TaxProblems-You’reNotAloneThereare certain thingsweoftendon’tdiscusswith friends. Forexample,howoftendoyoustrikeupaconversationwithyourbuddytodiscussthecreditcarddebtyouoweortheamountofunpaid taxesowed to the IRS–not tomention– thenumberofyearsyouhave“missed”filingyourtaxreturns?Thesearesubjectswedon’tsharewithothers.Theyarepersonalandtouchonsensitiveissueswedon’tshare–andtoooftendon’taddress.Truthbetold–theyarefarmore common thanyouwould imagine - and thepeoplewith suchproblems include thewage earner, self-employed individuals and professionals – engineers, lawyers, doctors andevenaccountants.

This report is designed to explain to you in simple and clear terms the following: (1) Thesolutionsthatareavailableandhowtheywork;(2)whytheTaxSettlementfirmsyouseeandhear on TV and Radio should be avoided; and (3) the steps you should take to solve yourproblem.Whenwesatdowntowritethisreport,wehadonegoalinmind–toprovideyouaquicksummaryoftheactualinformationyouneedtoknowtoaddressyourtaxproblem.Withthat said, enjoy the report and be sure to reach out to us if you have any questions or toaddressanyissuesyouorafriendmayhave.

2018-2019ResolvingTaxProblemsTheRealSolutions

By:JennyLingl,Esq.,andKenGross,Esq.

2018 - 2019

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ResolvingTaxProblemsTheRealSolutions

TwoCriticalTruths 3

Let’sGetStarted–TaxSettlementFirmsNotwhoyouwanttohelpyou! 4

HowweNavigatetheIRSCollectionProcess 5

CanYouSettleforPenniesontheDollar?TheOfferinCompromise 6

TheBankruptcyAlternative 8

AlternativesWhenanOfferinCompromiseorBankruptcyWon’tWork 8

HowtoStopaWageLevy 10

WhataboutUnfiledReturns 11

I’mBeingAudited 12

TheBottomLine 13

AbouttheAuthors 14

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Watch&Listen!

TwoCriticalTruthsWhile the types of problems vary fromunfiled returns, taxesowed or dealing with an unwanted IRS audit – there is acommon denominator – the individualsmore often than notfail to take the right action because they think it’s a biggerproblemthanitis.

Ifwehadadollar foreverypersonwhothought theproblemwastoobigtotackle–we’dhavesomuchmoneytosharethatwecouldpayyourtaxes!Here’sthekeypoint–thereisnotaxproblemwe haven’t addressed in our 36 years of addressingtaxproblems–and ineach instance–wefindasolutionthatworks. If returnsarenot filed,weget them filed. If taxesareowed,welooktogetoutfromunderpayingthetaxusingtheOffer in Compromise Program, or other alternatives such asdischarging the taxes in bankruptcy. We also look atinstallment payment plans that are affordable or having youdeemed uncollectable under IRS standards. There are lots ofsolutions.Readonandyouwillsee!

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TrustMe!

TaxSettlementFirmsNotwhoyouwanttohelpyou!NationalTaxSettlementFirmsareaBIGMistake

Wecouldnamethefirms–butdon’tneedto–becausetheyspendso much money advertising their services on Radio and TV –with nice jingles and sometimes animated characters – youcertainly know who they are. But here’s what you really need toknow:

Theywillgetyouexcited-tellingyouthat“wecan settle your tax debt” forpennies – we’re the experts, we have lawyers,accountants,formerIRSagentsworkingforus–everythingyouneedtobesuretogetthe“bestdeal.Here’stheproblem,the“FreshStartProgram”ortheIRSOfferinCompromise Program is nota mystery game that takes secret insiders at theseNationalFirmstogetyouthedeal.Theprogramisbasedontheassetsyouhaveandthe incomeyoumake. It isamathematical formula thatmustbeevaluated. Ifyouhave assets –

likeanIRA,401korequityinyourhome–theprogramstypicallyDONOTwork–andspendingyourmoneyonapplyingforthemisawasteofmoney.

Inafacetofacemeetingwithyou(whichisFREE)wedetermineifyouwillqualifyfortheprogram–andifyoudo–THENANDONLYTHENwouldwerecommendtheprogram.Ifbasedonthemeeting,theprogramwillnot

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work–thenthereisnoreasontowastethemoneyapplyingforit!TheTaxSettlementFirms–don’tseeitlikethis–theywantyourmoney–theychargemorethantheyshouldeveniftheprogramwouldwork–andtheworst thing is -whenyou receive the letter from IRS tellingyou thatyourofferwas rejected–your “bestfriend”(whoyounevermet)thatsignedyouup9monthsearlieris“notavailable”whenyoucalltoask,“Whathappened?”

ArecentarticleinInvestopedia–summarizeswhatyouneedtoknowaboutthese“operators:”

• Anyfirmthatpromisesadrasticreductionofacustomer'staxeswithoutfirstgettingadetailedfinancialbackgroundonthatpersonislikelygoingtoendupbeingascam.

• Taxpreparationfirmsplayheavilyuponthisfear,promisingalifelineofprofessionalhelpthatcanmaketheirproblemsgoaway.Don'tbefooledbymisleadingclaimsfromtheseoutfitsthatfirstrequiresubstantialup-frontpayments.

HowweNavigatetheIRSCollectionProcess

Ifyouhavenotfiledrequiredreturnsoryouowetaxes,theInternalRevenueServicewillbegintheCollectionProcess.Oneofthemostcommonmistakespeoplemakeistowithholdfromfilingreturnswiththehopethat

the IRS will not begin to look for your unfiled return and then pursuecollection.Thisdoesnotwork.Inthissituation,theIRSmaysubpoenayouor file returns for you –which is called a Substitute Return. From there,they will pursue collection. There are two mistakes here to avoid. First,failingtofilesubjectsyoutoa25%penaltyimposedat5%eachofthefirst5months.Thisisawasteofmoney.Second–whentheIRScreatesaSFR–SubstituteForReturn–theychargethe incometoyou–andgiveyounodeductions. Worse yet, while income taxes can be discharged in a

bankruptcy–taxesfromSFR’scannotbe.TheTakeaway:Fileyourreturnsevenifyoudon’thavethecashtopay.Eveniftheyarelate,filethemtoprotectyourrighttodischargetheminbankruptcy.

Whenfacingthecollectionprocess–theIRSmaycommencethefollowingactions:

ANYREPUTABLEFIRMWILLFIRSTOBTAINTHENECESSARYFINANCIALDATAFROMITSCUSTOMERSANDTHENGIVETHEMAREALISTICASSESSMENTOFWHATTHEYCANDOFORAREASONABLEFIXEDFEE.PROSPECTIVECLIENTSWOULDBEWISETOFINDALOCALFIRMTHAT'SBEENINBUSINESSFORSEVERALYEARSANDHASAPRESENCEINTHECOMMUNITY.

---MARKP.CUSSEN,CPF,CMFC,AFCINVESTOPEDIAJUNE26,2018

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• Wage Levies• Bank Account Levies• Levies of Account Receivables• Levy of Investment Accounts• Filing of Federal Tax Liens• Foreclose upon Home or other Real

Property• Seizure of Assets

Here’stheGOODNEWS–foreachoftheaboveactions–thereisasolutiontostopthemfromoccurring.Thekeyistoknowwhichstepstotakeandwhentotakethem.

CanYouSettleforPenniesontheDollar?

Thecorrectansweris,“Yes,sometimesyoucan.”Thisisnottheansweryouwillreceivefromtheadvertisedcompaniesbecausetheyaresellingyouanddeterminedtogetyourmoney firstbefore lookingout foryou.TheIRShasaprogramcalledtheOfferinCompromise–whichhasbeenaroundformanyyearsandin2012the program became even better under what the IRS called “The FreshStartInitiative.”Atthattime,theparametersdefininghowmuchyouhadtopayinorderforasettlementtobeacceptedbecame4timesbetterthanundertheoldprogram.

The key is you understandingwhat “sometimes”means. To get down tobrass tacks – if you have little or no equity in a home, no retirement orothersavingsandyour income is$60,000-$80,000peryearor less thenyouwillprobablyqualifyforanOfferinCompromiseandbeabletosettlefor almost nothing. The best part is – it does notmatter howmuch youowe!Theamountoftheofferisbasedonyourassetsandincome–notonthedebt. Ifyouowe$10millionor$10,000,theamountoftheofferyouneedtomakeisthesame!Sowhenyouhearacommercialwheretheguysays,Iowed$450,000andsoandsodid such a great job that Iwas able to settle for $3,000 – the truth is the settlementwouldhavebeen$3,000ifheowed$45,000or$4.5million.

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HerearethenutsandboltsoftheOICProgram–whichexplainhowwedeterminethesettlementamount:

An Offer in Compromise is calculated based on the following threeitems:

• Assets. Equity in your home above 20%, plus the money in yoursavings account above $1,000, and funds in investments accounts,less the tax you would be required to pay in liquidating thoseaccounts, the cash value of any life insurance, equity in a vehicleabove$3,450andanyotherassetsthatyoumayhave.Youneedtoadd these items together. If you are renting a home or have noequity,leasingvehiclesandhavenosavingsorretirement–thenthisnumberwillbezero.

• Dissipated Assets. The IRS will investigate whether you havetransferred anyproperty out of your name in theprevious 3 years,withdrew funds from an investment account and used those fundsfor items that are not deemed “allowable,” or otherwise divestedyourselfofanyassetsorfunds.Ifyouhave,theseitemsaredeemed“dissipated”assetsandmustbeincludedintheoffer.

• Income/Expense Component. The IRS will determine what you can afford to pay on an installmentagreementonamonthlybasis.ThisamountisbasedonyourincomelessallowedexpensesbasedonIRS’sNationalStandards.Generally,ifyourincomeis$60,000-$80,000orlessandyouhavenormalexpenses,theamountwillbe$-0-orclosezero.

Once these items are evaluated, we cantell youwhetheryouqualifyandpinpointtheamounttheoffershouldbe.

The Stay Clean Rule - if your Offer isaccepted and paid, the IRS will abate theliabilityandreleaseanyliens.However,theIRSwillkeepanyrefundsduetoyouintheyear that the Offer was accepted and willmonitor you for 5 years tomake sure thatyoufiletimelyanddonotcreateanewtax

liability.Ifyoufailtoremaincompliantforthose5years,theIRSwilldefaultyourcompromiseandreinstatetheoriginaltaxamountminusthepaymentsyoumadeundertheOffer.This isan importantrule–andonethatisnotexplainedtomanyindividualswhoseekanoffer.Wecallitthe“staycleanrule.”Itcanbedifficultforself-employedpersonswho,asaresultoftheirneeds,prioritizelivingexpensesaheadoftaxpayments.

Theansweris,“Yes.”Sometimesyoucansettleforpenniesonthedollar,buttheanswertothatquestionissomethingwecandeterminerightaway.Itisnotasecretmystery.

THEAMOUNTOFTHEOFFER

ThesumofAssets+DissipatedAssets+12MonthsNetIncome=OfferAmountifyouoffertopaythefullamountwithin5monthsofAcceptance.

ThesumofAssets+DissipatedAssets+24MonthsofNetIncome=OfferAmountifyouoffertopaythefullamountwithin24monthsofAcceptance.

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TheBankruptcyAlternative

To the surprise of most people – even lawyers, CPAs and bankruptcy lawyers! – income taxes aredischargeableinbankruptcy.Incometaxesarethe1040taxeswepay.Incontrast,ifyouownabusinessandfailtopaythepayrolltaxesdueforyouremployees–thesetaxesarenotdischargeable.Ifyouhaveapayrolltaxproblem–theOffer inCompromiseandAlternateProgramsare thecorrectstrategies topursue.But forincome taxes – if you meet the requirements, adischarge of the tax liability in Chapter 7 has greatadvantages.First,ifthetaxesaredischarged–thereisno Five Year Stay Clean Rule like with an Offer inCompromise.Chapter7isalsofasterandtypicallylessexpensive than an Offer in Compromise. As witheverything about tax issues – youmust fitwithin therule. Todischarge income taxes, the rule is called the“3Year/2Year/240dayRule”–which I liketocallthe Three-Two-240 Rule. Under this rule, the taxesmusthavecomeduemorethan3years fromthe filingdateof thebankruptcyandthetaxreturnsneedtohavebeenfiledmorethantwoyearsbeforethefilingdate.Thelastcomponentistypicallynotaproblemandrequires that the taxeswere billed to you (assessed) by IRSmore than 240 days prior. If youmeet theseparameters and you can otherwise qualify for a Chapter 7 Bankruptcy – then this is a viable solution thatshouldbeconsideredwhendecidinghowtoaddressyour taxproblem.Wheneverweanalyzeaclient’s taxissues, we explore whether they can eliminate their debt via a bankruptcy discharge or an Offer inCompromiseand,ifbothsolutionsareviable,wepicktheonethatbestsuitstheclient’sneeds.Sometimes–wepickboth–toresolvetaxesthatmeetthe3Yearrule,weusethebankruptcyandtoresolvethenewerincometaxesorpayrolltaxesweusetheOfferinCompromise.Howdoyoudecide?Theanswerisitdependsonyoursituationastotheamountofotherdebts,yourincomeandyourassets.

AlternativesWhenanOfferinCompromiseorBankruptcy

Won’tWorkInstallment Agreements:

An InstallmentAgreement isapaymentoption for those thatareunabletopaytheirentiretaxliability inalumpsum.Thefollowingareoptionsforinstallmentagreements:

Streamlined Installment Agreement: A streamlined installment agreement is the simplest collectionalternativecurrentlyoffered.Ifyouqualify,theIRSdoesnotaskyouforanyfinancialinformation.Instead,the IRSwill calculate your agreement by simply dividing the total amount that you owe by 72months, 84

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monthsorthenumberoftheremainingmonthsleftonthecollectionstatute.Inordertoqualifyforthistypeof agreement, youmust have filed all of your tax returns. In addition, youmust file all future tax returnstimelyandpayanyamountsduebytheduedateofthereturn.TheduedateofthereturnisusuallyApril15thofeachyear.Filinganextensionisonlyanextensiontofilethereturn.Thismeansthatpaymentofanytaxduewasdueonorbythereturnduedate.

StreamlinedAgreements are available if you oweup to $100,000 in tax. If you owe less than $50,000 andapplybeforetheIRSfilesalienagainstyourassets,youcanavoidalienbeingfiled.Thisisanimportantgoaltoavoidyourcredithistoryreflectingtherecordedlien.

WhiletheStreamlinedAgreementisanavailablealternative–youshouldnotelecttopursueitonyourown.Therearethreegoodreasonstoseekassistancefromaprofessional.First,beforeyouelectthisoption,youshouldhaveananalysis todetermine if youcaneliminateallorpartof the taxobligationusinganOffer inCompromiseorviaadischargeinbankruptcy.Iftheseoptionsarenotavailable,carefulplanningisneededtodetermine the time when you should seek the installment agreement. Once you have an installmentagreementinplace–youarerequiredtostaycurrentoncurrenttaxes.Ifyouarebehindonthecurrentyear,weplanforthissituationbydelayingthecollectionprocess longenoughsothatwecanincludethecurrentyear’s tax obligation in the installment plan. Finally,when it comes to dealingwith the IRS or any Federal

Agency thathasenforcementauthority -youshouldnevergo without representation – you have no way to protectyourself and the government agents – look out forthemselves–andnotforyou!

Non-Streamlined Installment Agreements – There aresituations where the Streamlined Agreement is notavailable or is not the best option, but a non-streamlinedagreement is available. There are four basic types of non-streamlinedagreements.

• InstallmentAgreementBasedonAbility toPay. If you do not qualify for a streamlined agreementor you cannot afford the streamlined payment, we evaluate how much you should pay monthlytaking into account assets, income and allowable expenses indeterminingtheappropriatepayment.Whenproperlydocumented,theIRSwillagreetosuchapayment.

• TheSix-Year-Rule.Ifyouareunabletopayinfullpayanddonotqualifyforastreamlinedagreement,youmay qualify for an installment agreement under the six-year-rule. If we can establish that you willmaintain tax compliance in the future, the IRS may allow an installment agreement that considersexpenses in excess of the IRS allowable expenses. This type of agreement is usedwhen a taxpayer isproposinganinstallmentagreementthatwillfullpaytheirtaxliabilityin6years.TheIRSoftencalculatestheinstallmentagreementbasedontheirstandardsforexpensesanddemandahigherpaymentthanthetaxpayercanafford.Ifwecanshowthatalowerpaymentwillstillfullpaytheliabilitywithin6years,wefrequentlycanconvincetheIRStoacceptourproposedpaymentamount.

• TheOne-Year-Rule. In a situationwhere you are not able to fully pay the tax liabilitieswithin 6 yearsbecause your actual expenses exceed the IRS’s evaluation of what your expenses should be, we cansometimes persuade the IRS to allow a 1-year period to adjust the expenses down. An example of an

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expensethatcanbeadjusteddownwouldbeanauto leaseorpurchasepayment. The IRSmaygrantayearfortheTaxpayertotakethestepsnecessarytolowertheirmonthlyautopayment.

• CurrentlyNotCollectible. Ifyouhavefewornoassetsandyour incomedoesnotcovertheamountofwhat the IRSconsidersallowablemonthlyexpenses,wecanseek the IRS’sagreement toplaceyou inacurrently not collectable status. Thismeans that although the liability remains, the IRS agrees that thetaxpayerisunabletomakeanymonthlypayment.TheIRStypicallylookstoreevaluatethisstatusevery24months.

THECOLLECTIONDUEPROCESSHEARINGYoumayhaveheardtheterm,“CDPHearing.”Thisstandsfor“CollectionDueProcessHearing.”TheCDPisaprocessthatcanbeusedtocontestthecollectionoftaxbeforetheIRScommencesalevyactiontocollectthetax(suchasalevyonyourwagesorbankaccount). TheCDPisausefulproceduretoslowtheIRScollectionprocessandallowustorequestprocedurestoreduceorcontrolthepaymentprocess–viaaninstallmentagreement,Offerin Compromise, abatement of penalties or innocent spouse claim.The benefit of the CDP Hearing is a specific person is assigned toyour case that has the authority to consider all discretionaryprovisions.Thesehearingsareconductedviatelephoneandwefindthereisoftenagoodchancetoresolvetheentiretaxissueduringtheconference.TheCDPhearingisacost-efficienttoolweusetoresolvetaxcases.

HowtoStopaWageLevy“Thekeyisspeedandknowingwhattodo”

First-youneedtoactquicklysothatyourwagesarenotsentbyyouremployertothegovernment.Ifyourreturnsarefiled,weneed tocompleteaCollection InformationStatement.WeneedtoprovidetheIRSwithbankstatements,proofofincomeandexpensesonhand.IfaRevenueOfficerisassignedtoyourcase,wefaxtheCollectionInformationStatementtothemandrequest an installment agreement and release of levy. If they

refuse,we fileaCollectionAppealRequest. If aRevenueOffice isnotassigned,wecontact theAutomatedCollectionService(“ACS”)andfaxthedocumentationtothe individualwhoanswersthephone.Westayonthelinewiththemandworkthroughmanagementtogetapprovaltofaxusthelevyrelease.

Ifyouhaveunfiledreturns,wetrytogetthelevyreleasedwithoutthem,butsometimesweneedtomovefastandgetthereturnsfiled.Weknowhowtoscramblewhennecessaryandgetthereturnsfiled!

SomefirmstelltheirclientsthatfilinganOfferinCompromisestopsapendinglevy.Thisisfalse.TheIRSdoesnotneedtoreleasealevythatwasissuedpriortothefilingofanOffer.

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WhataboutUnfiledReturns?

This is one of the most common taxpayer problems. Most of the time ithappensbecausethetaxpayerknowsthere is tax topayanddoesnothavethecash.Thisisthewrongreasonnottofile.Youincreasetheliabilityby25%andincreaseyouranxietyby10,000%.Whilefailingtofileyourreturnontimeisamistake,thebiggerandmostcommonmistakemadeisthatonceyoufailtofileforoneyear,mosttaxpayersthencontinuetheproblembynotfilinginthenextyear,andthenthenextyearandsoon.Thereasonforthelateryearsistheanxietyabouttheyearsyouhaven’tfiledandthen,ontopofthat,gatheringtherecordsand“bitingthebullet”becomesevenmoredifficult.Guesswhat–itdoesnothavetobethisway!Wecanresolvethisproblemfareasierthanyouwouldhaveeverimagined.Hereiswhatwedo.Fortheyearsyoudon’thaverecordsavailable,weaccessfromtheIRSthetranscriptsandinformationtheyalreadyhave–W2s,1099’setc.Oncewehavethisinformation,thereturnscanbeprepared,andexpensescanbeestimated.This isabigopportunity thatmost taxpayersandmanyaccountantsdon’trealizeisavailable.Timeandtime,theclientsaystous,“IthoughtifIdon’thaveallthe receipts, I can’t claimanydeductions.” Guesswhat – that’s not true! Wecan estimate in good faith.Here’saclassicexample,you’reatruckdriverandyouhavenorecordofanyofyourexpenses.Well,ifwecanfigureoutyourincomefromtheIRStranscripts,weknowthehourlyrateyou’repaidandthatthentranslatestomiles driven. Once we know that, we know the cost of fuel in those years, depreciation on the truck,insuranceandrepairs.Doyouseewherethisisgoing?Oncewegetthereturnsfiled,ifyouoweanytaxes,wecan seek collection alternatives, including the Offer in Compromise and the various Streamlined and Non-Streamlinedalternatives.

Onthistopic, it’s importanttoknowanotherkeyfact. Ifyoufailtofileyourreturnontime, it isacrime. If,however,youvoluntarilycomeintocompliancebeforeIRScomeslookingforyou–theIRS’spositionisthattheydonotpursuecriminalactions. Also,whenyou file late, youarepenalized25%of the tax, at5%permonthfor5monthsforlatefiling.Thisincreasesyourtaxby25%andisapenaltyyoucanavoid.Evenifyoudon’thave themoney topayyour tax, if you fileon time, there isno failure to filepenalty.Yes, there isapenaltyfor latepayment,butthatpenalty isseparatefromthe25%non-filingandit isassessedatonly.5%permonthuptoamaximumof25%. At .5%permonth–thisextendsover4years(50months)and,quitefrankly,islessthancreditcardinterest.Thekeytakeawayhereis:(1)ifyouhaven’tfiled,thenlet’sgetthereturnsfiled– it isnotnearlyasbigaproblemasyouthinkit is;and(2)goingforward,evenifyoudon’thavethecashtopaythetaxes,filethereturnsontimeandavoidthe25%penalty.

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I’mBeingAudited!Here’satruth.Noone–wantstobeaudited–butitisnottheendoftheworldor time topanic.An audit iswhen the IRSpicks a tax yearthatyoufiledareturnandrequiresthatyouprovidesubstantiationofall items on your return. The IRS is looking to verify that you havereportedall incomeandcansubstantiateallexpensesanddeductions.An audit can pose different situations depending on the degree towhich you have the documentation. If you have all the receipts andmileagelogstosupportthedeductionstaken,theprocesstypicallygoessmoothbecauseyouareabletoprovidetheauditorthedocumentation

requested.Ontheotherhand,ifyouhaveclaimeddeductionsbasedonyourestimateofexpensesoryoudonot readily possess the requisite documentation to support the deductions, the audit process becomesstickier. Inthissituation,youneedtoproperlypreparefortheauditandhaveastrategyinplacetosupportthedeductionsyou’vetakenevenintheabsenceofthe“ideal”documentation.Inthissituation,youwillneedthe assistance of a professionalwho knows the alternativeways to support deductions taken in situationswherethedocumentationrequestedisnotavailable.

Theprocessunfoldslikethis.Thetaxpayerorthetaxpayer’srepresentativeattendstheauditandworkswithaRevenueAgent.Often,theauditprocessrunsforsixmonthstoayear.Attheendoftheaudit,theRevenueAgentwillissueanIncomeTaxExaminationChangesForm.ThatFormwillshowalltheadjustmentsmadebytheRevenueAgentandwilloftenhaveanadditionaltaxalongwithpenaltiesandinterestdue.TheRevenueAgent often ask taxpayers to sign off on the Form.Our advice is to never sign this Form as itmakes theRevenueAgent’sdeterminationfinal.ThereareonlyafewinstanceswheresigningtheFormisadvantageous,soyoushouldseekknowledgeablecounselpriortosigninganything.Ifyoudon’tsigntheForm,youmaybeabletoreopenthetaxperiodforconsiderationatalaterdate.Youmayfindadditionalreceipts,orwemaytryreconsiderationtoimprovetheoutcome. Soundssimple–butit’snot. TheRevenueAgent’swilloftentelltaxpayersthatfailingtosigntheauditreportwillmeanthattheywillbeforcedtoissueaNoticeofDeficiencyandthatinordertochallengetheliabilitythetaxpayerwillhavetogobeforetheUSTaxCourt.TheRevenueAgentsmakethisprocessseemmuchmorecomplicatedandexpensivethanit is. TheywantyoutobelievethistobetruebecausetheirgoalistogetyoutosigntheExaminationChangesFormandconcludethecase.Often,however,theTaxExaminationChangesFormrepresentstheworstpossibleoutcomeyoucanreceiveandifyoucontesttheresults,yourultimatebill,afterprofessionalexpenses,willbesubstantiallylessthantheRevenueAgenthasdetermined.

RevenueAgentsoftendisallowexpensesormakeadjustments to thereturnseither inerrororbecausethetaxpayerdidnotkeeptherecordsinaccordancewiththegenerallyacceptedaccountingprinciples.Tocontest

thedetermination,wefileaPetitionwiththeTaxCourt.Oncewedothis,thenextstepisthatanAppealsOfficerisassigned.ThatAppealsOfficerwilltakeafreshlookat the audit and is also able tomake significant adjustments. Since the AppealsOfficerconsidersthecostoflitigation,weoftenareabletosettlethecasewiththeAppealsOfficer. For example, theRevenueAgent on the original auditmayhavedisallowed$50,000worthofexpensesas the taxpayerwasunable to substantiatetheexpenses.TheAppealsOfficerisabletolookatotheritemswhendeterminingwhether theexpenseshouldbedisallowed. Forexample, if the taxpayer failed to

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keepamileagelog,theoriginalauditorlikelydisallowedtheexpenseintotal.Inthissituation,weprovideourcalculationofmileageandprovidetheAppealsOfficerwithbackgroundonwhythetaxpayertravelsforwork,thenumberofdaysaweekoftravelandtheindustrystandardapplicabletotaxpayer’sbusiness. Whiletheoriginalauditorisunlikelytoconsiderthisinformation,theAppealsOfficerdoesreviewsuchsubmissionsandtypicallyallowssomeoralltheexpense.

A word of caution. You need to be careful here in selectingrepresentation.Youdon’twanttoselectaprofessionalthatdoesnotthinkoutsideof thebox–because theywill notbeable topresentthe required arguments to substantiate expenses using alternatemeanswhen theactual receiptsarenotavailable.Youalsoneed toassess cost. Beforewepursue suchanengagement for a client,wemake sure the cost of contesting the Revenue Agent’s report isjustified from the standpoint of saving money, after all expenses,incontrasttoacceptingtheauditfindings.

Thebiggestmistakeinsuchacaseisfailingtoinvestigateyouralternativesandsimplyacceptingtheauditor’sReport–that’swhat

theywantyoutodo!-sodon’t!

TheBottomLine

No one wants to have a tax problem – but if you have one –theimportant thing toknow is that it is a readily solvableproblem.Youneedtotakeactionandthesooneryoudo–thebetteryouwillfeel. It is, however, crucial – that you select your professionalcarefully.Aneasysolution– is tocontactTHAVGROSS–we’rehereand you canbe assured we know how to resolve your problem.When a clientcomes in for a FREE CONSULTATION – it is not a“meet and greet session.” You sit down with us, we analyze yourproblem and explain the solution – as well as the time and costinvolved.

From there - weexecuteand put the problem behind you. Call us today – or tellyour friends. We arecommitted to service,reasonable fees andsolving problems – and have 36 years behind us – doing precisely that

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AbouttheAuthors

KenGross JennyLinglKenGross isTHAVGROSSPC’sManagingShareholder and co-founder. Kengraduated with high distinction fromWayne State University in 1979 with aBachelor of Science and a Bachelor ofArts in accounting. He received his lawdegreealsofromWayneStateUniversity,Cum Laude, in 1982. Ken was named a2006, 2017, and 2018 Michigan SuperLawyer. He is a member of the UnitedStatesTaxCourtandrepresentsclientsinlitigation and business mattersthroughouttheUnitedStates.In2008,inthe midst of the collapse of the U.S.Economy,KenstartedtheFinancialCrisisTalkCenterTVandRadioShow.Withtherecession having become old news, thenameoftheshowwaschangedtoLaw&Reality.KenwasrecognizedasaLeaderintheLawbyMichiganLawyersWeekly.

Jenny Lingl graduated from MichiganState University in 2001 with aBachelor of Arts degree in Marketing.Jenny received her Law degree fromMichigan State University College ofLaw, graduating Cum Laude in 2005.She graduated with concentrations inCorporateLawandTaxationLaw.Jennyheads THAV GROSS’s Tax CollectionDefensepracticeandrepresentsclientsinmattersbeforetheInternalRevenueService, and other federal, state andlocal agencies. Her practice includesadvising clients as to their rights andincluding Offers in Compromise,Penalty Abatement Requests,Collection Due Process Hearings, andtaxlitigationinstateandfederalcourts,including the United States Tax CourtandtheMichiganTaxTribunal.

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LegalMattersThisreportisintendedtosharetheauthors’and THAV GROSS’s views and experienceswiththereaderinaddressingtaxproblems.This report is not a substitute for seekingtheservicesofalicensedattorney.Nothingcontainedinthisreportshallgiverisetothecreation of a client relationship and thereadershallnothavetherighttorelyuponthe opinions, recommendations orsuggestionscontainedinthisreport.

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