unit. It will supply you with a letter for each tax year requested showing the total contributions made to State Unemployment by the employer.

This letter is then sent along with an 843 Claim Form to the IRS, requesting abatement of the assessment and refund of any payments made within two years of the claim submission.

Equity Search help review your case and contact the state for recertification.

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