Convenience Stores, the Texas Comptrollers Favorite Target

Sales tax audits of convenience stores are at an all time high. It just seems that the Texas Comptroller is authorized to check what the stores buy from their suppliers. The liquor wholesalers and big box stores like Sam's provide the Comptroller with details regarding the purchases made by the store. The convenience store owner never knew what was going to hit them. If the sales tax reports do not match the reports there is an audit. The Comptroller knows at the beginning that the taxes are underpaid.  Watch out if you are a convenience store owner. You could owe a fortune with penalties and interest.

The Difference Between Federal Tax Liens and Notice of Federal Tax Lien

Most taxpayers owing back taxes worry that the IRS will file a Notice of Federal Tax Lien. They know that it is a public record and will damage their credit. However, the filing of the Notice of Federal Tax Lien is just the tip of the iceberg. The lien is a property right of the U.S. government against the property of the taxpayer. The lien begins soon after the tax debt is assessed. The IRS demands payment and lo and behold, the lien is in effect. However, the lien has not been filed. The distinction is important. A properly filed Notice of Federal Tax Lien is notice to all creditors of the claim of the IRS. The tax lien that is not filed is not superior to later secured debts and is not notice of the lien. Creditors are in a line to get paid. Usually the earlier filed lien is paid earlier if property is liquidated. A lien is inferior if filed after the Notice of Federal Tax Lien and can be wiped out by foreclosure of a higher lien. The proceeds from sale of property of the taxpayer after the lien is filed pays off the superior liens that attach to the property sold and then the tax lien. The filing of a bankruptcy does not release the tax lien from the debtor's property. The lien can be foreclosed by seizure of property of the taxpayer or by judgment.  The lien is far reaching and even affects the purchaser of the taxpayer's property that secures the lien. The lien survives if the tax is not paid at closing. The later sale by the purchaser will have the proceeds of sale reduced by the lien. The IRS can seize the purchased property. The lien has attached to the property sold and travels with the property until the debt is paid and the lien released. The lien is superior to state property exemptions. This info can be easily understood by just reading the Internal Revenue Code, Federal Income Tax Regulations, opinions of the U.S. Tax Court, opinions of the U.S. Bankruptcy Courts, opinions of the different Circuit Courts of Appeals, the United States Supreme Court, and thousands of scholarly articles and writings. Alternatively, you just were given a small taste of the info on this exciting topic. Yawn!  I think I just put myself to sleep.

Are Your IRS Tax Payments Impossible to Trace?

Today I tried to reconcile the payments my client had made to different tax debts. I used  IRS transcripts from the IRS to see all of the payments he made over several years. It was just like the scene in the Harry Potter movie where there is a maze that changes as you proceed. We had requested that the IRS provide us a list o the money obtained from the levy of my client's customers. Almost none of the payments received from the customer matched the IRS transcripts. The IRS randomly groups payments. Sometimes, the payments are posted to one year then partially removed and posted in another year. If that cause an overpayment the payment may then be moved to another year or tax period.  It is very frustrating.

The IRS provides account transcripts to taxpayers that request the transcripts. The transcripts will often have the IRS computer codes on each entry. Many of the codes are hard to find on the IRS website.

Reconciling the payments made to the transcripts gives you an opportunity to find lost money. It is bad enough to owe the IRS for tax from several taxable years or periods. It is even worse when some of the payments can not be found on your transcript. 

The IRS records numbers on the back of your check when the money is received. However, it is almost impossible to find out where they stuck the money without the cancelled check. Cashiers checks and money orders do not come back to you. The original is at the issuer and so is the tracing number. Use your own checks when paying IRS debt.

You can request that the IRS provide you with a schedule showing how much was received from a levy of your bank or your customers. Your customers will be upset that they were forced to send the money that was owed by you to the IRS. They will be even more upset if you bill them incorrectly because you can't see how much the IRS was paid. Many customers are lost because of the corrosive effect on the relationship with the customer because of the intimidation of future levies.
William K.

Owe Back Taxes - How Not to Get Ripped Off by Tax Experts' Ads on TV

I am an attorney and also a CPA. I have thirty years of experience successfully helping people who are in tax troubles. I apologize for the conduct of many of the firms that nationally advertise with enormous budgets. Many people come to my office after paying many thousands of dollars to these firms. I want to give you some simple things to look for when choosing someone to represent you.
When you listen to the ad remember settling for cents on the dollar can be 99 cents. Go to the Google website or other search index and type in their name and attorney general or their name and complaints. If there are results you should consider calling another company. When you meet the company's intake person ask if they themselves will be representing you and are they an attorney, a CPA, or an enrolled agent.  The intake person is not qualified to represent you if they are not one of these professions. How will that person know the right questions to ask to understand your needs. Someone who is not present at the meeting will have to fill in the blanks.You need them to take the time to fully understand the reasons behind your situation. Many firms will have a "national office" or "regional office". Often the IRS will not know who is representing you. I have represented quite a few people that were represented by firms that were actually taking their money and not even notifying the IRS that they had been hired.  Face to face meetings with the IRS are expensive when your representative offices in Denver, Colorado and you live in Dallas, Texas. Strong representational skills are less persuasive from a distance.
When you meet a qualified professional and are interviewed thoroughly you will have some comfort. Ask if they will be the person representing you. Obviously, large companies need many people to handle volume business. The person at the meeting should be responsible for your case. Offer to pay the company with Paypal or a credit card. A check can not be disputed. A credit card can be disputed if the services are not rendered.  Every company will have had some successes for their clients. Check the Better Business Bureau. Ask another professional if they have clients that used  the company and what was their experience. You need to feel that the company cares about your problems. If you feel like a number and not an individual do not hire them. Remember it is your tax case not theirs. There are many people with the proper experience and credentials to help you. I hope you the best success with your tax issues.
William Kunofsky CPA
attorney at law

Surrendering Your Property Can Make Tax Sense in Ch. 13 Bankruptcy

A debtor owing tax for multiple years files a Chapter 13 bankruptcy. The IRS has properly filed a Notice of Federal Tax Lien before the filing of the bankruptcy. The taxes for the earliest years could have been discharged if the lien had not been filed. The debtor owns a home as his main asset and is behind on the mortgage. He does have equity in property. He does not have enough available income to fund the plan. Therefore, the bankruptcy will ultimately be dismissed because it is not feasible.

The Claim of the IRS is secured by the equity in the home. If the debtor surrenders the home to the mortgage company two major changes occur in the bankruptcy. The IRS secured claim for the early years tax debt becomes unsecured. The second effect of surrendering the property is the debtor's budget changes. If the home is replaced with a less expensive apartment there will be more available income to fund the plan of reorganization.

The  debtor would not have been able to cure the mortgage arrears. A large percentage of the debtors available income would have been devoted to the home. The home would have been subject to foreclosure in the future given these facts. Therefore, the surrender of the property is advantageous. You can sometimes change a sows ear into a silk purse!

Buying A Business In Texas -You Owe Unpaid Taxes From Prior Owner!

Surprise! Pay the tax debt now or we will close this business.Successor liability for sales tax owed by the prior owner is awful. Anyone buying a business in Texas had better be careful because their life savings can disappear if they do not follow all of the rules. My client purchased a convenience store. He paid the prior owner the purchase price in full. The Comptroller visited his new business a few weeks later and claimed that he owed all of the money he paid the prior owner to the State of Texas. Shocker! He does not know where the other owner is living. Turns out, Texas requires the withholding of sales tax out of the purchase price and the new owner to seek a clearance letter from the Comptroller prior to completion of the purchase. The risk belongs to the buyer. My client could not pay the debt and was forced to borrow money to pay part of the debt of the old owner before he could pay the taxes due over time. His entire life savings was used up in buying the business. Tax trap! Pay careful attention if you want to buy a business. Look at the rules for withholding the taxes that are owed by the prior owner or you could lose everything.
William Kunofsky CPA JD

Checks are bouncing because the IRS has levied your bank account.

The IRS has the power under law to collect taxes that are owed to the IRS. Imagine that you just had your paycheck deposited in your bank account and wrote checks for this months expenses. Usually the notice of levy is only for one day. Bank deposits made after that day are normally not subject to levy. The bank does not send the balance to the IRS immediately. The bank takes the funds out of your account and holds the funds for 21 days. The funds are then forwarded to the IRS. You can sometimes get the IRS to release the account balance by trying to enter into an installment agreement. The installment agreement can be negotiated so that regularly payments are deducted from your bank account and automatically paid to the IRS. You can file bankruptcy prior to the release of the money by the bank. If you have had defaulted previous installment agreements or have not filed all returns athe IRS will most likely refuse to release the balance.
 They can continue to levy other sources such as other bank accounts or your wages if an agreement can not be reached. Usually, the IRS will make an agreement if you can file all of the returns that are late and make estimated tax payments. However, non-compliance can cause the IRS not to work with you.
There are other methods within the IRS that may get you relief from the levy. These include requests for collection due  process hearings and appeals. You can not force the IRS to release the funds by getting a court ordered injunction against future collection. However, filing bankruptcy may allow you to stop the IRS levying.
Levies cause hardship. The IRS is aware that they can cause irreparable harm in collecting tax.
Many of my clients search for me when they are levied. Have you been levied?

Hiring the wrong tax representative.

One of my clients hired a tax representative to help them with a sales tax audit. The audit resulted in a sizable tax debt. and penalties were assessed. The tax representative protested the audit and filed a request for an appeal. Of course the representative billed the taxpayer for services. When the taxpayer did not pay on time the representative withdrew the appeal leaving the taxpayer with all of the tax debt. Do you feel the representative should have withdrawn the appeal? Do you feel this was unethical.