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What To Do If You Have Unreported Bitcoin Income

Unreported Bitcoin Income - What To Do

You may need to amend your tax returns and pay additional taxes, penalties, and interest if you have previously unreported Bitcoin income.  If you fail to take action, the IRS may audit your returns as part of its Virtual Currency Compliance campaign.

Key Insights We Will Discuss
  1.  How the IRS treats Bitcoin transactions for tax purposes
  2. What thee IRS is doing to increase virtual currency tax compliance
  3. What you should be doing to correct your past non-compliance with Bitcoin tax laws
Bitcoin Taxes 101

The IRS considers Bitcoin and other virtual currencies to be property for tax purposes.  You need to pay taxes if you receive Bitcoin income, the same way you would need to pay taxes if someone paid you for your work by giving you a new car.

The property will be valued based on the currency’s exchange rate on the date you received the income.  You can use any exchange rate listed on a public exchange as long as you consistently use the same method.

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Written by | Posted in TaxConnections • Unreported Bitcoin

How To Handle A Trust Fund Recovery Penalty Assessment

How To Handle Trust Fund Recovery Assessment

The Trust Fund Recovery Penalty (TFRP) is a severe tax penalty assessed against individuals who fail to comply with certain payroll tax obligations. You may have several defenses and appeal options if the IRS assesses the TFRP, so contact a tax attorney for assistance.

Key Insights We Will Discuss:
  1.  When the TFRP may be assessed
  2. What to expect if the IRS is investigating a potential TFRP case
  3. Possible defenses to a TFRP assessment
What Is The Trust Fund Recovery Penalty?

Trust fund taxes are the employee’s portion of employment taxes and federal income taxes withheld from employee paychecks.  The employer holds this money “in trust” and is responsible for submitting it to the IRS.

The TFRP can be assessed against an individual who meets the following criteria:

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Written by | Posted in Recovery Penalty • TaxConnections • Trust Fund

What To Do If Your Offer In Compromise Is Rejected

Why An Offer In Compromise Is Rejected

The IRS rejects a lot of Offers in Compromise (OICs).  When an offer is rejected, you have 30 days to request an appeal.  You can also consider using other tax resolution strategies.

Key Insights We Will Discuss
  1.  Why the IRS rejects an Offer in Compromise
  2. Reasons you should consider appealing a rejection of your Offer in Compromise.
  3. The Requirements for submitting a valid appeal.
Why The IRS Rejected Your Offer In Compromise

The short answer here is that the IRS rejects a return when your offer amount is less than your reasonable collection potential.  However, like most things in life, the issue is a bit more complex than that.  For instance, you are probably wondering “well how did they arrive at that conclusion?  Isn’t this based on a mathematical formula?”  Well yes and no – mostly yes but what goes into that formula is often a little unclear.  Allow me to explain.

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Written by | Posted in Offer In Compromise Rejected

Understanding The Types Of IRS Audits

VENAR AYAR - Types of audits

The first reaction by most taxpayers when they find out they are being audited by the IRS is crippling fear.  An audit occurs when the IRS has reason to believe that the tax you paid is not what should have been collected.  The IRS wants to investigate how you calculated your tax due for the year.  If you have received a letter in the mail from the IRS, take a deep breath and don’t immediately panic.  You might not even have to meet in person with the IRS, depending on the type of audit.

There are three main categories of IRS audits: a correspondence audit, a field audit, and an office audit.  A correspondence audit happens via the mail.  The field audit happens in person in your place of work or home.  An office audit happens in person at your local IRS office.  Read on to learn more about each of these three different types of audits.

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Written by | Posted in TaxConnections

How To Avoid An IRS Lien Without Paying Your Full Balance Off

VENAR AYAR on IRS Lien

You can get around an IRS lien by requesting a withdrawal, discharge, or subordination.  Each of these strategies can be useful in different situations, depending on the reason you are trying to avoid the lien.

Lien Withdrawals

A lien withdrawal removes the Notice of Federal Tax Lien from the public records.  This could allow you to get a loan more easily or sell your property.

The IRS lists four reasons that it will consider a lien withdrawal request:

  • The lien was filed prematurely in error
  • Withdrawal will facilitate collection of the tax liability
  • Withdrawal is in the best interest of the taxpayer and the government
  • The taxpayer enters into a Direct Debit installment agreement and meets certain other conditions, or the installment agreement does not permit the filing of a tax lien

A lien withdrawal is the broadest type of relief because it removes the lien entirely from public record.

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Written by | Posted in IRS Lien

Can You Avoid An IRS Levy Without Paying Off Your Tax Debt In Full?

VENAR AYAR - IRS Levy

There are several ways to avoid an IRS levy without paying your full tax liability.  You’ll need to request a Collection Due Process (CDP) hearing before the appropriate deadline if you want to stop the bank levy, wage garnishment, or another type of IRS tax levy.  The most common ways to stop a levy are: dispute the tax liability, request an Installment Agreement, submit an Offer in Compromise, apply for Innocent Spouse Relief, make a case for Financial Hardship.  Read on to find out more about CDP hearings and the options available to you to stop a levy.

Request The CDP Hearing

Before levying your property, the IRS must first (most of the time) send you a notice and give you 30 days to request a hearing.  Only under rare circumstances can the IRS seize your property without sending one of these notices.

If you receive a CDP notice, keep the following information in mind:

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Written by | Posted in IRS Levy

What To Do If You Are Late Filing Your FBARs

Venar Ayar

If you miss the April 15 FBAR filing deadline, you’ll receive an automatic six-month filing extension.  For delinquent FBARs from prior tax years, you should use one of the offshore disclosure methods to file your late FBARs.

FBAR Filing Requirements

FBARs are due at the same time as your tax return on April 15.  However, you don’t file your FBAR with your 1040 Form.  Instead, you must e-file it through the Financial Crimes Enforcement Network’s e-filing system.

If you miss the deadline, you’ll receive an extension until October 15.  You don’t need to request this filing extension, and you won’t be charged any penalties as long as you submit your FBAR by the extended due date.

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Written by | Posted in FBAR Late Filing • TaxConnections

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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Written by | Posted in FBAR • Form 8938

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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Written by | Posted in IRS Audit • IRS Installment Agreements

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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Written by | Posted in TaxConnections

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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Written by | Posted in CDP Hearing • IRS Notice

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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Written by | Posted in IRS Audit
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