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Archive for Venar Ayar

What Can Happen If You Fail To Disclose Offshore Accounts

Venar Ayar On FBAR

A failure to file FBARs and Form 8938 can result in numerous civil tax penalties. Criminal penalties are also a possibility, which could result in jail time.

FBAR Civil Penalties

The FBAR civil penalties have two tiers, depending on whether your conduct was willful or non-willful:

  • Willful penalties can result in a penalty of $100,000 or 50% of the aggregate foreign account balance
  • Non-willful penalties can result in a penalty of up to $10,000 per violation

These penalties can be assessed for each account and for each year a FBAR should have been filed, but wasn’t.  So a taxpayer with 5 foreign accounts and 5 years of unfiled FBARs could have 25 FBAR violations.  In practice, examiners may recommend only one penalty per year and may even  recommend a single penalty for multiple years of violations.

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Where To Start When You Owe The IRS

Venar Ayar - IRS Audit

If you owe the IRS a substantial amount, be sure not to ignore it. Review options such as installment agreements, extensions, or personal loans, and always seek legal advice from a professional tax attorney.

While you may want to put off dealing with tax debt and that sinking feeling that you owe the IRS, not handling it will likely lead to additional penalties, interest, and other major consequences. If you can’t pay the debt by its due date, you still need to file a return on Tax Day and/or have your tax preparer file a six-month extension. This will give you more time to seek professional help and discover what options you have to settle the debt. To avoid this and other penalties, carefully review the action steps below.

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How To Get Rid Of IRS Tax Penalties

Venar Ayar- IRS Penalty Relief
You may be able to get IRS tax penalty relief simply by asking for it. If you meet the criteria for first-time penalty abatement (FTA), reasonable cause penalty relief, or other types of penalty relief, you will need to submit a request to the IRS in order to have your penalties reduced.

IRS Penalty Relief Programs

Many taxpayers are eligible for FTA, but don’t know about the program. If you don’t ask for penalty relief, you won’t receive it.

You need to meet the following criteria to receive FTA:

  • You can only request penalty relief for one tax year, and you must have not penalties in the previous three tax years.
  • You must not have any unfiled returns.
  • You must have paid or arranged to pay any tax due. This includes agreeing to a monthly payment plan.

Reasonable cause penalty relief is another option. You can request this relief if your failure to file or pay taxes was caused by circumstances outside of your control.

Fires, natural disasters, death or serious illness of a taxpayer’s immediate family, or an inability to obtain records may all qualify for reasonable cause relief. You can request this type of relief for the failure-to-file penalty, failure-to-pay penalty, and the failure to deposit penalty.

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What Is A CDP Hearing And What It Does For You

If for some reason, you find yourself defaulting on a tax payment or two, the IRS will take steps to recover that debt. This could be through IRS levies, allowing them to seize your assets, taking money from your accounts or through a Notice of Federal Tax Lien (NFTL). By law, the IRS must inform you before any collection efforts are made, and after filing an NFTL.

What Is A CDP Hearing?

After the IRS makes it known to you that they intend to initiate steps to recover what you owe, you can request a hearing to discuss your case. At the hearing, you get to find out whether there were any procedural issues on the IRS’s side or propose alternative methods of collection. So, a CDP hearing is a last-ditch effort to avoid the penalties altogether or offer payment alternatives that would be easier on you. It’s important to note, though, that most CDP hearings discuss alternative collection methods. So your chances of getting away without making payments are slim.

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10 Documents You Will Need For An IRS Tax Audit: Do Not Be Afraid!

Venar Ayar

It’s a nice breezy day. You pick your mail up, excited because that vintage Captain America comic you ordered came in today. But, alas, instead of nerding out all afternoon, you find yourself under the covers, stressing out over a fast-approaching audit of tax your returns. Receiving a tax audit notification in the mail can be a jarring experience, especially if you spend weekends embezzling a buck or two. Fret not, for a tax audit isn’t a death sentence. In fact, if you generally avoid criminal activity, you’ll probably be fine. Okay, you’ll be fine.

What is a tax audit?

A tax audit is a formal examination into your tax returns by the IRS to either verify information or uncover fraud or inaccurate tax returns. The IRS conducts these examinations both randomly and on purpose. If they decide to investigate your financial records randomly, they will just take a closer look to verify that all the information provided is correct. However, if the IRS suspects that there are any errors or that you weren’t entirely truthful while filing your returns, they will come at you with all they’ve got. Hard.

Audit notification letters are mailed for a couple of reasons:

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10 Common IRS Notices That You Are Likely To Encounter And What They Mean

Venar Ayar

No one likes when the IRS reaches out to them. The agency is like that one neighbor you never liked as a kid who never got the hint and just kept coming over. Chances are, he’s gonna call today too. The IRS sends millions of letters each year to taxpayers who, quite frankly, don’t ever want to hear from them. And even though you don’t even want to listen to their voice, they have a whole lot of crucial stuff to say. So strap in and get ready for a somewhat boring but extremely important ride.

So what’s up with these notices then?

Glad you asked. The IRS sends out these reasons for a couple of reasons, some good, some not so good. One of the reasons you got mail from them might be:

  • The IRS changed your return.
  • The IRS needs additional information from you.
  • They have a question about your tax return.
  • You are due a larger or smaller return.
  • The IRS needs to verify your identity.
  • You are being notified of delays in processing your return.

Now, don’t panic once you receive your letter. It’s a treasure trove of information, so make sure you go through it very carefully.  Let’s look at ten notices that the IRS might send you.

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The IRS Offer In Compromise – 6 Common Myths And Misconceptions

Venar Ayar OIC

When people first hear about the IRS Offer in Compromise (OIC) Program, (depending on where they hear about it from), many common misconceptions may come with it.  So, I am here to clear up some of the most common myths about the OIC Program

Myth #1 – The OIC Program is a scam or “too good to be true”

There are usually two extremes that people go to when you ask them what they think or know about the OIC program.  This myth is on one end of the scale.  (We will cover the other extreme in the next section).  People often immediately (and falsely) assume that the OIC Program is a scam.  I will admit…there are several “tax resolution” companies out there who do use the program to scam innocent people by promising potential clients that they will get them an Offer in Compromise (and settle for pennies on the dollar) before even looking at their financials.  While that is all codswallop, the program itself is NOT a scam. The IRS has 10 years to collect a tax debt from a taxpayer.  And they certainly do not want to spend that time trying to collect a tax debt that the taxpayer simply cannot pay. They also do not want to cause undue hardship by demanding someone pay their full liability if they cannot afford to do so and still meet their basic living necessities.  So, they are willing to work with taxpayers to get at least some of what is owed to them.  It makes the most economical sense to the IRS if they ever want to see any of that money.

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How To Appeal When You Are Denied CNC Status?

Venar Ayar How To Appeal To IRS

Currently Not Collectible (CNC) status can provide you with temporary relief from tax debt collection efforts by the IRS. However, if you applied for but were denied CNC status, all hope is not lost, as you have the option to appeal this ruling. A tax attorney can be a great ally during this process as appeals are often complex and can take months to complete.

When the IRS first initiates a collection action on your tax debt, such as in the form of a tax lien or a levy on your bank account, you have the option of trying to stop it through an appeal. Appealing a CNC determination is a very similar process.  In addition to requesting review of collection actions, you may ask the IRS to review your CNC determination. You may request a Collection Due Process (CDP) hearing, or pursue the Collection Appeals Program (CAP). You might choose the CAP process because it is faster, but bear in mind that the decision is final and cannot be reviewed by the Tax Court.

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How To Qualify For An Offer In Compromise

How To Qualify For An Offer In Compromise

If you have an outstanding tax debt with the Internal Revenue Service (IRS) but you’re concerned that you are unable to pay it, you may have the option to settle the debt for an amount lower than what you owe. The IRS provides a solution called an Offer in Compromise (OIC) that allows qualifying taxpayers to enter an agreement to pay off their tax liability. An attorney who specializes in tax debt relief can assist you with applying for this tax debt relief program.

The guidelines for qualifying for an Offer in Compromise are somewhat strict but certainly straightforward. First, your reasons for applying must be one of the following:

  • Doubt as to Liability – If the IRS has reason to believe that the amount of your tax debt is incorrect, this would be considered doubt as to liability.
  • Doubt as to Collectibility – When the IRS doubts that it would be able to collect the full amount of the taxpayer’s debt, it may accept an Offer in Compromise. This is often the case if the amount of the taxpayer’s income and assets is lower than the amount of the liability.
  • Effective Tax Administration – The IRS may also accept an Offer in Compromise if paying the tax debt would create a financial hardship for the taxpayer or if collecting the tax debt would be unfair or inequitable.

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What Is The IRS Streamlined Program?

IRS Streamlined Program

U.S. law requires that all taxpayers pay taxes on any foreign income or assets they have. This extends to anyone who is required to file taxes in the United States; it is not limited to U.S. citizens. Many people are not aware of this and subsequently fail to file and pay taxes on their foreign income or assets. Any taxpayer that fails to file legally required tax returns can face severe penalties including, among others, “failure to file” which can require the taxpayer to pay a 25% tax penalty or “failure to report foreign bank and financial accounts” which result in a civil fine of anywhere from $10,000 to $100,000. Foreign assets that must be filed and reported include, but are not limited to:

  • Financial accounts held at foreign financial institutions
  • Financial accounts held at a foreign branch of U.S. financial institution
  • Foreign stock or securities not held in a financial account
  • Foreign mutual funds
  • Foreign hedge funds and foreign private equity funds.

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How Much Will The Streamlined Procedures Penalty Cost?

Venar Ayar - Streamlined Process

The miscellaneous offshore penalty under the Streamlined Procedures is five percent of the highest aggregate account balance during the disclosure period. A number of factors can influence exactly how this penalty will be calculated in your case.

Asset Balances That Are Counted

The balances in all of your foreign financial accounts will generally be counted for the penalty calculation. The year-end balances will be reviewed and the highest aggregate balance will be used to determine your penalty amount.

Any asset that should have been reported will count for these purposes. Even if assets were reported on an FBAR, but the income from these accounts wasn’t reported on your tax return, they will also be counted for the penalty calculation.

Simply find the highest aggregate account balance and multiply it by five percent to determine your penalty amount under the Streamlined Procedures. This is the penalty that applies to domestic taxpayers.

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How Do I File An IRS Offer In Compromise?

Venar Ayar - Offer In Compromise

As Ben Franklin once said, “In this world, nothing can be said to be certain, except death and taxes.” If you owe a tax debt to IRS, it can be a frightening experience. The IRS has the power to seize and sell your property, place a lien on your property, garnish wages, or even take money straight out of your bank account. If you owe a tax debt to the IRS it is critical that you reach a resolution as quickly as possible, and hopefully, one that is as beneficial to you as possible. For some people, the best option for a solution is the IRS Offer in Compromise (OIC) program. This article will explain what the OIC program is and how to file an OIC.

What is the OIC Program?

The IRS OIC program is a settlement agreement between a taxpayer that owes a tax debt (this includes both individual taxpayers and businesses) and the IRS, that allows for the taxpayer to resolve their tax dispute for less than the full tax debt amount owed. If a taxpayer qualifies for the OIC program they can make a monetary offer to the IRS for a full settlement of their dispute, which the IRS will ultimately accept or reject.

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