Arizona Tax Lawyer Blog

I commonly receive calls from taxpayers in Arizona who have just hung up the phone with a "tax controversy" firm they found on the internet or tv.

Despite the fact that these calls are common, I continue to be shocked at the fees charged and tactics used by these firms.

If you have serious tax debt, great care needs to be taken when paying someone to help you solve it. Here are some reasons why:

1. Most tax organizations that you see on tv and hear on the radio are not law firms. They are highly specialized sales organizations.

2. The salespeople in these organizations are trained to scare the taxpayer about what the IRS may do to them in order to... you guessed it, make the service seem much more valuable then it is.

3. They are also trained to make it appear there is some "secret" ability to obtain an enormous reduction in the overall debt and remove the fear, and they are in on the secret.

4. They usually base a fee not on what the time involvement may be to help solve the problem, but on what they believe can be paid by the taxpayer. They do this by reviewing your assets a bit with you over the phone, including available credit you may have.

5. This fee is not typically based on the remedy. There is no correlation between the solution and the fee. You may end up paying the same very large flat fee for whatever is done, no matter how small or large.

6. The solution they sell although promising for some, doesn't work for most. That promised solution is the offer in compromise.

7. Despite the fact that the solution is usually something that requires less work than the offer in compromise, they keep the large fee anyway in the end.

My advice to Arizona taxpayers:

If a "firm" quotes you a very large fee for a tax resolution service without reviewing all of your documents, history and then comparing the available non bankruptcy options to bankruptcy itself, be very wary.

In fact, do yourself a favor by contacting a local tax attorney who bills by the hour, or whose flat fees are reasonable, and have that firm review your case.

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Offers in Compromise

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The IRS issued a statement recently claiming that it is aware of the economy and it's affects on taxpayer's income, home values, and ability to pay debt overall. It has laid out three ways that it is going to try and help.

First, the IRS is offering to be more lenient with those who have recently lost a job, rely on social security, welfare or who have large medical bills. It will not be calling these people or sending them letters.

The IRS already has a program that allows taxpayers without income or with "low" income to be placed on "non collectible" status. This means that they are left alone by the collections department of the IRS until the income situation improves. This new leniency in relation to collections appears to be expanding the realm of those who may qualify for this treatment.

Second, the IRS is going to allow those that are in an installment agreement arrangement to miss a few payments and stay in the arrangement if they have been steady payers.

The installment agreement program has long been in existence. Previously, if a taxpayer missed a payment during the plan, the IRS would withdraw the plan and the full amount would become due. They would however, typically allow the plan to be re-instated with a fee.

Third, the IRS is promising to review the valuations of homes in cases where the taxpayer is filing an offer in compromise.

Normally, in an offer in compromise, the IRS would require the payment of any equity in a home as part of the settlement. Many homes have little or no equity now, but the IRS systems may be showing the valuations based on previous years. This will help more offers to be accepted.

If you have a serious tax debt and are facing IRS collection activity, please call Arizona tax attorney Michael Anderson at 480 507 5985 for a straightforward evaluation of your options.

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Installment Agreement , Non Collectible Status , Offers in Compromise

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Taxpayers with large tax debt are initially confused about what to do. They start making calls to companies they have seen on the TV, only to receive a high pressure sales pitch. Confusion and frustration set in, and only the notice of levy or lien forces further action.

For all Arizona Taxpayers with debt, I encourage you to call my office to talk generally about what your options may be over the phone as soon as you find trouble.

However, there is no way for me to give specific advice without spending more time with the taxpayer's specific set of facts than I can during a short phone call.

For those who are wary of paying a larger retainer or who just don't have the funds to retain an attorney, a "strategy meeting" in my office may be the solution to obtaining some of that more specific advice without the higher cost of full representation.

The strategy meeting is designed to answer all of the taxpayer's questions at one time for one flat fee.

Many of those who choose the Strategy Meeting are then able to handle the issue themselves without spending more money. On occasion, a situation can be resolved during the meeting with a phone call.

Of course many situations are too complicated to be fully analyzed during a 2.5 hour meeting. In those instances, taxpayers will need further analysis and representation.

My goal is to help my clients solve the tax problem in a cost effective and timely manner. This meeting allows me to do that in many situations.

In order to set up the meeting, call to talk to me first. I will ask you some questions and discuss whether a strategy meeting may help you. Call 480-507-5985.

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Appeals/Litigation , Delinquent Tax Returns , Installment Agreement , Non Collectible Status , Offers in Compromise , Penalty Abatement , Tax Audit , Tax Levy , Tax Lien , Tax Motivated Bankruptcy , Trust Fund Recovery Penalty

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Licensed Attorneys, Certified Public Accountants, and "Enrolled Agents" are allowed to represent clients in front of the Internal Revenue Service. Licensed Attorneys are automatically allowed to be admitted to practice before the U.S. Tax Court. CPAs and Enrolled Agents must pass a rigorous exam.

Anyone on the other hand, can own a business that "sells" tax controversy and resolution services to taxpayers nationwide. This ability to "sell" tax resolution services with little oversight has led to a tremendous amount of misinformation about a taxpayer's ability to deal with overwhelming tax debt.

I receive a number of calls from taxpayers who are certain, based on an ad or telephone sales pitch, that they will be able to simply settle their tax debt for a very small amount.

Many who call have paid the company, went through the process, and failed.

Not only have they failed, they don't really understand why, and probably paid a large sum for the opportunity.

Attorneys have as a profession become the butt of many jokes. Many are quite funny. Most attorneys I know however are smart, hardworking and have the best interests of the client at heart.

For these reasons as well as the following, I always encourage taxpayers to talk to a real, live, licensed, experienced, and local tax controversy attorney before deciding what to do about their tax debt.

1. Lawyers Are Regulated

Attorneys have all sorts of legal obligations placed on them by various regulatory systems that have been set up to ensure the highest standards of representation. These include state ethics rules, and IRS rules of practice. No CPA or Enrolled Agent is held to a standard as high as an attorney. Tax controversy businesses are unregulated. These regulations ensure that most attorneys are as mentioned above, hardworking and conscientious.

Continue reading " For Arizona Taxpayers - Why use a local tax attorney to help you deal with the IRS? " »

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Appeals/Litigation , Delinquent Tax Returns , Installment Agreement , Non Collectible Status , Offers in Compromise , Tax Audit , Tax Levy , Tax Lien , Tax Motivated Bankruptcy , Tax and Politics , Trust Fund Recovery Penalty

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Many Arizona taxpayers who call me for help, have a few years of un-filed federal and state income tax returns.

Most will be worried about whether they can be arrested and sent to jail. They have seen the stories about Wesley Snipes and other famous types who are currently residing in a federal prison for similar offenses.

The good news is that the IRS typically and as a matter of internal policy will not prosecute the taxpayer who files their returns voluntarily or in other words beats them to it. Visit the IRS.gov website for information about this policy.

Obviously, prosecution is not the easiest way for the IRS to collect, or they would do it to everyone with a late return. It would seem that the prosecution of a few high profile cases would be more cost effective. Fear trickles down.

Prosecutions of the "rest of us" do occur however, and much more often than one would think. There are many "average joes" whose careers and families have been lost while they sit in jail as a result of unfiled returns.

Therefore, the non filer should get the returns prepared and filed as a first step. If the IRS does decide to prosecute, it usually won't lose.

Not only does the non filer risk jail, he or she also risks the loss of tax refunds, lost earned income credit, lost social security benefits, and increased debt as a result of penalty and interest add ons.

I can help a taxpayer who hasn't filed for years to prepare the returns even if they are missing documentation, file them properly, and then find the best way to deal with the debt, all while protecting the attorney client privilege.

If you have un-filed tax returns, call Michael S. Anderson, an experienced Arizona tax controversy attorney at 480-507-5985 to discuss your situation for free.

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Appeals/Litigation , Delinquent Tax Returns , Installment Agreement , Non Collectible Status , Offers in Compromise , Tax Motivated Bankruptcy

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A man calls an attorney and asks her how much she would charge to answer three quick questions. The attorney replies, "one thousand dollars." "A thousand dollars!" cries the man. "That's very expensive isn't it?" "It certainly is," replies the attorney. "Now, what is your third question?"

This is one of my favorite lawyer jokes. It is funny because there is truth in humor. Most attorneys I know however are not trying to get something for nothing, as is this attorney They know their practice area, and their knowledge and experience can be worth their weight in gold to those with serious problems.

The problem is that in between it's "weight in gold" and zero, it is hard to determine what a taxpayer should pay a tax attorney.

Generally, the fees charged are set by the market. Sometimes the market is skewed a bit by the high pressure sales skills of the tax resolution company employee. When promises are made that aren't necessarily true, apples can't be compared to apples.

In our office, we feel that the best way to bill a client for tax related work is by the hour.

The hourly rate solves a number of problems related to the determination of what should be paid.

1. The rate can be compared to other attorneys with similar experience and knowledge.
2. The hourly rate provides the attorney an increased incentive to work personally on the case instead of handing the file off to staff and turning the office into a "mill" as "flat" fees often do.
3. The hourly rate provides the taxpayer client an incentive to fully participate and cooperate with the Attorney. This results in a more educated client, and a better outcome.
4. Hourly rates do not end up costing the client more necessarily than flat fees. They are often less in reality and less when the results are considered. Would a client pay $500.00 more in fee, if it resulted in $10,000.00 in additional savings?
5. Hourly rates provide the client more control over what is being accomplished.
6. Hourly rates provide the client more opportunity to participate and thereby be active in the reduction of the fee.

Continue reading " Tax Controversy and Arizona Attorney Fees " »

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Appeals/Litigation , Delinquent Tax Returns , Installment Agreement , Non Collectible Status , Offers in Compromise , Penalty Abatement , Tax Audit , Tax Levy , Tax Lien , Tax Motivated Bankruptcy , Trust Fund Recovery Penalty

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Honest taxpayers find themselves with loads of tax debt for a number of different reasons including but not limited to:

- Paycheck under-withholding
- Failure to pay tax on withdrawn retirement funds
- Assessed a trust fund penalty related to employment tax
- Failure to pay tax related to business
- Hobby Loss Challenge, Independent Contractor Challenge

No matter what the cause of the tax debt, the question inevitably becomes "what can I do about it, if I can't afford to pay it?"

There are 9 options that are commonly considered in dealing with tax debt, short of fully paying. Some options are used in combination with others and some are more effective than others.

They are as follows:

1. File un-filed tax returns and challenge the IRS substitute returns

Most of my clients have a number of years of un-filed returns. These returns need to created and filed in order to avoid possible jail time of up to one year per return. They should be filed as well because:

- The filing of the returns makes the taxpayer "current" in the IRS records. The taxpayer must be "current" in order to file an offer in compromise, file bankruptcy or negotiation an installment agreement.

- The filing of the returns will often reduce the amount of the outstanding debt. "What?" you ask. How can there be tax debt if no return has been filed? The IRS can file a substitute return based solely on income that has been reported to them from employers and others. These substitute returns are not typically accurate as they don't take into account the taxpayer's entire situation. The filing of the proper return and the challenging of the substitute return will likely reduce the debt.

2. Challenge the tax assessment

If the tax that has been assessed against the taxpayer is incorrect because the law wasn't properly applied to the taxpayers facts, the assessment can be appealed and litigated in various ways. The most common method is the offer in compromise based on a doubt as to the taxpayer's liability not ability to pay. Assessment of a trust fund recovery penalty, a debt related to the denial of a hobby loss, a debt related to the denial of the treatment of an employee as an independent contractor, among other issues can all be appealed and litigated.

Continue reading " For the Arizona Taxpayer With Serious Tax Debt - What Are All Of Your Options? " »

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Appeals/Litigation , Delinquent Tax Returns , Installment Agreement , Non Collectible Status , Offers in Compromise , Penalty Abatement , Tax Audit , Tax Motivated Bankruptcy , Trust Fund Recovery Penalty

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If you have serious tax debt, income, employment or other, you have likely heard of the IRS' Offer in Compromise program.

The most common IRS Offer in compromise program, "doubt as to collectibility" was instituted to help the IRS close taxpayer files that showed little if any promise of future collection potential.

The program does this by setting up a formal application and negotiation process that allows the amount of the settlement to be based NOT on the amount of the debt or some informal give and take, but on the amount the taxpayer could theoretically afford to pay.

The remainder of the debt is forgiven.

Most taxpayers with serious tax debt hear about this and think "wow", I am going to be able to go on with my life after all. They then rush out and pay someone to fill out the paperwork, pay some fees and file it. A few months later, and.... rejection.

The reality is that most offers in compromise fail. They fail mainly because most taxpayers don't qualify well for the formal program. The reasons are numerous.

Continue reading " For Arizona Taxpayers - Is the IRS Offer In Compromise Oversold? " »

Posted by Michael S. Anderson | Permalink | Email This Post

Posted In: Offers in Compromise

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