What is a Civil Trust Fund Penalty?

The easiest way to explain this is fees and fines that are placed upon individuals that don't pay their employees' tax withholdings to the IRS.

Here's some background info...
Those taxes that take a nice bite out of your paycheck (Federal, Social Security, Medicare) are not being taken out by the IRS. Your employer withholds these amounts for you. (Don't get all sentimental. They're required by law to do this.) Then, your employer pays those taxes to the IRS quarterly. These quarterly taxes are called "payroll" taxes, also known as 941's.

Here's where the trouble comes in.
What if your employer does not pay these taxes to the government? Big trouble. Not only does the IRS consider this stealing from them, they also consider this stealing for you, the employee, as well. Even worse is when you file taxes and the IRS pays you money in a refund... money the IRS never received from your employer in the first place. Now, as an employer, you've stolen from two people and put the IRS out of some dough. You better believe they're coming after you.

But who will they come after?
This is where the IRS becomes ruthless. "Who" you ask? Anyone involved in payroll is the answer. And they can assign the Civil Trust Fund Portion (unpaid payroll taxes) and Penalties (fines) onto anyone in any fashion. It does not have to be one person or the big wig. It can be anyone they get their hands on.

My Advice
Act quickly. Find a reputable firm to represent you because these matters get tricky. Research thoroughly who will be doing your bidding and cooperate.

Additional Resources...

Items on the Trust Fund Recovery Penalty

The Real Price of Tax Debt Resolution

That Basic Question
If you're like me the first question you want to ask after hearing about a product or service is "How much does it cost?" And it's a very good question. The last thing you want to do is waste your time learning about a service that's great but you cannot afford. It's human nature. So of course "How much will this cost?" is one of the first questions that get asked when those in tax debt hell finally break down and call a tax resolution firm.

The Lie
Unfortunately, however, the debt resolution industry as a whole markets itself as a quick fix to big problems. People expect a low $29.99 fee and a miracle a lot like they expect tiny pills to melt away years of unhealthy eating and sedentary lifestyle. It just isn't that easy.

So of course those in trouble with the IRS and dealing with the resulting financial crisis contact a firm and have unrealistic expectations right off the bat. Well, let me pop your bubble and let you know there is no "quick fix" to tax problems and if someone offers you a miracle with a low fee you should RUN.

The Truth
Whether you're problem is from years of dodging the tax man or a one-time mistake that has had catastrophic effects, the end result is the same... someone must negotiate with perhaps one of the biggest, slowest, most complex and bureaucratically bogged down institutions known to man. Think this is easy? Think this is quick? I think not.

The greater thing to realize is not how much the resolution service will cost you, but how much not resolving the problem will cost in the end. I bet you like your home and car. If you don't pay, the IRS will like them too--as your form of payment. And that's not the worst part. Your paycheck, your credit score, savings, 401K's... all within the scope of the IRS. Still think a "large" payment up front is a lot to pay to protect these things? I think not. You must put fees in perspective.

Now, I bet you were thinking that this post would give you a list of fees. Sorry to disappoint. Depending on the severity of your debt, fees can vary widely. I can say though that don't come to a firm expecting to pay $30, $50, or even $100 for a fix. But do come with an open mind and a willingness to try to make fees work. Research your firm. Make sure you know who you are buying from. And then give the fees a once over again. But do prepare yourself, for if you don't the sticker shock may seem worse than it actually is and prevent you from fixing something that MUST be fixed.

Why Enrolled Agents?

When you have a tax issue, nine times out of ten, you are going to call upon the help of professionals. And honestly, nine times out of ten, you should be calling upon professionals for help because you are going to be at a disadvantage when stepping onto the battlefield with the IRS. When going head-to-head with the Internal Revenue Service, it will not benefit you to choose a simple tax preparation firm (ex. H&R Block) or even a tax attorney. The reason I say this is because neither are familiar with negotiating with the IRS. What you will want on your side is an Enrolled Agent (EA). An EA is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals. I have included a more detailed explanation of an EA below.

“An Enrolled Agent (EA) is a tax professional who has passed an IRS test covering all aspects of taxation, plus passed an IRS background check. Enrolled Agents have passed a two-day, 8-hour examination. The examination (called the Special Enrollment Examination) covers all aspects of federal tax law, including the taxation of individuals, corporations, partnerships, and various regulations governing IRS collections and audit procedures. Like CPAs and tax attorneys, EAs can handle any type of tax matter and represent their client's interests before the IRS. Unlike CPAs and tax attorneys, Enrolled Agents are tested directly by the IRS, and Enrolled Agents focus exclusively on tax accounting. The "EA" designation may be revoked by the IRS' Office of Professional Responsibility for malpractice.

Enrolled Agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. Enrolled Agents expertise in the continually changing field of taxation enables them to effectively represent taxpayers audited by the IRS.”
-Effectur

Basically, the gist of what I am saying is that I wouldn’t suggest bringing a knife to a gunfight. If you seek out the right weaponry when trying to take on the IRS, you will have a much better chance winning the fight.
If you have a tax problem, call the “big guns”

Cheers!
Taxus

Federal Income Tax Burdens: Our Top 10

Well it appears that NEW YORK and Connecticutt walk away with the prestige of having the highest paying taxpayers among U.S. counties and cities.

Among counties, taxpayers in New York County (Manhattan) pay the highest average percentage of Adjusted Gross Income (20 percent) in federal income taxes, or $25,875. Among major metropolitan areas, taxpayers in Stamford and Norwalk, Conn. pay the highest average percentage of Adjusted Gross Income (22 percent), or $41,496.

On the other end of the spectrum, Starr County in Texas is the lowest ranked county in terms of federal tax burden. It had a negative tax burden of 4.13 percent, meaning taxpayers there got back an average $867.



Federal Individual Income Tax Burden: Highest-Paying Counties and Major Metro Areas

Rank--County ------------------State---Avg.Tax Liability/Return------Taxes as % of AGI
1 --------New York (Manhattan) --NY ------------- $25,875 ------------------------------- 20.0%
2 --------Fairfield --------------------CT --------------$23,479 --------------------------------19.4%
3 --------Teton -----------------------WY -------------$27,015---------------------------------18.3%
4 --------Westchester ---------------NY -------------$19,411 --------------------------------17.8%
5 --------Pitkin -----------------------CO -------------- $24,001-------------------------------- 17.6%
6 --------Collier -----------------------FL ------------- $16,966 --------------------------------17.4%
7 --------Union -----------------------SD --------------$14,006 --------------------------------17.2%
8 --------Marin -----------------------CA --------------$18,365 --------------------------------16.8%
9 --------Somerset -------------------NJ --------------$16,502 --------------------------------16.8%
10 ------Morris ----------------------NJ ---------------$15,296 --------------------------------16.3%

Source: The Tax Foundation
Full Article

Cheers!
Taxus

Effectur

The Need for Compliance

When dealing with the IRS and more specifically, a tax liability, it is extremely important to be in compliance with the IRS. In order to be in full compliance with the IRS, all taxes must be paid up to date and all returns required to file must be filed to date. Obviously, full compliance should be a goal for every taxpayer.

It’s a requirement to be moving towards compliance with the IRS when submitting an Offer in Compromise, Installment Agreement, or Currently Non-Collectible (Status 53). The past tax debt does not necessarily need to be paid off at that time, but the taxpayer must have all estimated tax payments paid to date and all returns filed. If you are going to submit an OIC or IA for a business, you are going to need to have paid all taxes for the past 2 quarters and filed all returns. The IRS will not even begin to have a conversation concerning a tax settlement or installment agreement until all returns have been filed.

I suggest consulting with a tax professional before your tax liability gets out of hand. A tax resolution firm will be able to help you get back into compliance with the IRS and bring you some peace of mind.

Cheers!
Taxus

Santa + Audit = HO! HO! NO!

That's right kiddies, Santa has been paid a visit by the IRS. Seems our Internal Revenue Service has a "Naughty" list of their own. Check out this video that a few of my collegues made: Santa's Audit.

Cheers!
-Taxus

TAX NEGOTIATION: Mr. Fix-It VS. The IRS

I have always considered myself a do-it-yourself type person. I just don’t agree with paying someone to do something that I can do myself. I recently purchased a home in the last year, and when something goes wrong, I will try to fix it myself. That’s just the way I am. But recently, I have come to a very significant realization: I am not able to fix everything. More importantly, if I can do it, I just might not do it well. I have realized the hard way that there are some situations better left to a professional.

A tax problem is another good example. Any taxpayer may choose to represent themselves before the IRS, and it is possible to facilitate tax negotiation without professional assistance. Yes it’s possible…BUT it can be difficult for a taxpayer to represent himself or herself effectively due to the lack of experience. This is similar to representing yourself in a court of law. Oh, it’s possible, but probably not the best route to take. You see, it is an IRS agent’s job to deal with taxpayers, but not a taxpayer’s job to deal wit the IRS. If the average taxpayer only knows to that they have to pay taxes and something bad happens if they don’t, I would not consider that existing knowledge to be the secret weapon in their arsenal. I am afraid they are going to get to the line and it’s game-set-match. IRS.

If you find yourself in a situation where you believe you might be over your head, you probably are. That is why, especially in high-liability cases (cases involving more than $10,000), I would strongly advise that a taxpayer have good representation by a professional who is enrolled to practice before the IRS. Don’t try to be Mr. Fix-It or Mrs. Fix-it for that matter. As stated before, you can do it, but you might not do it well. Think about that before you take on the IRS.